The Bed Bath & Beyond Selloff: Opportunity or Value Trap?

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Source: Thinkstock

Source: Thinkstock

Bed Bath & Beyond Inc. (NASDAQ:BBBY) is a household name and chances are you have visited one of its establishments. It is an incredibly profitable company, although the stock has struggled to pick up any lasting momentum. It caught my eye after reporting a top and bottom line earnings miss last night. For those who do not know the company, it operates a chain of retail stores. It sells a range of domestic merchandise, including bed linens and related items, bath items, and kitchen textiles. It also has home furnishings, such as kitchen and tabletop items, fine tabletop, basic housewares, general home furnishings, consumables, and certain juvenile products. The company also offers health and beauty care items, and giftware and household items, as well as infant and toddler merchandise.

It has several different stores it operates too. As of May 31, 2014, the company had a total of 1,500 stores, including 1,015 Bed Bath & Beyond stores in all 50 states, the District of Columbia, Puerto Rico, and Canada, 266 stores under the names of World Market, Cost Plus World Market or Cost Plus, 91 BuyBuy BABY stores, 78 stores under the names of Christmas Tree Shops, and 50 stores under the names of Harmon or Harmon Face Values. The stock is down about 3 percent today and falling on the back of poor earnings. Is this an opportunity to get long the stock?

Well, the quarter wasn’t completely terrible, but it reflected a lack of any meaningful growth out of the company. It reported net earnings of $0.93 per diluted share, or $187.1 million, in the first-quarter, compared with net earnings for the first-quarter of 2013 of $0.93 per diluted share or $202.5 million. As you can see, total earnings fell, but the per share number held due to the company buying back shares in the last year.

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