Bed Bath & Beyond (NASDAQ:BBBY) has been a repeated disappointment for a long time running. At times in the past I’ve been drawn in by its ludicrously cheap valuation and juicy yield but thus far, that has proven to be nothing more than a trap. The stock has been stagnant for all of 2016 after a huge selloff to end last year and even the moderate rally that took place heading into Q3 results has been rebuffed and then some. BBBY is cheap (again) and the stock seems to be making a bottom but I don’t think I’m brave enough to try and pick it up here.
Sales were flat for BBBY in Q3 as it continues to struggle with its physical stores. The transition to digital sales has been a long and arduous journey and but for all of its progress on that front – digital comp sales were up better than 20% in Q3 – the physical stores continue to struggle. Comps were down 1.4% this quarter on top of a 40bps decline in last year’s Q3 as BBBY can’t seem to figure it out. This has been the case for some time so no one is surprised, but I’ll be honest and say that I thought we’d have seen something positive by now.
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BBBY has invested heavily in trying to compete in the digital space and it is working to be sure; success in digital sales is indisputable. But that success has come at a high price not only in terms of investments that have made it possible but also in the simple fact that digital sales seem to just be coming from purchases that would otherwise have been made in the stores. The simple fact is that while BBBY’s stores aren’t losing comp sales at a catastrophic rate by any means, they are losing them steadily and there is no end in sight. I worry about the stores over time because even small nicks can cause a retailer to bleed to death as store costs are largely fixed and constant deleveraging of those costs can be disastrous.
Fuente: Seeking Alpha
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