Deutsche Bank Offers Takeaways On Bed Bath & Beyond's Q3 Results

Deutsche Bank commented on Bed Bath & Beyond Inc. BBBY Friday following its Q3 results.

“Comps were 1.7 percent, which was below estimates of 2-3 percent and expectations of 3 percent as BBBY had an easier comparison. As such, the two year stacked decelerated by 400 bps. E-commerce growth was “more than 40 percent” versus “more than 50 percent” last quarter, implying 4 percent penetration as store comps were flat,” according to analyst Mike Baker.

Baker noted that this “is the third year in a row that 3Q has disappointed relative to 2Q, so perhaps the market should have realized that easier 3Q comparisons haven’t helped in the past. The good news though is that 4Q comps appear to be rebounding at BBBY reiterated its 4-5 percent estimate, which includes the holiday season.”

“We think BBBY is making the right investments and has a lot of room to do so in its still healthy 13 percent margin structure. But, over time, we see that continuing to fall. BBBY’s margins will likely remain the envy of most in retailing as the company is still very profitable. But, perhaps just a bit less so in the future.”

Baker concluded that as “we build in more SG&A investment in our model over the next few years than we had previously contemplated, we are reducing our FY15 and FY16 EPS estimates to $5.36 and $5.78 from $5.52 and $6.12. Our long term growth rate estimate remains 10 percent, driven by 2 percent EBIT growth and 8 percent from lower share count.”

The firm maintained a Hold rating and $57 price target.

Bed Bath & Beyond recently traded at $74.22, down 6.58 percent.