Market Overview

REITERATE: This Stock is a Loser, For Now

Apologies in advance for the break in the action of finding obscure data on the market and making appropriate calls. But, when I feel passionate about a specific stock, good or bad, just have to dish the 411. The name on the chopping block is Bed Bath & Beyond, which apparently is the sexy discretionary stock to own for 2013 (pretty scary how many peeps are overweight consumer discretionary). There is a mound of cash on the company's balance sheet, square footage growth potential exists across multiple concepts, and a runway of favorable year over year financial comparisons are in play (if you don't know what that gibberish means, Tweet me at https://twitter.com/BrianSozzi). Oh, and naturally, more people scoring keys to condos, co-ops, and houses is supposed to create a boost for the kitchen gadgets and sheets sold by Bed Bath.

Hey, I get the thesis, though caution it's misguided at present and that stock remains overvalued. Here are the only things to care about regarding the company today:

•Management has tried to blow off the fundamental impact to its business from coupons. I say hogwash, as the company is experiencing increased redemptions of its higher average coupon amounts. BTW, the coupon totters are shopping lower margin departments. Equation: MORE COUPON USAGE + MORE COUPON USAGE ON LOWER MARGIN PRODUCTS = NO GOOD FOR MARGINS

•With same-store saws decelerating since the February quarter of 2011, a shift in product mix, and ongoing expansion, Bed Bath's expense base is proving to be too fat. This dynamic will only change when same-store sales re-accelerate or gross margin begins to expand.

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Reiteration Analyst Ratings Trading Ideas

 

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