3 Bed Bath & Beyond Analysts On Kroger Partnership, Stock Buyback And More

Bed Bath & Beyond Inc. (NASDAQ: BBBY) stock is spiking sharply Wednesday in reaction to a trio of announcements from the home furnishing retailer made late Tuesday.

The Bed Bath & Beyond Analysts: Raymond James analyst Bobby Griffin maintained a Market Perform rating on Bed Bath & Beyond shares.

Telsey Advisory Group analyst Cristina Fernandez maintained a Market Perform rating and increased the price target from $20 to $22.

KeyBanc Capital Market analyst Bradley Thomas reiterated an Underweight rating and $13 price target.

RayJay Says Kroger Partnership Interesting, Cautious On Stock Buybacks: While still in the very early innings, the The Kroger Co. (NYSE: KR) partnership is interesting, especially as it provides Bed Bath & Beyond with the opportunity to penetrate its products in markets it does not have as much exposure, RayJay's Griffin said in a note.

Kroger, the analyst said, offers a great name brand to partner with and a very loyal customer base.

The product overlap and shopping trip desire between Target Corporation (NYSE: TGT) and Ulta Beauty, Inc. (NASDAQ: ULTA) appear more similar than between Bed Bath & Beyond and Kroger, Griffin said. The small-scale physical store rollout will likely be a slow rollout and therefore may not have a near-term impact to sales and earnings, he said.

Related Link: Why Bed Bath & Beyond's Stock Could Slam Short Sellers Yet Again

The new Bed Bath & Beyond marketplace is a relatively low risk initiative that could provide a nice incremental earnings stream for the company, the analyst said.

Since business trends have not changed materially changed since the company's last earnings report, the accelerated share repurchase announcement engenders caution, Griffin said.

"Admittedly, we understand management's view that there is a lot of value in the stock today, versus the potential earnings as part of their three-year transformational plan," the analyst said.

Several Elements Of Strategic Plan Seem To Be Working, Telsey Says: Bed Bath & Beyond's announcements should be received positively by investors, Telsey analyst Fernandez said. The share buyback has the potential to reduce the share count by 15% and boost 2022 EPS by 15%, the analyst said. 

The launch of a digital marketplace and the collaboration with Kroger demonstrates management's willingness to think outside the box, accelerate the digital transformation and add new revenue streams, she said. 

Near-term, Bed Bath & Beyond needs to improve its comp trend and stabilize costs in the second half of 2021 following disappointing second-quarter results that led to both a sales and EPS miss, Fernandez said. 

Much of the second-quarter sales shortfall appeared self-inflicted, the analyst said. That said, several elements of the strategic plan seem to be working, such as an increase in the penetration of private label brands to about 20% from about 10% and a mid-single digit comp increase in remodeled stores, she added.

KeyBanc Highlights Challenging Oct Comps: From Bed Bath & Beyond's announcements, it appears that October remained challenged, with comps likely down by mid-single to high-single digits, KeyBanc analyst Bradley said.

The accelerated share repurchases the company announced is for buying back of $400 million shares in the second half of 2021, representing 23% of the market cap, based on Tuesday's closing price, the analyst said. 

Given what he said are an expensive valuation, challenged fundamentals and ongoing risk from comp, the analyst reiterated his bearish stance on the company.

BBBY Price Action: Bed Bath & Beyond shares were trading 19.28% higher to $19.98 midday Wednesday.