Bed Bath & Beyond Inc. (BBBY): This Home-Furnishing Retailer Is Still the Place to Shop

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Peter Lynch always said to buy what you know. Well I know that whenever I need household furnishings such as sheets and towels, I still go to Bed Bath & Beyond Inc. (NASDAQ:BBBY). The large big-box retailers Target Corporation (NYSE:TGT) and Wal-Mart Stores, Inc. (NYSE:WMT) sell the same items, but Bed Bath & Beyond is the first place I think of going. The store is very organized and consumers generally know what they're looking for when they go there. It's the shopping experience that has kept consumers coming back to Bed Bath & Beyond.

Tough to argue with success

Bed Bath & Beyond Inc. (NASDAQ:BBBY)

One of the things that impresses me the most about Bed Bath & Beyond Inc. (NASDAQ:BBBY) is how well the company navigated the housing downturn. Now that housing has bottomed and is rebounding strongly, the retailer looks set for further gains as new items are bought for the home. To reach its customers, the company operates 1,006 Bed Bath & Beyond stores, 264 World Market stores, 83 Buy Buy Baby stores, 74 stores under the names Christmas Tree Shops or andThat!, and 47 stores under the Harmon or Harmon Face Values.

In the latest quarter, earnings increased 14% to $1.68 per share. This capped a 12% rise for the full year to $4.56 per share. Net sales for the quarter rose 24.5% to $3.4 billion due to the integration of the World Market and Linen Holdings acquisitions. Comparable-store sales increased 2.5% after rising 6.8% in the prior year's quarter.

I really like the fact that Bed Bath & Beyond Inc. (NASDAQ:BBBY) has no debt and $1.0 billion in cash. The company funds all operations without the use of any debt financing. Operating cash flow last year was $1.2 billion. The company is also using existing cash to fund its $2.5 billion share-repurchase program, which will be completed by the end of the 2015 fiscal year.

In looking forward, there are several ways for Bed Bath & Beyond Inc. (NASDAQ:BBBY) to sustain growth. The company sees the potential for an additional 300 Bed Bath & Beyond stores in the United States and Canada. There is also the ability to take its smaller store concepts coast to coast. World Market, Buy Buy Baby, Christmas Tree Shops, andThat!, and Harmon stores have considerable room to grow. In Mexico, there are only three Bed Bath & Beyond stores, with an additional pair to be opened this year. There's considerable opportunity for growth south of the border.

The company is also undertaking several initiatives to boost online sales. New sites will be launched by the end of the second quarter for Buy Buy Baby and Bed Bath & Beyond Inc. (NASDAQ:BBBY). The company just opened a new Internet-fulfillment center in Georgia to handle the growing web orders. The company also built a new data center in North Carolina to handle all of its IT needs. These are all great moves by management as more shopping continues to occur online.

The competition

Both Target and Wal-Mart are serious competitors to Bed Bath & Beyond Inc. (NASDAQ:BBBY). Both are big-box retailers that know their customers and sell all kinds of general merchandise. Target Corporation (NYSE:TGT)'s customers tend to have a slightly higher income than Wal-Mart's. Wal-Mart Stores, Inc. (NYSE:WMT)'s focus is on offering the lowest price possible, whereas Target focuses on providing a better shopping experience with its store design.

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