Retailers: The Search to Buy, Not Buy From – Best Buy Co., Inc.(BBY), Bed Bath & Beyond Inc. (BBBY)

Odd things you never knew you needed

Whenever I go to Bed Bath & Beyond Inc. (NASDAQ:BBBY), I always end up with something I barely use, but actually need. Last time it was an electric grill. I barely use the grill, but when I am in the mood, it is an absolute necessity.

Bed Bath & Beyond Inc. (NASDAQ:BBBY) is doing well. Its trailing twelve month net income is $1 billion with a trailing EPS of $4.36, and it is witnessing both top line and bottom line growth. It sports no debt and almost $800 million in cash. Contrast that to Barnes & Noble’s situation. Bed Bath & Beyond also sports 8.61% net margin, which is higher than I would expect from a retailer.

It establishes the company’s place as a specialty retailer that can have higher margins. There is nothing at Bed Bath & Beyond and other stores the company owns that you can’t find anywhere else.

This company is actually opening more stores, as opposed to Best Buy and Barnes & Noble who are downsizing. Opening new physical locations is another surprise from the company, that also establishes its nature as a specialty retailer.

Oddities win

Make no mistake about how much of a gamble Best Buy is. There is some hope it can make a move that will keep it relevant to the future of retail, but that does not make it a buy for the vast majority of investors. I generally like risky, turnaround stocks, but until I understand how Best Buy will innovate for the future, I am waiting and watching. What little information we have regarding its plans have not been enough for me to get off the bench.

I have made my opinion of Barnes & Noble quite evident. I am not sure how it will manage to remain a physical retailer. That would be a shame, but the market for physical books is shrinking fast.

Bed Bath & Beyond Inc. (NASDAQ:BBBY) has positive earnings, expansion plans, and actually has physical stores I could see sticking around. I would still take a small position in this retailer, because I see it growing steadily but slowly. Eventually, it will just be a dividend investment.

The century long outlook for retail remains bleak. The thing about Bed Bath & Beyond Inc. (NASDAQ:BBBY) is that while many of its products can be found online in one form or another, you need to go to the store to see the things to realize you need them.

The article Retailers: The Search to Buy, Not Buy From originally appeared on and is written by Nihar Patel.

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