Wells Fargo Initiates Coverage on Bed Bath & Beyond (BBBY) with a Market Perform

October 6, 2009 5:03 PM EDT

Wells Fargo initiates coverage on Bed Bath & Beyond Inc. (Nasdaq: BBBY) with a Market Perform rating. Valuation range $32-34.

Wells analyst says, "Home furnishings has been one of the hardest hit sub-sectors of retail, with a 13% reduction in stores since 2007. We see a slow recovery for even the best in class operators, as housing turnover and access to credit remain depressed. We believe the liquidation of Bed Bath's primary specialty competitor, Linens 'N Things, provides a near-term opportunity to improve sales and margins, a theme that has been widely reported by the Street. Linens, however, masks a longer-term trend that led to stagnant sales productivity and multi-year margin declines for Bed Bath, even during the massive housing boom. Why? The specialty retail channel is losing share in the housewares category as selection and low prices have become more ubiquitous, particularly on the Internet. With the Linens tailwind and a solid balance sheet (in our view), this is unlikely to manifest itself as an immediate concern. That said, we see no catalyst for the shares until FQ309 earnings in January, so we think BBBY will trade with the retail sector until then."

To see more analyst ratings on BBBY Click Here.

Bed Bath & Beyond Inc., together with its subsidiaries, operates a chain of retail stores.

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