Bed Bath & Beyond Inc. (BBBY): This Stock Is a Sleeper

Wal-Mart Stores, Inc. (NYSE:WMT) might not seem like a major threat to Bed Bath & Beyond, but it threatens every retailer on the planet. Wal-Mart’s low prices attract hordes of value-focused consumers. The quality of its products might not be as good as its peers, but fewer consumers are looking for top quality in today’s economic environment.

Wal-Mart Stores, Inc. (NYSE:WMT) consistently increases its revenue and earnings, and debt management is good, which allows for a 2.40% yield. Wal-Mart might steal some market share from Bed Bath & Beyond, but it should not be the primary cause for its demise.

Target Corporation (NYSE:TGT) is somewhere in the middle. Its products aren’t as high quality as what you might find at Bed Bath & Beyond, and it’s prices aren’t as low as Wal-Mart, but checkout lines are incredibly fast, the atmosphere is clean, and generally goes after the same type of customer as Bed Bath & Beyond.

Target Corporation (NYSE:TGT) has also seen continuous revenue and earnings growth through the years, and like Wal-Mart, it yields 2.40%. The good news for Bed Bath & Beyond is that Target hasn’t been performing well in its home goods segment. Overall, Target will do just fine thanks to strong performances in other segments, but many feel Target is more of a real estate play.  And that’s because it owns a good chunk of its properties.

Conclusion

Since Wal-Mart doesn’t offer top quality home goods, and considering Target isn’t performing well in home goods, it would seem as though Amazon is the biggest threat. And while that might be true, there will always be a need for a brick and mortar retailer of home goods.

Many people like to see what they’re buying for their home, prior to purchasing it. That being the case, there is no real direct threat to Bed Bath & Beyond. It’s highly specialized and serves a niche. Overall, Bed Bath & Beyond Inc. (NASDAQ:BBBY) looks to be a decent long-term investment.

The article This Stock Is a Sleeper originally appeared on Fool.com and is written by Dan Moskowitz.

Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends Bed Bath & Beyond. Dan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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