Bed Bath & Beyond Inc. (BBBY): Time to Buy This Value Stock?

Similarly Williams-Sonoma, Inc. (NYSE:WSM) has a three pronged strategy of expanding its e-commerce facility, international expansion, and rolling out new stores in its growth brands. Again, it is trying to achieve a certain amount of differentiation with its offerings and experimenting with its new stores.

I think that it will do well with its teens and baby furnishings because this is more of a ‘conceptual sell’. In other words, shoppers will appreciate going to the store in order to feel the impact of its furnishings. Furthermore, its range is somewhat more high-end than Bed Bath & Beyond Inc. (NASDAQ:BBBY), and relatively less susceptible to Amazon’s onslaught.

Where next for Bed Bath & Beyond Inc. (NASDAQ:BBBY)?

In common with the industry, it is moving to a multi-channel offering and is launching some new websites this year, while aiming to generate margins in order to try and turn around performance. Thus far, the acquisitions have eaten into margins (at a time when some of existing stores were reporting poor performance), and the plan to improve prospects will see a ramp up in capital expenditures to $350 million next year from $315 million this year.

Much of the capex is dedicated to store refurbishments and integrating the World Market and Linen Holdings acquisitions. In addition, the shift to lower margin products in the sales mix as well as increases in coupon redemptions will continue to pressure margins going forward. It’s tough out there.

Putting all these things together means that an investment in the company depends upon a certain level of confidence in its plans to turn things around in 2013. Its not the kind of situation I enjoy investing in, so I will take a pass. It’s also not the sort of company you buy as a pure play on housing, but you might if you are hunting for a bargain than could suit your purpose. You just have to expect that it will come (as do all value plays) with some faults.

The article Time to Buy This Value Stock? originally appeared on Fool.com and is written by Lee Samaha.

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