The home goods market
As a dedicated seller of home goods, Bed Bath & Beyond Inc. (NASDAQ:BBBY) is a fairly good barometer of the market.
Year-to-date, shares of Bed Bath & Beyond Inc. (NASDAQ:BBBY) are up more than 20%. Unfortunately, the company isn’t particularly transparent — management, for example, doesn’t take analyst questions during earnings calls.
The company reported earnings in line with expectations back in April, but guidance was light. Still, shares have continued to rally over the last month. Analysts at Jefferies downgraded shares to Hold on Monday, and cut their price target to $71. Jefferies expects shares to struggle in the short-run.
But at the same time, if the housing market is truly rebounding — as many fund managers, traders and pundits have argued — a secondary play on home goods makes sense. Someone who buys their first home, or a larger home, is going to be in the market for any number of home goods, from rugs to towels to kitchenware and many other things.
Perhaps that’s why Bed Bath & Beyond Inc. (NASDAQ:BBBY) is one of the single largest holdings of the SPDR S&P Homebuilders ETF.
The Martha Stewart shops
Ron Johnson intended to make Martha Stewart’s brand the lynchpin of his home goods strategy. But after a legal dispute with Macy’s, goods branded with Martha Stewart’s name occupy only a small portion of the home goods section.
The sections given to Jonathan Adler and Bodiam were significantly larger than the section for Martha Stewart at my local J.C. Penney. Stewart’s section was perhaps just 50 square feet, dedicated strictly to party supplies.
Macy’s failed to block J.C. Penney from selling the other goods Martha Stewart had designed (kitchenware, bedding, bath), but they are sold under a J.C. Penney private label — the average shopper would have no idea Stewart was behind them.
Although Stewart’s company, Martha Stewart Living Omnimedia, Inc. (NYSE:MSO), remains exposed to the success of J.C. Penney’s home department, the inability of J.C. Penney to brand the goods under Stewart’s name limits any sort of buzz Johnson was hoping to attract originally.
Customers need to see the new layout
J.C. Penney’s home goods shops are visually stunning, despite the fact that the Martha Stewart Living Omnimedia, Inc. (NYSE:MSO) brand is hardly noticeable. In general, if the housing market in the US continues to rebound, major sellers of home goods should do well, as they benefit from a broad, secular trend.
However, it will be up to the retailer’s new management to execute and get shoppers back into the stores. Ultimately, if no one is in the store, all the flashy displays in the world won’t matter.
The article JC Penney’s New Home Shops Look Amazing originally appeared on Fool.com.
Salvatore “Sam” Mattera is long shares of J.C. Penney. The Motley Fool has no position in any of the stocks mentioned. Salvatore “Sam” 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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