Bed Bath & Beyond Inc. (NASDAQ:BBBY) Is Trading On the Cheap

Bed Bath & Beyond Inc. (NASDAQ:BBBY) has witnessed declining profit margins as well as minimal revenue growth since 2013, which has led to the retailer’s stock price dropping over the same period. The retailer is currently trading at a P/E ratio of 5.14, which is much lower than the S&P average, hence, implying that the stock is quite cheap.

Article Summary

Bed Bath & Beyond is trading at a cheap valuation in comparison to the S&P 500.

The retailer is suffering from decreasing margins and profits.

The company should explore other strategies in order to remain profitable.

Here’s the trading report on BBBY.

BBBY’s overall margins have been shrinking since 2013 with the company reporting declining margins up to date. The company is also suffering from higher coupon redemptions, which is affecting the retailer’s overall profitability given that the company runs coupons for most of the year.

The retailer is suffering a fate similar to that of other physical retailers who are being affected by the rising popularity of online retailers such as, Inc. (NASDAQ:AMZN). The fact that Amazon recently launched its own furniture brands and is currently investing in an upgrade of its supply chain infrastructure in order to handle bulky furniture spells trouble for the company’s future.

The retail landscape in the US is being redefined by the rise of online retailers, especially Amazon, which has forced physical retailers to become more innovative in order to compete with online retailers. This has led the company to continuously slash prices in order to attract more customers leading to the lower operating and profit margins.

However, physical retailers such as Best Buy Co Inc (NYSE:BBY) have managed to remain competitive by creating extraordinary shopping experiences for their customers. Bed Bath & Beyond could try a similar strategy in order to attract more customers to its stores instead of overusing coupons to attract customers.

The company has been on a mission to acquire other e-commerce sites, which it has used in efforts to compete with online retailers. This strategy seems to be working even as the company focuses on improving the customer experience in its stores by reducing the number of managers, while increasing the number of non-managerial staff.

The retailer initiated a dividend payout program in 2016 and paid a $0.30 dividend in the first half of fiscal 2017, which means that the annual dividend for the current fiscal year is $0.60. However, these financial moves by the company could not stop its share price from dropping.

To find out more about where we believe this stock is going to go in the future, subscribe to our proactive investment newsletter. As a free trial member, you will have access to over 1300 real time stock trading reports full of actionable trading strategies.