BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F Annual Dividend Rate BUSINESS DESCRIPTION Bed Bath & Beyond Inc., together with its subsidiaries, operates a chain of retail stores. STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change -23.06-53.95-33.72 GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues -1.74 0.59 1.40 Net Income -43.69-26.80-16.83 EPS -39.64-20.78-6.90 RETURN ON EQUITY (%) Ind Avg S&P 500 Q2 2017 20.74 184.53 13.41 Q2 2016 29.96 66.20 11.79 Q2 2015 35.29 48.16 12.91 P/E COMPARISON HOLD Sector: Consumer Goods & Svcs Sub-Industry: Homefurnishing Retail Source: S&P HOLD RATING SINCE 06/25/2015 Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years Rating History HOLD Volume in Millions 2015 2016 2017 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History 65 60 55 50 45 40 35 30 25 20 15 60 40 20 0 5.41 20.91 Ind Avg 24.97 S&P 500 RECOMMENDATION We rate () a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing nesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find nesses including feeble growth in the company's earnings per share, deteriorating net income and operating cash flow. EPS ANALYSIS¹ ($) HIGHLIGHTS The current debt-to-equity ratio, 0.55, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a debt-to-equity ratio, the quick ratio of 0.23 is very and demonstrates a lack of ability to pay short-term obligations. Q1 0.93 Q2 1.21 Q3 1.09 2015 Q4 1.91 Q1 0.80 Q2 1.11 Q3 0.85 2016 NA = not available NM = not meaningful Q4 1.84 Q1 0.53 Q2 0.67 2017 1 Compustat fiscal year convention is used for all fundamental data items. 36.39% is the gross profit margin for which we consider to be. Regardless of 's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.20% trails the industry average. The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Specialty Retail industry. The net income has significantly decreased by 43.7% when compared to the same quarter one year ago, falling from $167.34 million to $94.23 million. Net operating cash flow has decreased to $160.07 million or 38.52% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower. PAGE 1
PEER GROUP ANALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) -5% 25% KIRK WSM HVT HVT.A PIR UNFAVORABLE 0% RH HOME SNBR EBITDA Margin (TTM) FAVORABLE AAN 60% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $195.5 Million and $3.9 Billion. Companies with NA or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) -5% 25% RH KIRK WSM AAN HVT.A HVT ANF PIR UNFAVORABLE -2.5% HOME SNBR Earnings Yield (TTM) FAVORABLE 20% Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -2% and 23.9%. Companies with NA or NM values do not appear. INDUSTRY ANALYSIS The specialty retail industry includes very well-known home improvement, apparel, automotive, and other narrow-focus stores such as Home Depot (HD), TJX Companies (TJX), Lowe s Companies (LOW), Gap (GPS), Bed Bath & Beyond (), Ross Stores (ROST), O Reilly Automotive (ORLY), CarMax (KMX), and Build-A-Bear Workshop (BBW). The variety of product focuses targeted by specialty retail companies is very diverse. These include but are not limited to home improvement goods, pharmaceutical & beauty, shoes, electronics, and office supplies. Also included are stores narrowly focused on music, books, wine, games, rentals, vitamins, lumber, sporting goods, toys, jewelry, and fashion apparel for men, women, and teddy bears. Some of the larger specialty retail companies also profit from the extension of credit to their customers with branded credit cards. Companies in this industry are judged based on the metric of same-store sales, a measurement that shows if stores open for more than one year are increasing top line revenue or shrinking. PEER GROUP: Specialty Retail Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) 21.06 3,017 5.41 12,167.94 564.67 HVT.A HAVERTY FURNITURE 23.55 498 17.32 825.68 29.10 HVT HAVERTY FURNITURE 23.45 498 17.24 825.68 29.10 WSM WILLIAMS-SONOMA INC 46.28 3,910 13.11 5,194.03 308.41 PIR PIER 1 IMPORTS INC/DE 4.57 383 12.69 1,821.39 29.41 AAN AARON'S INC 35.60 2,519 18.74 3,294.04 136.61 RH RH 99.37 2,102 NM 2,320.69 0.72 KIRK KIRKLAND'S INC 12.21 195 29.07 612.66 6.97 SNBR SLEEP NUMBER CORPORATION 34.94 1,391 24.78 1,394.66 60.57 HOME AT HOME GROUP INC 22.24 1,344 41.96 849.10 32.98 ANF ABERCROMBIE & FITCH 16.62 1,132 NM 3,335.90-18.33 The peer group comparison is based on Major Homefurnishing Retail companies of comparable size. PAGE 2
Annual Dividend Rate COMPANY DESCRIPTION Bed Bath & Beyond Inc., together with its subsidiaries, operates a chain of retail stores. It sells a range of domestics merchandise, including bed linens and related items, bath items, and kitchen textiles; and home furnishings, such as kitchen and tabletop items, fine tabletop, basic housewares, general home furnishings, consumables, and juvenile products. It also provides various textile products, amenities, and other goods to institutional customers in the hospitality, cruise line, healthcare, and other industries. As of February 25, 2017, the company had a total of 1,546 stores, includes 1,023 Bed Bath & Beyond stores in 50 states, the District of Columbia, Puerto Rico, and Canada; 276 stores under the names of World Market, Cost Plus World Market, or Cost Plus; 113 buybuy BABY stores in 35 states and Canada; 80 stores under the CTS name; and 54 stores under the Harmon name. It also offers products through various Websites and applications, such as bedbathandbeyond.com, bedbathandbeyond.ca, harmondiscount.com, christmastreeshops.com, buybuybaby.com, buybuybaby.ca, harborlinen.com, t-ygroup.com, and worldmarket.com. In addition, the Company operates Of a Kind, an e-commerce Website that features specially commissioned limited edition items from emerging fashion and home designers; One Kings Lane, an online authority in home decor and design that offers a collection of selected home goods, and designer and vintage items; PersonalizationMall.com, an online retailer of personalized products; Chef Central, an online retailer of kitchenware, cookware, and homeware items catering to cooking and baking enthusiasts; and Decorist, an online interior design platform that provides personalized home design services. Bed Bath & Beyond Inc. was founded in 1971 and is based in Union, New Jersey. 650 Liberty Avenue Union, NJ 07083 USA Phone: 908-688-0888 http://www.bedbathandbeyond.com STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 2.0 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 30% of the stocks we rate. Total Return 0.5 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company ranks at the bottom of the companies we cover. Efficiency 5.0 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 90% of the companies we review. Price volatility 0.5 out of 5 stars Measures the volatility of the company's stock price historically. The stock is more volatile than nearly all of the stocks we monitor. Solvency 4.5 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 80% of the companies we analyze. Income 4.5 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 80% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. PAGE 3
Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial FINANCIAL ANALYSIS 's gross profit margin for the second quarter of its fiscal year 2017 is essentially unchanged when compared to the same period a year ago. Sales and net income have dropped, underperforming the average competitor within its industry. has very liquidity. Currently, the Quick Ratio is 0.23 which clearly shows a lack of ability to cover short-term cash needs. The company's liquidity decreased from the same period a year ago, despite already having very liquidity to begin with. This would indicate deteriorating cash flow. 0.36 Q3 FY17 3.00 E 2018(E) 2.66 E 2019(E) During the same period, stockholders' equity ("net worth") has increased by 5.73% from the same quarter last year. The key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the near future. INCOME STATEMENT Net Sales ($mil) 2,936.36 2,988.24 EBITDA ($mil) 259.33 351.82 EBIT ($mil) 185.75 280.97 Net Income ($mil) 94.23 167.34 STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.thestreetratings.com. BALANCE SHEET Cash & Equiv. ($mil) 464.06 577.84 Total Assets ($mil) 6,782.66 6,669.38 Total Debt ($mil) 1,491.84 1,491.37 Equity ($mil) 2,721.70 2,574.00 PROFITABILITY Gross Profit Margin 36.39% 37.38% EBITDA Margin 8.83% 11.77% Operating Margin 6.33% 9.40% Sales Turnover 1.79 1.81 Return on Assets 8.32% 11.56% Return on Equity 20.74% 29.96% DEBT Current Ratio 1.77 1.97 Debt/Capital 0.35 0.37 Interest Expense NA NA Interest Coverage NA NA SHARE DATA Shares outstanding (mil) 143 152 Div / share 0.15 0.13 EPS 0.67 1.11 Book value / share 19.00 16.92 Institutional Own % NA NA Avg Daily Volume 4,072,337 3,897,286 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. PAGE 4
RATINGS HISTORY Our rating for has not changed since 6/25/2015. As of 11/22/2017, the stock was trading at a price of which is 56.9% below its 52-week high of $48.83 and 10.4% above its 52-week low of $19.07. 2 Year Chart HOLD: $53.62 2016 $60 $40 $20 MOST RECENT RATINGS CHANGES Date Price Action From To 11/20/15 $53.62 No Change Hold Hold Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 11/22/2017) 44.02% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. 30.74% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 25.24% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726 VALUATION HOLD. 's P/E ratio indicates a significant discount compared to an average of 20.91 for the Specialty Retail industry and a significant discount compared to the S&P 500 average of 24.97. For additional comparison, its price-to-book ratio of 1.11 indicates a significant discount versus the S&P 500 average of 3.17 and a significant discount versus the industry average of 35.46. The price-to-sales ratio is well below both the S&P 500 average and the industry average, indicating a discount. Upon assessment of these and other key valuation criteria, proves to trade at a discount to investment alternatives within the industry. Price/Earnings 5.41 Peers 20.91 Discount. A lower P/E ratio than its peers can signify a less expensive stock or lower growth expectations. Price/Projected Earnings 7.91 Peers 20.21 Discount. A lower price-to-projected earnings ratio than its peers can signify a less expensive stock or lower future growth expectations. Price/Book 1.11 Peers 35.46 Discount. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. Price/Sales 0.25 Peers 1.51 Discount. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. industry on this measurement. DISCLAIMER: Price/CashFlow 3.20 Peers 14.31 Discount. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. Price to Earnings/Growth NM Peers 2.47 Neutral. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. 's negative PEG ratio makes this valuation measure meaningless. Earnings Growth lower higher -20.78 Peers 9.07 Lower. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. However, is expected to significantly trail its peers on the basis of its earnings growth rate. Sales Growth lower higher 0.59 Peers 5.21 Lower. A sales growth rate that trails the industry implies that a company is losing market share. significantly trails its peers on the basis of sales growth The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at http://www.thestreet.com/static/about/terms-of-use.html. PAGE 5