Is Bed Bath & Beyond Finally Primed for Your Portfolio?

Source: Thinkstock

Source: Thinkstock

Bed Bath & Beyond (NASDAQ:BBBY) was punished after earnings with stock losses of 8 percent following its first-quarter report to touch 52-week lows. However, when compared to peers like Home Depot (NYSE:HD) or J.C. Penney (NYSE:JCP), is this reaction fair, and does its near 5 percent stock gains on the week of Independence Day suggest that investors see significant value in the company?

Not exactly apples to apples

Bed Bath & Beyond sells a mixture of goods and products that are unlike any other home furnishing retailer. For one, it sells many of the same home improvement products like kitchen fixtures and curtains as Home Depot or J.C. Penney, but lacks a large building materials segment like the former or a diversified clothing business like the latter.

Nonetheless, Bed Bath & Beyond, J.C. Penney, and Home Depot may not be apples to apples comparisons, but these three companies do have core similarities in home improvement as industry leaders.

What were the numbers?

With that said, Bed Bath & Beyond shares have fallen 30 percent in 2014 as pricing and increased competitive pressure from brick-and-mortar and e-commerce retailers have weighed on its store traffic, growth, and margins. In its first-quarter report, this was further put on display; the company grew revenue just 1.9 percent behind comparable-store sales growth of only 0.4 percent year-over-year.

Its gross margin declined 70 basis points to 38.8 percent, and its earnings-per-share midpoint guidance of $1.12 fell far below expectations for $1.20. However, management did reiterate mid-single digit EPS growth for the full year, implying the back half of the year will be strong following a poor start to 2014.