The Daily Dose: Bed Bath & Blech

 | Jun 25, 2014 | 10:00 AM EDT
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Where an Activist Investor May End Up Next

On the surface, all would appear well at Bed Bath & Beyond (BBBY). New stores are opening. Older stores are being refreshed. There are now personal care products sold at the front of a store, resembling a couple of aisles in a CVS (CVS) or Target (TGT). However, digging beneath the crust of Bed Bath & Beyond, one can easily see red flags.

Here are four things that should be very disturbing if one is a Bed Bath & Beyond shareholder, other than the recent horrid financial performance of the company.

  1. There is no Q&A session with analysts, which is troubling as the company has stepped up the pace of investments in technology infrastructure and new stores. Earnings calls sound similar each quarter, save for the actual financials. With the financial performance of the company deteriorating, analysts' questions on earnings calls are crucial to the broader investor base obtaining a true picture of the business.
  2. There are no quarterly or annual breakdowns on the performance of the company's individual business segments. Should Bed Bath & Beyond be operating a division called the "Christmas Tree Shop" year round? Who knows, the trends in the business are not being shared.
  3. The company's co-founders continue to serve in co-chairman capacities, overseeing the decisions of a CEO who has been at the helm since 2003. Amid significant upheaval in retail due to mobile shopping and Amazon's (AMZN) expansive selection of general merchandise, Bed Bath & Beyond continues to push forward with the opening of new, giant stores. The reluctance to slow things down in the face of weakening operating results is disturbing.
  4. Finally, there is minimal granular information being supplied by Bed Bath & Beyond on what specifically is being invested in tech infrastructure wise, and what is fueling the slowdown in same-store sales, a drop in cash, and pressured profit margins. Brutal.

On Nike Earnings

A tough call on Nike (NKE). Expectations are a little lower than in recent quarters given the guide to higher World Cup marketing spending three months ago. I sense this World Cup has captivated the globe in a more profound way than many had expected, and that could lead to positive surprises in Nike's geographic sales lines and future orders.

Panic in Dubai?

A stock crash in Dubai hit Twitter feeds with great fanfare Tuesday. The benchmark Dubai Financial Market General Index fell 6.7%, pushing its losses above 20% for June. That was pretty scary in the face of Fed chief Janet Yellen's calming words last week (opposed to the emerging market rout last year caused by Ben Bernanke). The index then jumped back more than 6% on Wednesday.

While I am no Dubai economic expert, this stock volatility does appear to be country-specific, not something that is poised to blow back onto U.S. shores in a few weeks.

As a check on this view, the iShares Emerging Markets ETF (EEM) has held nicely amid this Dubai stock pullback, and liquidity-driven names in the social media/tech sectors are continuing to act well. For now, have no fear, Yellen is here.

Source: Yahoo Finance



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