Bed Bath & Beyond Soars 31% As 2Q Sales Outperform

Shares of Bed Bath & Beyond are surging 31% after the company reported better-than-expected 2Q comparable store sales or comps. Its comps grew 6% year-over-year, beating analysts’ estimates of a 2.1% decline.

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Notably, the home goods retailer returned to growth in its comps after a hiatus of almost three and a half years. It last reported positive comps in the fourth quarter of fiscal 2016.

Bed Bath & Beyond’s (BBBY) earnings per share surged 47% to $0.50 year-over-year, in comparison to analysts’ loss expectations of $0.30 per share. Its 2Q sales of $2.69 billion also came ahead of the Street consensus of $2.63 billion, thanks to the digital sales growth of 89% year-over-year.

The company did not provide any guidance but said that “On a preliminary basis, monthly sales for September show positive comparable sales growth, with similar store and digital sales as in the second quarter and accelerated BOPIS [Buy-Online-Pickup-In-Store] trends.” (See BBBY stock analysis on TipRanks)

On Sept. 25, Merrill Lynch analyst Curtis Nagle raised the stock’s price target to $19 (26.8% upside potential) from $16 and maintained a Buy rating, expecting upside to 2Q consensus. Nagle had forecast a significant sequential improvement in 2Q results given “positive channel mix (less online and more buy online pickup in-store), positive banner mix (more Bed Bath & Beyond), positive product mix (less consumables and promotions) and a big drop in deleverage.”

Currently, the Street is sidelined on the stock. The Hold analyst consensus is based on 6 Holds, 4 Buys and 4 Sells. The average price target of $11.08 implies downside potential of about 26% to current levels. Shares have increased by 1.1% year-to-date.