Bed Bath & Beyond (NASDAQ:BBBY) remains susceptible to volatile economic conditions as the housing and employment data in the U.S. remain weak. This is likely to effect the overall home furnishing retail industry. Since the bankruptcy of Linen ‘n Things in 2008 and closure of over 500 of its stores, Bed Bath & Beyond witnessed strong rebound in comparable sales and average revenue per square foot in 2009 and 2010. It competes with specialty retailers like Williams-Sonoma, IKEA, Pier 1 Imports and with large retailers like Wal-Mart (NYSE:WMT), Target (NYSE:TGT).
Factors Affecting Bed Bath & Beyond:
More affordable housing may shift consumer preference toward home ownership vs. renting
The Trulia Rent vs. Buy Index shows home ownership to be more economical than renting in 4 out of 5 major U.S. cities. As the economy recovers, this could lead to greater home ownership. Bed Bath & Beyond would benefit since new home owners are likely to spend more money furnishing their house than rental customers.
The pace of recovery of the U.S. economy
Spending on home furnishing items is discretionary in nature and is sensitive to the state of the economy. Spending on durable goods declined $200 billion from a peak of $1.2 trillion in 2007, to around $1 trillion during the crisis in 2009. The products sold by Bed Bath & Beyond are often discretionary spending items.
Shifting consumer preferences may affect home furnishing industry
In the digital age, many consumers prefer furnishing their home with a new HDTV or other electronics instead of linens and home décor items. According to a survey by IBM, electronics is the product category most often chosen by multi-channel retail shoppers. (Multi-channel retailing means selling through different distribution channels such as brick & mortar retail stores and online). Home Décor items ranked last, the lowest out of discretionary spending items surveyed.