NEW YORK (AP) — Shares of home products retailer Bed, Bath & Beyond fell Tuesday after an analyst downgraded the stock a day before the company reports second-quarter results.
THE SPARK: Oppenheimer analyst Brian Nagel said in a note to investors that waning product cycles for products by Green Mountain Coffee Roasters, which makes Keurig single-cup brewers, that it sells could hurt Bed Bath & Beyond. In addition, coupons are starting to be a more important part to driving traffic into the stores, which could hurt profit margins, Nagel said.
THE BIG PICTURE: Big-box stores such as Bed, Bath & Beyond are facing tough competition from discounters and online retailers. In June, the Union, N.J.-based company gave a disappointing second-quarter outlook, although it announced better-than-expected first-quarter results. It told investors it was being forced to use more coupons to get people to shop, and that was hurting its profitability. The company reports second-quarter results on Wednesday.
ANALYSIS: Nagel noted that the stock is up 19 percent since late June, so it is fairly valued.
"We are increasingly concerned that the potential for consistent and meaningful sales and earnings upside at Bed, Bath & Beyond is beginning to wane," Nagel said. He downgraded the stock to "Perform" from "Outperform."
SHARE ACTION: Shares fell $2.42, or 3.4 percent, to $68.35 in midday trading. The stock is up 22 percent since the beginning of the year.