I believe that Bed Bath & Beyond (BBBY Quote - Cramer on BBBY - Stock Picks) stock has been bid up to an unwarranted level because of the expectation of the short- or longer-term effects of the closure of some Linens-N-Things stores (or the closure of the entire chain), which some analysts believe would add as much as 50 cents to earnings. I believe that this is being done by investors who are ignorant of the total composition of the home furnishings market and who also believe that Christmas Tree Shops will be a successful 300-store chain at some point (41 stores now).
Home furnishings sector sales break down as follows:
- specialty players (like Bed Bath & Beyond) 17% of sales;
- department stores 13%;
- home improvement companies 9%;
- traditional furniture stores 25%; and
- mass merchants 24%.
Textiles and tabletop, the biggest sub-segments of the specialty stores, compete against mass merchants and club stores, which are the market share leaders in these sub-segments. They are also the only sector with market share gainers now, and are likely to be market share gainers for the foreseeable future. Using
Target (TGT Quote - Cramer on TGT - Stock Picks) as an example in a sell-side pricing survey, the opening price point market basket for bedding has Bed Bath & Beyond at $330 vs. Target at $159; for bath, the comparison was $69 for Bed Bath & Beyond vs. $58 at Target.
At the high end, Target's top price in bedding was $251. While admitting that the average of
JCPenney (JCP Quote - Cramer on JCP - Stock Picks),
Kohl's (KSS Quote - Cramer on KSS - Stock Picks) and
Macy's (M Quote - Cramer on M - Stock Picks) opening price point bedding was $562, for example, and that Bed Bath &Beyond could gain share from them (and that quality is probably not comparable at Target), I believe that the trend is obviously for more trading down and pricing pressure.
Christmas Tree Shops does a nice job with seasonal merchandise and the addition of Harmon's discount store merchandise that has been described as "front end of
Walgreen (WAG Quote - Cramer on WAG - Stock Picks)" will be a positive. But I agree with one analyst that Christmas Tree is a cross between
Trader Joe's,
Cost Plus (CPWM Quote - Cramer on CPWM - Stock Picks),
HomeGoods and
Tuesday Morning (TUES Quote - Cramer on TUES - Stock Picks), and that implies that there is no reason for a special trip to this store for a retrenching consumer, since much of the merchandise is not too important for folks whose real income is under pressure.
Ron Thomas
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