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Bed Bath & Beyond Off; 'Experiences' to Replace 'Things' Post-Pandemic

Bed Bath & Beyond will see second-half headwinds as consumers shift spending toward 'experiences' and away from 'things,' KeyBanc says.

Shares of Bed Bath & Beyond  (BBBY) - Get Bed Bath & Beyond Inc. Report were lower on Monday following analysts said that as the pandemic lockdowns ease, they expected consumers to shift their spending to "experiences" from "things." 

The Union, N.J., retail chain was lowered to underweight from sector weight. The stock's benefit from "nesting" trends should wane as states lift their coronavirus lockdown restrictions, the investment firm said.

KeyBanc initiated a $24 price target for BBBY, indicating 32% potential downside for the stock. Bed Bath shares at last check were off 16% at $29.78. 

Home-improvement retailer Lowe's  (LOW) - Get Lowe's Companies, Inc. (LOW) Report was downgraded to sector weight from overweight in the same note. 

And Rent-A-Center  (RCII) - Get Rent-A-Center Inc Report was upgraded to overweight from sector weight based on the same experiences-versus-things argument. 

The firm sees "nesting share of wallet trends remaining strong in the first half (and driving potential upside to consensus in the first quarter for many names)," KeyBanc analyst Bradley Thomas wrote. 

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But "fundamentals and sentiment are likely to see challenges in the second half as covid-19 dynamics dissipate and consumers return to spending on 'experiences' at the expense of 'things.' 

"As such, we recommend caution and selectivity among home-related retailers and manufacturers with a focus on clear market-share-growth stories," 

KeyBanc estimates U.S. consumers have shifted more than $500 billion of annual discretionary dollars into home-related spending from categories where outlays have been "significantly reduced."

But the firm expects that trajectory to change in the second half, a move that should hurt most home-focused retailers.

As for the upgrade to Rent-A-Center, the Plano, Texas, provider of consumer goods under flexible payment plans, Thomas wrote that he was "encouraged by the recently announced Acima acquisition, which should position RCII for accelerating growth and profitability in the more attractive direct/digital segment of the business. 

"Furthermore, government stimulus and an influx of higher quality customers have supported strong customer payment activity in recent months." 

Rent-A-Center shares at last check were trading up 2.4% at $44.33. Lowe's shares were 2% lower at $163.46.