Existential troubles facing Bed Bath & Beyond (BBBY) are creating an opportunity for Club holding TJX Companies (TJX) to take market share, which could lead to sustainable long-term growth at the off-price retailer behind the T.J. Maxx, Marshalls and HomeGoods. Bed Bath & Beyond has closed hundreds of stores around the nation and floated a number of ideas to try to raise capital in hopes of mounting a turnaround and avoiding bankruptcy. However, a Chapter 11 filing appears unavoidable and could come at any time. Shares of Bed Bath & Beyond traded for less than 30 cents each Thursday. Remarkably, with the struggles at the company well-known at the time, shares traded near $54 per share in January 2021 during a burst of meme-stock trader interest. Known for its wide-ranging home goods items, Bed Bath & Beyond has struggled to attract consumers who have shifted their spending online and are geared toward promotional purchases as they turn more cautious in a challenging macroeconomic environment. The retailer has also been wrestling with inventory issues, accompanied by declining sales, which has ultimately led to poor financial performance. “TJX of the off-pricers has the greatest exposure to home and this could only increase their relevance in the home category,” retail analyst Dana Telsey said Thursday in an interview. “The assortment of goods, the categories they can extend into, and the strength of the balance sheet … allows for them to be a solid beneficiary” of Bed Bath & Beyond’s misfortunes. Off-price retailers have been “taking share of home at a pretty steady clip,” William Blair retail analyst Dylan Carden told CNBC on Thursday. As Bed Bath & Beyond continues to decline, there’s “a considerable amount of share that could be spread between Amazon , Target , Walmart and TJX to the tune of 50 or so basis points for each,” Carden added. William Blair has an outperform, or buy-equivalent, rating on TJX whose shares gained nearly 18.5% over the past 12 months. TJX 1Y mountain TJX Companies (TJX) 1-year performance That inventory glut isn’t just a Bed Bath & Beyond problem; it’s industry-wide. Specialty retailers and major department stores alike have scrambled to unload excess inventory that’s piled up from the pandemic. Over the past year, TJX has been there — ready and able to buy the excess apparel and home items at even steeper discounts, further exemplifying why its business model works well, even in tough times. More Bed Bath & Beyond store closures “can only enhance conversion,” said Telsey, whose firm Telsey Advisory Group likes TJX stock. “These locations are “in very good areas, there’s great traffic, good demographics — and given the lack of new shopping center development, this provides a new opportunity for expansion,” Telsey said. While Bed Bath & Beyond stores tend to be larger than TJX-owned locations, their closues “still open up more real estate, in key areas, which is important as these companies try to continue to grow,” Carden said. Bottom line The fall of Bed Bath & Beyond stands to create more value for TJX Companies — the best-positioned retailer in a slowing economic environment as consumers become increasingly budget-conscious following the worst bout of inflation in decades. We own TJX for the high-quality merchandise it sells at its stores, which keeps on attracting consumers for its treasure-hunting experience at cost-saving prices. Over the long term, TJX should have a solid growth trajectory as it benefits from Bed Bath & Beyond’s merchandise liquidation and the wider inventory glut in retail. It’s possible TJX could choose to expand its HomeGoods or Marshalls operations into closed Bed Bath & Beyond locations as it gains more exposure in the home furnishings category. (Jim Cramer’s Charitable Trust is long TJX, AMZN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Shoppers come and go the TJ Maxx store at the Mall at Prince George’s on August 17, 2022 in Hyattsville, Maryland.
Chip Somodevilla | Getty Images
Existential troubles facing Bed Bath & Beyond (BBBY) are creating an opportunity for Club holding TJX Companies (TJX) to take market share, which could lead to sustainable long-term growth at the off-price retailer behind the T.J. Maxx, Marshalls and HomeGoods.
