As the focus on improving living spaces has increased amid the pandemic because of the increased amount of time spent indoors, demand for home improvement products has skyrocketed. However, specialty retailer Bed Bath & Beyond Inc. (BBBY) has not been able to capitalize on the industry tailwinds lately.
The company recorded an operating loss of $71.87 million and a net loss of $50.87 million in the last reported quarter. Over the past month the stock has dropped 15.1%, reflecting a poor forecast for the company’s future performance. Moreover, the company’s increasing store closures and divestments may hurt its revenue generating prospects in the near term.
Meanwhile, BBBY’s peers have taken full advantage of the growing demand for home improvement products and have delivered stellar returns. The TJX Companies, Inc. (TJX), Newell Brands Inc. (NWL), and Tempur Sealy International, Inc. (TPX) are expected to see a boost in sales as they are ramping up manufacturing capacity to meet rising demand. Hence, we believe these companies can be better bets given their tremendous growth prospects and expanded capabilities.
The TJX Companies, Inc. (TJX)
TJX is a global off-price clothing and home fashions store. Marmaxx, HomeGoods, TJX Canada, and TJX International are four-business segments through which the company operates. It sells home basics, furniture, rugs, lighting products, as well as other home decorative accessories and merchandise.
Last month, the company’s Board of Directors reinstated its share repurchase program under which TJX will repurchase approximately $1.0 billion to $1.25 billion of its stock during the fiscal year ending January 29, 2022. This decision demonstrates its strong business outlook and its ability to maintain a solid balance sheet.
During the first quarter that ended May 1, 2021, TJX’s net sales increased 128.8% year-over-year to $10.09 billion. Its net income came in at $533.93 million for this period, compared to a net loss of $887.49 million in the first quarter of 2020. The company’s EPS came in at $0.44, compared to a loss per share of $0.74 in the prior year period. Also, TJX’s net sales under the Home Goods segment increased 181.8% from the prior-year quarter to $2.14 billion.
The consensus EPS estimate of $2.58 for the current year represents a 732.3% increase year-over-year. The consensus revenue estimate of $46.03 billion for the current year represents a 43.2% increase from the same period last year. The stock has gained 33.2% over the past year and 3.6% over the past month.
TJX’s POWR Ratings reflect this promising outlook. The company has an overall grade of B, which translates into a Buy rating in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
TJX also has an A grade for Growth, and a B for Quality, Sentiment, and Momentum. Within the A-rated Fashion & Luxury industry, it is ranked #14 out of 65 stocks. To see additional POWR Ratings for Stability and Value for TJX, click here.
NEWELL Brands Inc. (NWL)
NWL primarily engages in designing, manufacturing, and distribution of consumer and commercial products internationally. X-Acto, arpie, Tigex Waterman, and X-Acto are among the well-known brands of the company. The company markets its products to various stores, which includes warehouse clubs, department stores, drug/grocery stores, mass merchants, specialty retailers, distributors, e-commerce businesses, and others.
In April, NWL’s subsidiary Rubbermaid collaborated with stylist and interior designer Emily Henderson to demonstrate how, with the help of Rubbermaid Brilliance Pantry containers, outer order at home can lead to inner calm. This collaboration might help the company create a superior brand identity in the industry, further boosting its revenue.
For the fiscal year ending March 31, 2021, NWL reported net sales of $2.29 billion which represents a year-over-year increase of 21.3%. Its operating profit came in at $192 billion, compared to an operating loss of $1.41 billion in the prior year. Its net income came in at $89 million for this period, compared to a net loss of $1.28 billion in the first quarter of 2020. The company’s EPS came in at $0.21, compared to a loss per share of $3.02 in the prior-year period.
NWL is expected to see revenue growth of 7.6% for the current year. Moreover, NWL has an impressive earnings surprise history as it beat the consensus EPS estimates in each of the trailing four quarters. Its EPS is estimated to increase 9.9% year-over-year to $1.89 in fiscal 2022. Over the past year, NWL’s stock has gained 67.9%. Furthermore, it has gained 25.3% so far this year.
NWL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, which equates to a Buy rating in our POWR Ratings system. The stock also has an A grade for Growth, and a B for Momentum. In the A-rated Home Improvement and Goods industry, it is ranked #29 of 65 stocks.
In total, we provide eight different ratings for NWL. Beyond what we’ve stated above, we have also given NWL grades for Sentiment, Value, Quality, and Stability. Get all the NWL ratings here.
Tempur Sealy International, Inc. (TPX)
TPX engages in developing, manufacturing, and distribution of bedding products. The company operates through two North America and International segments and markets its products under brand names TEMPUR, Tempur-Pedic, Sealy, Comfort Revolution, and Stearns & Foster.
Last month, in Furniture Today’s ranking of the Top 20 U.S. Bedding Producers, TPX’s Sealy and Tempur-Pedic brands were rated as the #1 and #2 best-selling mattress brands in the United States. This is the second year in a row that the Sealy brand has been named the best-selling mattress brand in the United States. This might help TPX establish its brand image among its consumers.
Also last month, TPX announced that it has chosen Crawfordsville, Indiana as the site of its third-domestic foam pouring plant. The new-state-of-the-art facility is projected to be the world’s largest TPX production facility, and it will help the company to cater its northeast customers in a convenient and timely manner.
TPX’s net sales increased 26.9% year-over-year to $1.04 billion in the first quarter that ended March 31, 2021. Its operating income surged 78.9% year-over-year to $188.4 million. The company’s net income increased 118.6% from the year-ago value to $130.5 million over this period. Its EPS increased 121.4% year-over-year to $0.62.
The company’s EPS is expected to grow 44% year-over-year to $2.75 in the current year. Analysts expect TPX’s revenue to increase 26.1% year-over-year to $4.64 billion in the fiscal 2021. TPX’s stock has gained 127.1% over the past year. The stock has surged 50.1% year-to-date.
It is no surprise that TPX has an overall grade of B, which equates to a Buy rating in our POWR Ratings system. The stock also has an A grade for Growth, and a B for Momentum and Quality. In the same industry, it is ranked #18 out of 65 stocks.
In addition to the POWR Ratings grades I have just highlighted; you can see the TPX grades for Value, Sentiment, and Stability.
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BBBY shares were trading at $28.87 per share on Thursday afternoon, up $0.02 (+0.07%). Year-to-date, BBBY has gained 62.56%, versus a 16.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...
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