Why Shares of Bed Bath & Beyond Dropped Today

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What happened

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Shares of retailer Bed Bath & Beyond (NASDAQ: BBBY) slumped on Friday following an analyst downgrade. The stock was down about 4.15% at 12:30 p.m. EST, after having been down as much as 7% earlier in the day.

So what

Analysts at JPMorgan lowered their rating on shares of Bed Bath & Beyond to "underweight" from "neutral." Increased competition in the home furnishing market, as well as overly optimistic estimates regarding the benefits of tax reform savings, led to the downgrade. JPMorgan also lowered its price target on the stock to $18.

Bed Bath & Beyond has struggled over the past few years as retail has shifted increasingly online. Both gross and operating margins have been trending downward since 2012, the result of increased competition and the company's dependence on its ubiquitous "20% off" coupons. Bed Bath & Beyond produced $500 million of net income over the trailing-12-month period, down from $1.04 billion in fiscal 2013.

Shares of Bed Bath & Beyond shed 46% of their value in 2017. That $18 price target is 18% lower than the current stock price.

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Now what

Bed Bath & Beyond won't report its fourth-quarter results until April 11, so investors won't have a good sense of how the retailer did last holiday season for a few more months. Retail sales overall were strong, so the company may benefit from a rising tide lifting all boats.

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Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.