2 US Retailers Worth A Look

Two retailers that may be worth a look are Family Dollar Stores, Inc. (FDO) and Bed Bath & Beyond, Inc. (BBBY). Both reported quarterly results and investors liked what they saw. FDO shares are higher by 5% and BBBY shares are up about 20%.

Family Dollar reported strong fiscal second quarter results, with sales up 9% year-on-year and EPS up 33%. The retailer is benefiting from selling non-discretionary items such food and staples, and consumers trading down to cheaper alternatives. Management is also doing a good job of driving store traffic by emphasizing its low cost merchandise in a convenient format.

Family Dollar has been taking advantage of the weak economy and consumers trading down by opening new stores to increase market share. The consumer is likely to remain weak for some time, and Family Dollar should continue to do very well in this environment.

Bed Bath & Beyond’s results weren’t as impressive as Family Dollar’s. Sales were down 0.5% and EPS were down 17%, but the company did beat investor expectations. Moreover, this stock may have more potential than FDO shares going forward. That’s because BBBY’s sales have suffered during the economic downturn.

The retailer has also had to deal with its primary competitor, Linens ‘N Things, going out of business. Linens ‘N Things stores were liquidating inventories and putting pressure on BBBY’s sales and margins. With Linens ‘N Things out of the way, Bed Bath & Beyond will face less competition and should be able to increase market share and maintain profit margins - even as consumers continue to scale back on discretionary purchases and look for cheaper alternatives.

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