Bed Bath And Beyond Essay

Although Bed Bath and Beyond (BBBY) seems to be performing well, it is important to underscore that they only have 4% of the market share. They are facing direct competitors in the domestic retail market, such as Linens ’n Things. They also face indirect discount store competitors including department stores, such as JC Penny, and mass merchandisers, such as Walmart and Target. In order to keep afloat in such a competitive environment, BBBY has placed emphasis on its merchandise and shopping experience, which must differentiate in price and quality from other retailers. Constantly updating the merchandise, employing a low-cost strategy, and having excellent customer service have enabled them to enjoy a competitive edge in comparison to competitors. Due to their dominance in these disciplines, their business risk seems to be low. In addition to this, they were also basically the pioneers of the domestic retail market, meaning they likely have formed relationships with distributors that cannot be disrupted too much. Their large product mix is another strength that keeps their business risk low as well. With so

To illustrate, even though they primarily deal in small investments (expansions, acquisitions), there is too much extra cash to be able to guarantee investors a secure investment. "No investor wants to see all that cash sitting on BBBY's books" (Bed Bath & Beyond: The Capital Structure Decision, HBS). In order to increase earnings per share and provide equity holders with a higher rate of return, investors urge that BBBY modify the capital structure. Exhibit 8 serves as an illustration of the advantages of using another format. By providing $400 million in excess cash and $636.3 million in borrowed funds to repurchase shares and raising the long-term debt to a level of 40%, the company's earnings per share would rise from $1.35 to