KeyBanc Capital Markets analyst Bradley Thomas told investors that home
products retailer BBB and electronics retailer Best Buy could reap some
benefits from the decision by bankrupt Linens 'n Things Inc. to pull
the plug and the impending bankruptcy of Circuit City Stores Inc.
Thomas then upgraded Best Buy to "buy" from "hold" and BBB to "hold"
from "underweight" in the "Someone has to gain from the banking
meltdown" category.
Thomas obviously believes that what has
sometimes been dubbed the "reckless American consumer" by certain
foreign observers will continue to fork over cash for home goods and
electronics despite what could be some gaping holes in their
pocketbooks.
Despite sagging TV prices and consumer precaution,
CC's woes will provide a net benefit for Best Buy, Thomas surmised. He
said it's a matter of when, but clearly not if, CC is going to seek
bankruptcy protection.
Linens, meanwhile, indicated on Oct. 3 it
would forgo reorganization under Chapter 11 and either sell its assets
as a going concern or liquidate its remaining stores. The latter
scenario -- perhaps more likely after a going-concern bid failed to
materialize before a stalking-horse bidder was approved Oct. 10 -- could
bolster BBB's same-store sales this year by 6% over last year, Thomas
predicted.
He did acknowledge, however, that BBB's revenue will still
be under a lot of pressure in the second half because some consumers
will pull back from household goods sales. Thomas then decided to err
on the side of caution, perhaps, when he declined to upgrade BBB to
"buy" because of that sales pressure. - Terry Brennan
Terry Brennan is a senior writer covering bankruptcy for The Deal.
It's debatable whether congratulations are actually in order for retailers Bed Bath & Beyond Inc. and Best Buy Co. after an equity analyst upgraded both of them on Monday.
