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Upgrading Bed Bath & Beyond

Bed Bath & Beyond (BBBY): Upgrades to 4

STARS (accumulate) from 3 STARS (hold)

Analyst: Maureen Carini

The domestics and home furnishings retailer posted Q4 EPS of $0.22 vs. $0.17, a penny better than expected. Same-store sales grew 4.9%, at the high end of the expected range. Despite the weaker economy, Bed & Bath's promotional level remained in line with last year's level. S&P sees good cash levels and a good inventory position entering fiscal 2002 (Feb.). S&P expect EPS this year to grow 27% to $0.75 -- aided by 80 new stores, 3%-5% comparable-store sales gains and a modest margin improvement. S&P believes Bed & Bath is well positioned to expand its 4% share of the $75 billion home-furnishing market, warranting a premium valuation at 35 times the fiscal 2002 estimate.

Dell Computer (DELL): Reiterates 3 STARS (hold)

Analyst: Megan Graham-Hackett

Ahead of a New York City analyst meeting Thursday and after the market's close Wednesday, Dell confirmed Q1 fiscal 2002 (Jan.) guidance of revenues of $8 billion and EPS of $0.17, but noted it still has one month to go before the quarter ends. Dell's guidance was in line with S&P's estimates. The PC-maker's confirmation is encouraging and reflects market share gains vs. competition as the company has been aggressively pricing its systems. S&P expect Dell to highlight competitive strengths vs. its peers at the analyst meeting, but S&P will look for further detail on gross margin outlook and Dell's comments on international demand. S&P will update after the meeting.

Supervalu (SVU): Reiterates 3 STARS (hold)

Analyst: Phillip Seligman

The discount retailer posted fiscal Q4 EPS of $0.46 vs. $0.52, before one-time items, matching its guidance. Fiscal 2002 (Feb.) is a transition year, with a loss of some $1.7 billion in revenue and $0.18-$0.22 in EPS from the end of its Kmart business, and from restructuring that includes closing of underperforming stores, warehouse consolidation and layoffs of 4,500 workers. Supervalu says the benefit is negligible in fiscal 2002, but is adding $0.07-$0.09 in EPS and adding $60 million in free cash flow by fiscal 2003. Supervalu also is focusing on store remodels and is expanding its Sav-A-Lot format. S&P is cutting the fiscal 2002 EPS estimate $0.10 to $1.70, and says avoid Supervalu until a profit trend is seen.

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