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Wedbush Favors BBB, Williams-Sonoma, Cost Plus

The Basics Still Rule: Value, Merchandise, Service and 'Experience'

Los Angeles — Wedbush Morgan Securities has selected three favorites among the home furnishings specialty retailers it evaluates: Bed Bath & Beyond, Williams-Sonoma and Cost Plus World Market.

Wedbush, which specializes in coverage of small capitalization companies, notes that specialty chains win by taking share from department stores based on: differentiated merchandise, superior customer service and value to the consumer, and what they call “a compelling shopping experience.”

Wedbush cites Bed Bath & Beyond for its continually strong financial results and points to the expected acceleration of volume growth in the Christmas Tree Shops division, now that this 2003 acquisition has been integrated into the corporate infrastructure. (The firm does not believe BBB will move to acquire rival Linens N Things.) The analysts also like the BBB valuation relative to other retailers.

Williams-Sonoma is cited by the Wedbush analysts for its multi-tier formats and strong brands. Like W-S, the Pottery Barn division enjoys good customer loyalty, a product of powerful merchandising and focused marketing campaigns.

The continuing rollout of West Elm, the hip urban retail entry, is expected to provide the company with increased access to a more moderate demographic than that tapped by its core brands, and it is aimed at a competitor, Pier 1 Imports, that is in the midst of a tricky alteration in its own image.

Cost Plus wins kudos for its highly unique merchandise mix, which includes gourmet consumables and wine. Wedbush believes that recent investments in infrastructure will hold down costs while the Cost Plus management team ramps up new merchandising and marketing initiatives.

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