Bed Bath tests Cost Plus food section -analyst

* Pilot in handful of New York/New Jersey stores -analyst
* Test seen raising possibility of Bed Bath buying Cost Plus
* Cost Plus shares up 6 pct

By Dhanya Skariachan

NEW YORK, Dec 10 (BestGrowthStock) – Home goods chain Bed Bath &
Beyond Inc (BBBY.O: ) is testing a Cost Plus (CPWM.O: ) specialty
foods section in a handful stores in key markets such as New
York and New Jersey, a JPMorgan analyst said on Friday.

Union, New Jersey-based Bed Bath, whose products range from
bed linens to cutlery, has in recent years been carrying more
specialty foods, and the test could ultimately lead to a bigger
partnership between the two retailers, JP Morgan analyst
Christopher Horvers said.

“One obvious question is whether Bed Bath & Beyond would
consider purchasing Cost Plus World Market as a means to roll
out the store-within-a-store concept,” Horvers said.

The Cost Plus World Market section in the Bed Bath store is
about 2,OOO square feet in size, Horvers wrote in a note.

“If they stayed as separate entities, it is unclear what
the financial and strategic relationship would be and how Cost
Plus would protect itself from Bed Bath usurping their
capabilities,” Horvers said.

Bed Bath has a history of making strategic acquisitions. It
bought health and beauty care retailer Harmon in 2002 and
another chain — Christmas Tree Shops — in 2003 to boost its
direct sourcing capabilities.

“Both Harmon and Christmas Tree Shops were designed to
first improve the core and drive the Bed Bath stores’ sales
productivity,” Horvers said, indicating that the pattern was a
positive for Cost Plus.

Bed Bath, which is due to report earnings in January, has
more than $1 billion in cash and no debt. Cost Plus, which has
a market cap of $210 million, ended its shareholder rights plan
in April 2010, three years ahead of time.

A shareholder rights plan, or poison pill, is a tool used
to fend off potential takeover threats.

Cost Plus shares were up 6 percent at $10.04, while Bed
Bath shares were up 0.6 percent at $46.78 on Friday afternoon.
(Reporting by Dhanya Skariachan, editing by Matthew Lewis)

Bed Bath tests Cost Plus food section -analyst