Bed Bath & Beyond Inc.
) reported earnings of 93 cents per share for first-quarter
fiscal 2013 that came in-line with the Zacks Consensus Estimate,
and rose 4.5% from the year-ago quarter's earnings of 89 cents.
Earnings for the quarter and the prior-year quarter included a
distinct net tax benefit of a penny and 6 cents, respectively.
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However, excluding tax benefit, quarterly earnings came in at 92
cents per share for the quarter, up 10.8% from the year-ago
quarter's earnings of 83 cents.
Quarter in Detail
The company's top line jumped 17.8% to $2,612.1 million in the
first quarter from $2,218.3 million in the year-ago quarter. The
year-over-year rise in sales was primarily driven by the
inclusion of World Market and Linen Holdings, an increase in
comparable-store sales (comps) and new store openings. Moreover,
Bed Bath & Beyond's top line surpassed the Zacks Consensus
Estimate of $2,600.0 million.
Comps rose 3.4%, primarily driven by an increase in the
transaction count and the average transaction amount.
Gross profit came in at $1,033.0 million, up 16.4% from the
comparable year-ago level. However, gross profit margin for the
quarter declined 50 basis points (bps) to 39.5% from 40.0% in
first-quarter fiscal 2012. Margins suffered a downside mainly due
to rise in coupons driven by higher redemptions as well as
increase in the average coupon amount, and mix shift in products
sold to lower margin categories.
Selling, general and administrative (SG&A) expenses surged
23.7% year over year to $709.9 million and as a percentage of
sales it expanded 130 bps to 27.2%. During the quarter, Bed Bath
& Beyond's higher payroll and payroll-related expenses as
well as higher advertising costs led to an increase in SG&A
expenses as a percentage of net sales.
Consequently, operating margin contracted about 170 bps to 12.4%
from the prior-year quarter. However, in dollar terms, operating
profit increased 3.1% to $323.1 million.
Bed Bath & Beyond ended the first quarter with cash and cash
equivalents of $439.9 million compared with $1,075.2 million at
the end of the prior-year quarter. Moreover, shareholders' equity
as of Jun 1, 2013, stood at $4,005.1 million versus $3,874.6
million as of May 26, 2012.
During the quarter, the company repurchased nearly 5.0 million of
its outstanding shares, valued at about $324.0 million.
Therefore, as of first-quarter end, the company had nearly $2.1
billion remaining under its share repurchase program of $2.5
billion, authorized in Dec 2012.
In the first quarter, Bed Bath & Beyond inaugurated 4 Bed
Bath & Beyond store, 2 World Market stores, 1 buybuy BABY
store and 1 Harmon Face Values store and closed 1 Christmas Tree
Shops store. As of Jun 1, 2013, the company operated 1,008 Bed
Bath & Beyond stores in all 50 states, the District of
Columbia, Puerto Rico and Canada; 266 World Market or Cost Plus
World Market stores; 73 Christmas Tree Shop or andThat! stores;
83 buybuy BABY stores and 48 stores under the names Harmon or
Harmon Face Values, thereby bringing the total store count to
Bed Bath & Beyond is in a joint venture operating 3 stores in
the Mexico City under its namesake brand.
Stepping into the second quarter of fiscal 2013, Bed Bath has so
far opened 1 buybuy BABY store.
Taking into account the 9 stores opened so far in fiscal 2013,
the company anticipates its total store openings for the year to
be in the mid-30s. Additionally, the company expects its joint
venture in the Mexico City market to open 2 more stores in fiscal
Management expects net sales to increase by 7% to 9% in the
second quarter and by 5% to 7% for fiscal 2013. Further, the
company projects a comparable store sales increase of 2% to 4%
for both the second quarter and fiscal 2013.
On the cost side, the company expects depreciation in fiscal 2013
to be nearly $220.0 million. Additionally, driven by the above
mentioned sales projections and the consolidation of World Market
and Linen Holdings, the company expects operating profit margin
to deleverage for the second quarter and fiscal 2013.
Net interest expense for the second quarter and the full year is
expected to include about $2.2 million and $8.7 million,
respectively, in World Market net interest expense, mainly due to
the addition of sale-leaseback obligations related to its
distribution facilities. Further, tax provision for the second
quarter is projected in the 35% - 36% range, while the full-year
tax provision is estimated to be 36.5% to 37%.
Bed Bath & Beyond expects to deliver second-quarter fiscal
2013 earnings per share between $1.11 and $1.16. Moreover, the
company projects fiscal 2013 earnings per share in the range of
$4.84 - $5.01, consistent with the previous projection of
mid-single-digit to low-double-digit percentage growth.
Additionally, Bed Bath & Beyond projects a total capital
spending, including that of World Market and Linen Holdings, of
about $350 million in fiscal 2013, mainly slated for new outlets
and existing store renovation, information technology advancement
and other important future projects.
Other Stocks to Consider
Bed Bath Beyond currently holds a Zacks Rank #3 (Hold). Other
stocks worth considering in the retail industry are
Big 5 Sporting Goods Corp.
Tractor Supply Company
). Big 5 and Cabela's hold a Zacks Rank #1 (Strong Buy), while
Tractor Supply carries a Zacks Rank #2 (Buy).