Bed Bath & Beyond Inc.
) reported earnings of $1.16 per share for second-quarter fiscal
2013 that came a notch ahead of the Zacks Consensus Estimate of
$1.15, and rose 18.4% from the year-ago quarter earnings of 98
Quarter in Detail
The company's top line jumped 8.9% to $2,823.7 million in the
second quarter from $2,593.0 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 $2,816.0 million.
Comps rose 3.7%, primarily driven by an increase in the
transaction count and the average transaction amount.
Gross profit came in at $1,113.5 million, up 7.8% from the
comparable year-ago level. However, gross profit margin for the
quarter declined 40 basis points (bps) to 39.4% from 39.8% in
second-quarter fiscal 2012. Margins suffered a downside mainly
due to a 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
8.4% year over year to $723.7 million and as a percentage of
sales it contracted 10 bps to 25.6%. During the quarter, Bed Bath
& Beyond's higher advertising costs offset by lower
professional fees and store expenses led to a decline in SG&A
expenses as a percentage of net sales.
Consequently, operating margin contracted about 30 bps to
13.8% from the prior-year quarter. However, in dollar terms,
operating profit increased 6.7% to $389.8 million.
Bed Bath & Beyond ended the second quarter with cash and
cash equivalents of $383.3 million compared with $744.5 million
at the end of the prior-year quarter. Moreover, shareholders'
equity as of Aug 31, 2013, stood at $4,026.7 million versus
$3,920.1 million as of Aug 25, 2012.
During the quarter, the company repurchased nearly 3.5 million
of its outstanding shares, valued at about $257.0 million.
Therefore, as of second-quarter end, the company had nearly $1.8
billion remaining under its share repurchase program of $2.5
billion, authorized in Dec 2012.
In the second quarter, Bed Bath & Beyond inaugurated 1 Bed
Bath & Beyond store, 1 Christmas Tree Shops store, 3 buybuy
BABY store and 1 Harmon Face Values store. As of Aug 31, 2013,
the company operated 1,009 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; 74 Christmas Tree
Shop or andThat! stores; 86 buybuy BABY stores and 49 stores
under the names Harmon or Harmon Face Values, thereby bringing
the total store count to 1,484.
Additionally, Bed Bath & Beyond is in a joint venture
operating 3 stores in Mexico City under its namesake brand.
Stepping into the third quarter of fiscal 2013, Bed Bath has
so far opened 1 World Market store and 2 Bed Bath & Beyond
Taking into account the 17 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 continues to
renovate and relocate its stores across all concepts.
Management expects net sales to increase by 6% to 8% in the
third quarter and decline by 2% to 4% in the fourth quarter.
However, on a 13-weeks comparable basis, excluding the effect of
the additional 14
week in fiscal 2012, net sales are expected to rise by 1% to 3%
in the fourth quarter of fiscal 2013.
Further, the company projects a comparable store sales
increase of 1% to 3% for the third quarter and 3.5% to 5.5% for
the fourth quarter.
On the cost side, the company expects depreciation in fiscal
2013 to be nearly $220.0 million. Additionally, the company
expects operating profit margin to be flat for the third and
fourth quarter and marginally deleverage for fiscal 2013.
Net interest expense for the third and fourth quarters are
each expected to include about $2.2 million in World Market net
interest expense, mainly due to the addition of sale-leaseback
obligations in connection to its distribution facilities.
Further, tax provision for the third quarter is projected to be
about 37.5%. For the fourth quarter and full year, the company
expects tax provisions of about 37%.
Bed Bath & Beyond expects to deliver third-quarter fiscal
2013 earnings per share between $1.11 and $1.16 and
fourth-quarter earnings of $1.70 to $1.77. Moreover, the company
raised its lower-end fiscal 2013 earnings per share guidance to
$4.88 from $4.84 projected earlier. Therefore, Bed Bath &
Beyond's new earnings guidance for fiscal 2013 ranges between
$4.88 and $5.01, compared with $4.84 - $5.01 forecasted
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
Five Below Inc.
Tractor Supply Company
), all of which carry a Zacks Rank #2 (Buy).
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