With continued focus on new store openings along with enhancing
online presence and information technology up gradation,
Bed Bath & Beyond Inc.
) reported a solid first-quarter 2012 result with respect to
earnings growth, cash flow generation and overall financial
Earnings in the first quarter rose approximately 24% to 89 cents
per share from the year-ago earnings of 72 cents, handily
surpassing its earnings guidance range of 79 cents and 85 cents per
share. Bed Bath & Beyond also outpaced the Zacks Consensus
Estimate of 84 cents per share.
Bed Bath & Beyond's top line grew almost 5.1% to $2,218.3
million in the first quarter from $2,110 million in the year-ago
quarter. However, the company's top line missed the Zacks Consensus
Estimate of $2,243 million.
The company has been witnessing incremental trends in
comparable-store sales for the past several quarters, with the last
notable downside in comps dating back to the second quarter of
fiscal 2009. In the reported quarter, comparable-store sales rose
3% compared with a 7% rise in the prior-year quarter. This upside
in comp-store sales for the period came mainly from an increase in
both the number of transactions as well as average transaction
Gross profit margin for the quarter declined 60 basis points to
40% from 40.6% in first-quarter 2011. Margins suffered a downside
mainly due to increased coupons and their redemption and shift in
the mix of merchandise sold to lower margin categories.
During the quarter, Bed Bath's lower payroll and occupancy
expenses led to lower selling, general and administrative expenses
as a percentage of net sales, which eventually resulted in
operating margin expansion of about 40 basis points to 14.1%
compared with the prior-year quarter.
Bed Bath & Beyond ended the quarter with cash and cash
equivalents of $1,075.2 million compared with $1,229 million in the
year-ago quarter. Moreover, shareholders' equity at year-end stood
at $3,874.6 million versus $3,935.8 million in the prior-year
During the quarter, the company repurchased nearly 4.6 million
of its outstanding shares, valued at about $306 million. Therefore,
as of first-quarter end, the company had nearly $613 million
remaining under its share repurchase program of $2.0 billion,
authorized in December 2010.
Major events in fiscal 2012 so far
During the quarter, the company has entered into an agreement to
acquire a leading casual home furnishings and entertainment
Cost Plus Inc.
). The acquisition, which is expected to close during
second-quarter 2012, is anticipated to increase Bed Bath &
Beyond's fiscal 2012 earnings in the high-single digit to low
double-digit percentage range.
Moreover, on June 1, 2012, the company completed the acquisition
of Linen Holdings, LLC. We believe the acquisition will enhance the
company's customer base, as Linen Holdings distributes textile
products and other goods in hospitality, cruise line, food service,
health care and other industries.
In the first quarter of 2012, the company inaugurated about 2
Bed Bath & Beyond stores, 4 buybuy BABY stores and 1 Christmas
Tree Shops store. The company as of May 26, 2012 operated 995 Bed
Bath & Beyond stores in all 50 states, the District of
Columbia, Puerto Rico and Canada; 72 Christmas Tree Shop stores; 68
buybuy BABY stores and 45 stores under the names Harmon or Harmon
Face Values, thereby bringing the total store count to 1,180.
Bed Bath & Beyond is also a partner in a joint venture,
which operates two stores in the Mexico City market under the name
"Home & More."
Stepping into second-quarter 2012, Bed Bath has so far opened 2
Bed Bath & Beyond stores and 3 buybuy BABY stores.
Accounting for the additional 53
week in fiscal 2012, management forecasts a comparable-store sales
increase of 2% to 4% for both second quarter and fiscal 2012.
Consequently, the company expects comparable-store sales to boost
net sales by 5% to 7% in the second quarter and 6% to 8% in fiscal
On the cost side, the company expects depreciation in fiscal
2012 to be in the $180 - $190 million range. All this coupled with
assumptions of advertising expense similar to fiscal 2011 and
continued mix shift toward low-margin categories is expected to
deleverage operating profit margin for both the second quarter and
Bed Bath & Beyond expects to deliver second-quarter 2012
earnings per share between 97 cents and $1.03. Moreover, the
company continues to expect fiscal 2012 earnings per share to
increase by a high-single to a low-double-digit percentage,
including one additional week this fiscal year.
In addition to 12 stores opened so far in 2012, the company
expects to open a total of 40 stores across all concepts in fiscal
2012. The company expects the 2012 mix of store openings by concept
to remain similar to fiscal 2011.
Moreover, Bed Bath projects a total capital spending of about
$275 - $325 million in fiscal 2012, mainly slated for new stores
and existing store refurbishments, information technology
enhancements and other important future projects.
A strong countrywide network of stores coupled with the
strategic effort to align merchandise according to regional climate
and demographics offer a strong competitive advantage to Bed Bath
& Beyond, while also strengthening its well-established
position in the market.
Bed Bath & Beyond operates in a highly fragmented industry
and faces competition from larger retailers, such as
Wal-Mart Stores Inc.
) as well as from departmental and specialty stores.
Currently, Bed Bath & Beyond holds a Zacks #2 Rank, implying
a short-term Buy rating on the stock. The company retains a
long-term Neutral recommendation on the stock.
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