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September 23, 2010
Share ThisThe company has reported six consecutive quarters of improving trends thanks to its continuous endeavor to boost productivity and providing customers an excellent shopping experience.
Quarterly Details
Bed Bath & Beyond's top line jumped 11.6% to $2,137 million from $1,915 million in the year-ago quarter. The company has been witnessing increasing trends in comparable-store sales. After falling 0.6% in the second quarter of fiscal 2009, comparable-store sales increased in the subsequent quarters. In the quarter under review, comparable-store sales climbed 7.4%.
Double-digit top-line growth, coupled with a reduction in coupon redemption and inventory acquisition costs, led to a 50 basis-point increase in gross margin to 40.4%. However, this was partially offset by a change in the mix of merchandise sold, which included lower-margin categories. Bed Bath & Beyond's cost containment efforts led to lower selling, general and administrative expenses and advertising expenses, which eventually resulted in operating margin expansion of 230 basis points year over year.
Financial Position
In the quarter under review, cash and cash equivalents came in at $1,040.5 million compared with $1,035.6 million in the year-ago quarter. Bed Bath & Beyond repurchased $193 million worth of shares and ended the quarter with shareholders' equity of $3,784.7 million versus $3,260.9 million in the prior-year quarter.
For investment in new stores, renovating existing stores and to improvise on information technology, the company incurred a capital expenditure of $84 million in the first half of fiscal 2010 and expects to spend $225 million in fiscal 2010.
Stores Update
The company currently operates 973 Bed Bath & Beyond stores in 50 states, the District of Columbia, Puerto Rico and Canada, 62 Christmas Tree Shops stores, 35 buybuy BABY stores and 45 stores under the brands of Harmon or Harmon Face Values, thereby bringing the total store count to 1,115. The company added five Bed Bath & Beyond stores and two buybuy BABY stores in the reported quarter.
On May 30, 2010, Bed Bath opened one additional Bed Bath & Beyond store. Also, the company is a partner in a joint venture, which operates two stores in the Mexico City market under the name "Home & More."
Management Guided Sales and Same-Store Sales Outlook
Management now expects comparable store sales to increase by a low single-digit percentage in the third and fourth quarters of fiscal 2010 due to a tough comparison in the second half. For fiscal 2010, the company expects comparable store sales to increase in the mid single-digit percentage. The company expects comparable store sales to trigger net sales by a mid single-digit percentage in the third and fourth quarters of fiscal 2010 and a high single-digit percentage for fiscal 2010.
Earnings Guidance
Bed Bath & Beyond expects to deliver third-quarter 2010 earnings per share between 61 cents and 65 cents. Fiscal 2010 earnings per share are expected to rise 20% over 2009 earnings per share of $1.64.
Zacks Estimate Trend
The Zacks Consensus Estimate on Bed Bath & Beyond's earnings for the fiscal year ending February 2011 is currently pegged at $2.71 per share and for the third quarter of fiscal 2010 at 64 cents a share.
Our Take
We believe that Bed Bath & Beyond's prudent inventory management, good customer service, continuous effort to spur profitability and robust market share with a debt free balance sheet indicate that it is well poised for future growth.
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