Thursday, June 24, 2010

Bed Bath & Beyond Beats

Bed Bath & Beyond Inc. (BBBY: 39.88 -1.58 -3.81%) reported better-than-expected first-quarter results on the heels of double-digit growth in sales and higher margins. Earnings rose 53% to 52 cents per share from the year-ago quarter and handily surpassed its earnings guidance range of 44 cents to 48 cents per share. Bed Bath & Beyond also outpaced the Zacks Consensus Estimate of 48 cents a share. 
The company has reported five consecutive quarters of improving trends thanks to a continuous endeavor to boost its productivity and provide customers an excellent shopping experience.
Quarterly Details 
Bed Bath & Beyond’s top line jumped 13.5% to $1,923 million from $1,694 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 8.4% compared with a decrease of 1.6% in the prior-year quarter. 
Double-digit, top-line growth coupled with a reduction in coupon redemption and inventory acquisition cost led to a 90 basis points increase in gross margin to 40.3%. Bed Bath & Beyond’s cost containment efforts led to the cut in selling, general and administrative expenses and advertising expenses, which eventually resulted in operating margin expansion of 330 basis points year over year. 
Sales and Same-Store Sales Outlook 
Management now expects comparable store sales to increase by a low, single-digit percentage in the second half of 2010, compared with a mid, single-digit percentage growth in the second quarter of fiscal 2010, due to a tough comparison and lumpy economic condition expected in the second half. The company expects comparable store sales to trigger net sales by a high, single-digit percentage in the second quarter of fiscal 2010 and a mid, single-digit percentage in the second half of fiscal 2010. 
Financial Position 
In the quarter under review, cash and cash equivalents came in at $1,083.9 million compared with $855.4 million in the year-ago quarter. Bed Bath & Beyond repurchased $85 million worth of shares and ended the quarter with shareholders’ equity of $3.783.2 million versus $3,110.4 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 $39 million in the reported quarter and expects to spend $225 million in fiscal 2010. 
Store Update 
The company operates 967 Bed Bath & Beyond stores in 49 states, the District of Columbia, Puerto Rico and Canada, 61 Christmas Tree Shops stores, 31 buybuy BABY stores and 45 stores under the names of Harmon or Harmon Face Values, thereby bringing the total to 1,104 stores. The company added two 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.” 
Earnings Guidance 
Bed Bath & Beyond expects to deliver second-quarter 2010 earnings per share between 59 cents and 63 cents. Fiscal 2010 earnings per share are expected to rise 15% over 2009 earnings per share of $1.64. 

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