Earnings Preview: Bed Bath & Beyond

From the AP:

Home accessories retailer Bed Bath & Beyond Inc. reports earnings for the fiscal second quarter on Wednesday. The following is a summary of key developments and analyst opinion related to the period.
OVERVIEW: Home furnishings and accessories retailers are being pressured as the housing market sags, and consumers curb discretionary spending due to widening credit problems and high energy costs.
Bed Bath & Beyond Inc. is no exception. In June, the Union, N.J., company said its full-year profit would miss analyst expectations due to uncertain economic trends.
BY THE NUMBERS: Analysts polled by Thomson Financial expect a profit for the fiscal second quarter of 52 cents per share on revenue of $1.77 billion.
ANALYST TAKE: Bear Stearns analyst Christopher Horvers said in a note to investors on Monday that he remains cautious on the sector.
“Home furnishings remains one of the most challenging spaces in retail given the difficulties in housing, the fragmentation of the market, the discretionary nature of the products and the inventory build that has occurred across the retail landscape,” he wrote.
He said he believes Bed Bath & Beyond will continue to “encounter near-term headwinds” and said he expects a few more quarters of difficult trends.
For the quarter, he expects its gross margin to fall less than 1 percent to 41.4 percent of sales, driven by an increase in inventory acquisitions costs, a shift in merchandise mix and a heightened promotional environment.
WHATS AHEAD: In a note to investors on Monday, Deutsche Bank North America analyst Mike Baker said he is “concerned” about analyst estimates for fiscal 2008 in the home furnishings sector overall, including Bed Bath & Beyond. Analysts polled by Thomson Financial expect, on average, a profit of $2.47 per share.
“The company will not give its 2008 guidance until December, but at that time, we would not be surprised if BBBY guides to a number below the current consensus,” Baker wrote.
A profit of $2.47 per share in fiscal 2008 implies a same-store sales improvement of 3 percent and a slight increase in operating margins, Baker said.
“But, with our concerns regarding high inventories industry wide, demand environment would need to improve considerably over the next year to drive that kind of recovery,” Baker wrote. “The recent Fed easing could help us get there, but that’s not without risk, in our view.”
The Federal Reserve approved a half-point reduction in interest rates on Thursday, in an effort to ease concern about the economy.
STOCK PERFORMANCE: Shares fell nearly 15 percent during the quarter.

Posted by on September 24th, 2007 at 4:30 pm


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