Earnings Preview: Bed Bath & Beyond

Tomorrow, Bed Bath & Beyond (BBBY) reports its fourth-quarter earnings. Like many retailers, the company’s fourth-quarter ends in February so it can take in the entire holiday shopping season. That’s a big time for BBBY. Historically, more than one-third of their profits come during the fourth quarter.
Sales have been growing in the low double-digit rate for the past few quarters, so I’m looking for a top-line number of about $1.9 billion. That works out to about 12.7% growth which should give the company a net earnings figure of about $222 million, or roughly 78 cents a share, which is exactly what the company told us to expect. It could be slightly higher or lower, but either way the company’s results are fairly easy to forecast. Despite what many people think, the slowdown in housing doesn’t affect BBBY that much.
The company has also warned us of a $40 million charge, or about 14 cents a share, to help employees out with the tax consequences of options grants. This came about as the part of the company’s options review.
I also expect BBBY to give us a peak at what they expect for this year. I think the company should be able to make about $2.40 a share this year. Barron’s mentioned earlier this year that if BBBY exceeds its conservative expectations, the stock can go to the upper-$40s, which certainly seems reasonable.
On last quarter’s conference call, the company said that it’s targeting sales and EPS growth of 10% a year. I think they’re obviously low-balling, but that’s how they do things. The other thing to watch is BBBY’s number of outstanding shares. The company has been buying back its stock at a nice pace for the past few years.
For some reason, $43 a share has been like Krypton for this stock. Let’s hope that changes in the next few weeks.
The AP has more.

Posted by on April 10th, 2007 at 10:47 am


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