Bed Bath & Beyond’s Earnings: I Freakin Called It

Me a week ago:

I wouldn’t be surprised to see BBBY smash earnings next week. The stock could even make as much as 70 cents per share (look at me being all bold).

Today’s earnings report:

Bed Bath & Beyond Inc. today reported net earnings of $.70 per diluted share ($181.8 million) in the fiscal second quarter ended August 28, 2010, an increase of approximately 35% versus net earnings of $.52 per diluted share ($135.5 million) in the same quarter a year ago.

That wasn’t a small beat either. Wall Street was expecting 63 cents per share.

Net sales for the fiscal second quarter of 2010 were approximately $2.137 billion, an increase of approximately 11.6% from net sales of approximately $1.915 billion reported in the fiscal second quarter of 2009. Comparable store sales in the fiscal second quarter of 2010 increased by approximately 7.4%, compared with a decrease of approximately 0.6% in last year’s fiscal second quarter.
Also during the fiscal second quarter of 2010, the Company repurchased approximately $193 million of its common stock representing approximately 4.9 million shares.
For the fiscal first half ended August 28, 2010, the Company reported net earnings of $1.22 per diluted share ($319.3 million), an increase of approximately 42% over net earnings of $.86 per diluted share ($222.7 million) in the corresponding period a year ago. Net sales for the fiscal first half of 2010 were approximately $4.060 billion, an increase of approximately 12.5% from net sales of approximately $3.609 billion in the corresponding period a year ago. Comparable store sales for the fiscal first half of 2010 increased by approximately 7.9%, compared with a decrease of approximately 1.1% in last year’s fiscal first half.
For the fiscal third quarter of 2010, the Company is modeling net earnings per diluted share to be approximately $.61 to $.65. For fiscal 2010, the Company is now modeling net earnings per diluted share to increase by approximately 20%, up from the previous model of approximately 15%.

That last line is great news. BBBY made $2.30 per share last year so the company is effectively increasing its EPS projection from $2.64 to $2.76. The Street was at $2.71.
Here are the earnings results going back a few years:

Quarter Sales Gross Profit Operating Profit Net Profit EPS
May-99$356,633 $146,214 $28,015 $17,883 $0.06
Aug-99 $451,715 $185,570 $53,580 $33,247 $0.12
Nov-99 $480,145 $196,784 $50,607 $31,707 $0.11
Feb-00 $569,012 $238,233 $77,138 $48,392 $0.17
May-00 $459,163 $187,293 $36,339 $23,364 $0.08
Aug-00 $589,381 $241,284 $70,009 $43,578 $0.15
Nov-00 $602,004 $246,080 $64,592 $40,665 $0.14
Feb-01 $746,107 $311,802 $101,898 $64,315 $0.22
May-01 $575,833 $234,959 $45,602 $30,007 $0.10
Aug-01 $713,636 $291,342 $84,672 $53,954 $0.18
Nov-01 $759,438 $311,030 $83,749 $52,964 $0.18
Feb-02 $879,055 $370,235 $132,077 $82,674 $0.28
May-02 $776,798 $318,362 $72,701 $46,299 $0.15
Aug-02 $903,044 $370,335 $119,687 $75,459 $0.25
Nov-02 $936,030 $386,224 $119,228 $75,112 $0.25
Feb-03 $1,049,292 $443,626 $168,441 $105,309 $0.35
May-03 $893,868 $367,180 $90,450 $57,508 $0.19
Aug-03 $1,111,445 $459,145 $155,867 $97,208 $0.32
Nov-03 $1,174,740 $486,987 $161,459 $100,506 $0.33
Feb-04 $1,297,928 $563,352 $231,567 $144,248 $0.47
May-04 $1,100,917 $456,774 $128,707 $82,049 $0.27
Aug-04 $1,273,960 $530,829 $189,108 $120,008 $0.39
Nov-04 $1,305,155 $548,152 $190,978 $121,927 $0.40
Feb-05 $1,467,646 $650,546 $283,621 $180,980 $0.59
May-05 $1,244,421 $520,781 $150,884 $98,903 $0.33
Aug-05 $1,431,182 $601,784 $217,877 $141,402 $0.47
Nov-05 $1,448,680 $615,363 $205,493 $134,620 $0.45
Feb-06 $1,685,279 $747,820 $304,917 $197,922 $0.67
May-06 $1,395,963 $590,098 $148,750 $100,431 $0.35
Aug-06 $1,607,239 $678,249 $219,622 $145,535 $0.51
Nov-06 $1,619,240 $704,073 $211,134 $142,436 $0.50
Feb-07 $1,994,987 $862,982 $309,895 $205,842 $0.72
May-07 $1,553,293 $646,109 $154,391 $104,647 $0.38
Aug-07 $1,767,716 $732,158 $211,037 $147,008 $0.55
Nov-07 $1,794,747 $747,866 $203,152 $138,232 $0.52
Feb-08 $1,933,186 $799,098 $259,442 $172,921 $0.66
May-08 $1,648,491 $656,000 $118,819 $76,777 $0.30
Aug-08 $1,853,892 $739,321 $187,421 $119,268 $0.46
Nov-08 $1,782,683 $692,857 $136,374 $87,700 $0.34
Feb-09 $1,923,274 $785,058 $231,282 $141,378 $0.55
May-09 $1,694,340 $666,818 $142,304 $87,172 $0.34
Aug-09 $1,914,909 $773,393 $222,031 $135,531 $0.52
Nov-09 $1,975,465 $812,412 $245,611 $151,288 $0.58
Feb-10 $2,244,079 $955,496 $370,741 $226,042 $0.86
May-10 $1,923,051 $775,036 $225,394 $137,553 $0.52
Aug-10 $2,136,730 $874,918 $296,902 $181,755 $0.70

Here’s a closer look at the critical factor, the rebound in BBBY’s margins.
image987.png
For financial newbies, net margin is a fancy way of saying the “bottom line.” Operating margin is just like net margin but it doesn’t include interest expense or taxes. What’s interesting is that BBBY is able to charge more for its products while sales are still growing at a healthy pace. Net sales have grown by double-digits for the last four quarters in a row.
I said last week that I would be leery of starting a position over $40. I still feel that way but the new guidance makes me willing to go as high as $42. The shares are up after hours. If you’re looking to buy BBBY, don’t it chase it — wait for it to come to you.

Posted by on September 22nd, 2010 at 4:16 pm


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