Details from BBBY’s Earnings Call

I wanted to share some details from Bed Bath & Beyond’s ($BBBY) conference call. To recap, their Q3 earnings-per-share rose 8.7% while their sales rose by 6%. Breaking down their sales increase, 78% came from comp store sales and 2% came from new stores. BBBY’s gross margins fell a bit due to inventory acquisition costs, shoppers using more and larger coupons and a shift towards lower margin goods. Expenses for selling, general and administrative dropped a bit partially thanks to lower payroll costs.

What the market is focused on today isn’t so much the third-quarter results but rather the lower guidance for Q4. A few things to point out. Last year’s fourth-quarter was 14 weeks, while this year’s is 13 weeks. Also, the data ranges are a bit off so the comparisons aren’t exactly apples to apples.

The company listed several planning assumptions that factor into their earnings forecast for Q4. I’ll summarize the important parts. BBBY sees comp store sales rising by 2% to 4%, instead of the earlier projection of 3.5% to 5.5%. Net sales are expected to fall by -3.9% to -5.7%. Again, that’s with one less week of sales. The company estimates that adjusting for the missing week, Q4 sales growth is expected to range from -0.3% to +1.6%.

Bed Bath & Beyond lowered their Q4 guidance range by ten cents per share, from $1.70 – $1.77 per share to $1.60 – $1.67 per share. Their full-year range drops from $4.88 – $5.01 per share to $4.79 – $4.86 per share.

The company added some thoughts on the coming fiscal year (Feb 2014 to Feb 2015):

Turning to fiscal 2014. While we are in the progress of completing our annual budget, our preliminary planning assumptions include the following. One, we anticipate opening approximately 30 stores across all our concepts. We anticipate the mix of store openings to be relatively consistent with fiscal 2013. Two, we expect to continue our program of renovating or repositioning stores within markets when appropriate.

Three, our operations will continue to be entirely funded from internally generated sources. Four, as previously discussed, we anticipate completing the current share repurchase program by the end of fiscal 2015. Five, we expect continuing variability in our quarterly tax rates. We will provide further information related to the fiscal first quarter and full year 2014 on our next quarterly conference call on April 9, 2014.

Before concluding this afternoon’s call, a few additional comments relative to our recently concluded fiscal third quarter. Our balance sheet and cash flows remain strong. We ended the fiscal third quarter with cash and cash equivalents and investment securities of approximately $781 million.

The stock is currently down about 11% this morning.

Posted by on January 9th, 2014 at 9:41 am


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