BBB profits jump 37 percent

Don Hogsett, April 5, 2004

Raising the bar still higher with every successive quarter and undaunted by a tricky environment for most full-price American retailers, Bed Bath & Beyond parlayed remarkably strong same-store sales, wider margins and lower costs into a fourth-quarter profit that soared by 37 percent, to $144.2 million from $105.3 million.

Sales at the big-box superstore climbed by 23.7 percent, to $1.3 billion from $1 billion last year, spurred by a big 8.1 percent increase in same-store sales and continued rapid expansion. For all of last year, same-store sales grew by 6.3 percent, compared with an increase of 7.9 percent a year ago.

In another big lift to the bottom line, average gross margin widened substantially, by 110 basis points, or 1.1 percentage points, to 43.4 percent from 42.3 percent a year ago. Still whittling away at costs, the retailer reduced expenses, when measured as a percentage of sales, by 60 basis points, or six-tenths of a percentage point, to 25.6 percent from 26.2 percent.

Conserving cash by buying goods sparingly — and paying as little as it can for them — the retailer throttled back its inventory growth. Indeed, the value of its stockpiles grew at less than half the pace of sales during the closing quarter, rising by 10.6 percent, to $1 billion from $915.7 million, compared with the sales growth of almost 24 percent.

In another boost to profits, the retailer doesn't borrow money, it banks it, generating interest income as opposed to the interest expense that choked so many other companies. During the fourth quarter, the retailer earned $3 million on its investments, up 6.8 percent from the preceding year. And for all of last year, it made $10.2 million, off 9.6 percent from 2002 in a low interest-rate environment.

Bed Bath & Beyond Inc.

Qtr. 2/28 (x000) 2004 2003 % chg
a-Fourth-quarter results include $3 million in investment income, up 6.8 percent from $2.8 million a year ago.
b-12-month results include $10.2 million in investment income, down 9.6 percent from $11.3 million the preceding year.
Sales $1,297,928 $1,049,292 23.7
Oper. income (EBIT) 231,567 168,441 37.5
Net income 144,248a 105,309a 37.0
Per share (diluted) 0.47 0.35 34.3
Average gross margin 43.4% 42.3%
SG&A expenses 25.6% 26.2%
12 months 2004 2003 % chg
Sales 4,477,981 3,665,164 22.2
Oper. income (EBIT) 639,343 480,057 33.2
Net income 399,470b 302,179b 32.2
Per share (diluted) 1.31 1.00 31.0
Average gross margin 41.9% 41.4%
SG&A expenses 27.6% 28.3%

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