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Bed Bath profits stratospheric again

Don Hogsett -- Home Textiles Today, June 28, 2004

Still opening stores at a rapid pace, and at the same time building margins and cutting costs, Bed Bath & Beyond boosted first-quarter profits 42.7 percent, sharply faster than the pace of sales growth, to $82 million from $57.5 million last year.

Sales at the home furnishings superstore pioneer climbed 23.2 percent, to $1.1 billion from $893.9 million last year. The crucial gauge of same-store sales increased 5.1 percent, improving on a year-ago gain of 4.4 percent.

As the retailer has taught Wall Street to expect, earnings per share, came in higher than expected — at 27 cents a share breezing past a consensus forecast of 25 cents.

Wall Street seemed unimpressed by the strong first-quarter performance. Shares in the retailer trended down on the news, dipping 35 cents a share, or 0.9 percent, to $37.28 in mid-day trading, the day after the company put out the news.

By Friday afternoon, shares were trading up again, around $38.50.

Despite the company's rocket-hot performance, its share price has declined about 6 percent over the past 12 months, even as major stock indices have climbed at a double-digit pace. At a current price of $37.28, the stock is now down about 15 percent from its high of $44 reached during December of last year, but still up almost 9 percent from a 12-month low of $34.28.

Driving the strong bottom-line growth during the opening quarter, in addition to rising sales, average gross margin improved 40 basis points, or four-tenths of a percentage point, to 41.5 percent from 41.1 percent. Gross margin dollars shot up 24.4 percent, to $456.8 million from $367.2 million.

In another strong assist, operating costs were pared 30 basis points, or three-tenths of a percentage point, to 29.8 percent of sales from 31 percent the preceding year.

Stockpiles remained under stringent control, rising well behind the rate of sales growth. Inventories grew 15 percent, to $1.1 billion from $927 million, lagging the increase in sales of 23.2 percent.

The retailer continues to expand its store base at a rapid pace, and opened 17 new stores during the first quarter, with a total of 80 to 90 scheduled for all of this year. As of May 29, the retailer maintained 592 stores operating in 44 states and Puerto Rico, with square footage totaling 19.8 million, up from 17.4 million during the same period a year ago.

Bed Bath & Beyond Inc.

Qtr. 5/29 (x000) 2004 2003 %chg
a-First-quarter results include $3.1 million in interest income, compared with $3.1 million during the same period a year ago.
Sales $1,100,917 $893,868 23.2
Oper. income (EBIT) 128,707 90,450 42.3
Net income 82,049a 57,508a 42.7
Per share (diluted) 0.27 0.19 42.1
Average gross margin 41.5% 41.1%
SG&A expenses 9.8% 31.0%


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