Bed Bath drives 2Q profits up
October 1, 2001-- Home Textiles Today,
UNION, NJ — Still acting as a magnet to consumers eager to buy, superstore retailer Bed Bath & Beyond drove second-quarter profits up an impressive 23.8 percent, to $54.0 million from $43.6 million a year ago.
Though sales and earnings gains at rivals have now begun to slow, the pioneer big-box home furnishings retailer continues to surge ahead despite a persistently tricky environment for American retailers in virtually every channel of distribution.
Indeed, Bed Bath & Beyond recorded a formidable 7.6 percent return on sales during the second-quarter and first six months of the year, banking almost eight cents on every dollar of sales.
Results were in line with Wall Street's expectations, and cheered by the news investors pushed Bed Bath stock sharply higher the day following the earnings release, driving the retailer's share price up by 11.1 percent, or $2.55 a share, in extremely heavy volume on the New York Stock Exchange. By 1 p.m. on Sept. 26, more than 8.7 million shares had changed hands, almost three times the usual daily trading volume of 3.0 million shares, as investors raced into the stock.
Sales at the red-hot retailer jumped up by 21.1 percent, to $713.6 billion from $589.4 last year. The bellwether gauge of same-store sales increased by 4.8 percent.
Average gross margin continued to tighten slightly, by 10 basis points, to 40.8 percent from 40.9 percent the prior year. But given the big jump in sales, gross margin dollars still increased by 20.7 percent, to $291.3 million from $241.4 million the prior year.
And offsetting any margin erosion, operating costs were whittled down by 10 basis points, to 29.0 percent from 29.1 percent the preceding year.
With margins and costs both holding steady, the retailer recorded an operating profit of $84.7 million, up 20.9 percent from $70.0 million last year. Bed Bath's operating margin — operating profits measured as a percentage of sales — continued to grow at an impressive double-digit rate, coming in at 11.9 percent, unchanged from a year ago.
An anomaly among U.S. retailers, Bed Bath & Beyond continues to fund its growth, build new stores and stock its shelves entirely out of its cash flow, without taking on any long-term debt. Indeed, rather than paying any interest expense, the retailer continues to make millions on the money it invests each quarter. Interest income in the second quarter more than doubled, climbing to $3.0 million from $1.4 million last year. Through the first six months of the year, the retailer has earned about $6.2 million on its investments, an amount roughly equal to 7.4 percent of its overall earnings during the same period.
The retailer maintained a rock-solid balance sheet, with inventories remaining well controlled, increasing by 21.7 percent, just slightly ahead of the increase in sales, to $733.2 million from $594.6 million. The company's cash position more than doubled from a year ago, climbing by 129.4 percent, to $338.8 million from $147.7 million last year.
Still opening new stores at an aggressive pace, Bed Bath opened the doors to 22 new stores during the second quarter, adding about 13.2 million square feet in total store space, up about 21.8 percent from last year. As of Sept. 1, the chain operated 344 stores. Since then, the retailer has opened another 15 units, bringing its total to 359 stores in 44 states. So far this fiscal year, the company has opened 48 new stores, including its first unit in New Hampshire. The company plans to open about 32 more stores this year in new and existing markets, including a store opening in Puerto Rico after Thanksgiving, the company's first store outside the continental United States.
Bed Bath & Beyond Inc.
|Qtr. 9/1 (x000)||2001||2000||% CHG|
|Oper. income (EBIT)||84,672||70,009||20.9|
|Per share (diluted)||0.18||0.15||20.0|
|Average gross margin||40.8%||40.9%||—|
|Oper. income (EBIT)||130,274||106,348||22.5|
|Per share (diluted)||0.28||0.23||21.7|
|Average gross margin||40.8%||40.9%||—|