Bed Bath Finds it Must Go Beyond Just Good
January 2, 2006-- Home Textiles Today,
Union, N.J. — Helped by wider margins and a big chunk of change it earned on money it has in the bank, Bed Bath & Beyond recorded a third-quarter profit of $134.6 million, up 10.4 percent from $121.9 million last year.
But that wasn't enough for antsy investors who've come to expect more. So when same-store sales came in lower than expected last week — gaining 3.1 percent — investors headed for the exits, triggering a stampede in the stock and a 12-plus percent drop in its price.
Overall sales at the company climbed higher by 11.0 percent, to $1.4 billion, driven by continued expansion. And profits were in line with Wall Street expectations, at $0.45 per share.
Helping to fuel the earnings gain, average gross margin improved by 50 basis points, or half a percentage point, to 42.5 percent from 42.0 percent the prior year.
Costs rose 70 basis points to 28.3 percent of sales from 27.4 percent a year ago, largely from stock-based compensation costs due to early adoption of a new accounting standard. Pull that item out of the equation and operating costs actually declined by 10 basis points, or a tenth of a percentage point.
Earned interest on cash and investments was $9.6 million — slightly more than 7 percent of the total third-quarter profit.
At the close of the third quarter, the retailer had $1.3 billion in cash and securities — without taking on any debt.
Bed Bath & Beyond
|Qtr. 11/26 (x000)||2005||2004||% change|
|a. Third-quarter results include interest income of $9.6 million, compared with $4.9 million during the same period a year ago. Results also include incremental stock-based compensation expense of $14.6 million due to the early adoption of an accounting standard.
b. Nine-month results include interest income of $24.7 million, compared to $11.7 million; an incremental stock-based compensation expense due to the early adoption of an accounting standard.
|Oper. income (EBIT)||205,493||190,978||7.6|
|Per share (diluted)||0.45||0.40||12.5|
|Average gross margin||42.5%||42.0%||—|
|Oper. income (EBIT)||574,254||508,793||12.9|
|Per share (diluted)||1.25||1.06||17.9|
|Average gross margin||42.1%||41.7%||—|