Bed Bath & Beyond Posts Powerful Profit Gain

Matthew Kalash, James Mammarella, January 11, 2010

Driven by a hefty 7.3% increase in same store sales for the third quarter ended Nov. 28, Bed Bath & Beyond posted net earnings of $151.3 million, or 58 cents per share, up 72.5% and 70.6% respectively.

Quarterly net sales gained 10.8% to $1.975 billion, up from $1.783 billion in the same period one year ago, the 1,083-unit home furnishings specialty retailer reported.

Net sales for the nine months year-to-date climbed 5.7% to $5.585 billion. Comparable store sales were up 1.7% in the period.

All figures showed an acceleration of good news. For example, the 72.5% rise in Q3 net income was more than double the year-to-date rise of 31.8%, and an 80.0% boost in Q3 operating income (to $245.6 million) was more than double the YTD increase of 37.8% (to $609.9 million).

Bed Bath & Beyond management warmed Wall Street's heart by announcing its upwards-revised forecast for Q4 and full year earnings at close of business Jan. 6. The company now estimates that it will earn 67 cents to 71 cents per share for the fiscal fourth quarter and $2.11 to $2.15 per share for the full fiscal year.

By merchandise division, BBB said domestics accounted for 42% of Q3 sales, compared to 43% one year ago, while home furnishings edged up to 58% from 57% of sales. Similarly, in the nine-month period, domestics made up 43% of sales, down from 44%, with a corresponding rise in home furnishings to 57% from 56%.

Bed Bath and Beyond

Qtr. 11/28 (millions) 2009 2008 % change
a. Q3 net income was affected by interest income of $0.7 million vs. $1.4 million in the year-ago period, and by a tax benefit of $0.4 million vs. $1.6 million in the year-ago period.
b. YTD net income was affected by interest income of $4.0 million vs. $8.9 million in the year-ago period, and by a tax expense of $1.9 million vs. a tax benefit of $2.6 million in the year-ago period.
Sales $1,975.0 $1,783.0 10.8%
Oper Income (EBIT) $245.6 $136.4 80.0
Net income $151.3a $87.7a 72.5
Per share (diluted) $0.58 $0.34 70.6
Average gross margin 41.1% 38.9%
SG&A expenses 28.7% 31.2% --
Nine Months
Sales $5,585.0 $5,285.0 5.7%
Oper Income (EBIT) $609.9 $442.6 37.8
Net income $374.0b $283.7b 31.8
Per share (diluted) $1.44 $1.10 30.1
Average gross margin 40.3% 39.5%
SG&A expenses 29.4% 31.1% --

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