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Bed Bath & Beyond Cuts Outlook

Determined to Outperform Sector

While Bed Bath & Beyond's third-quarter results did not encompass the full holiday season — the quarter ended Dec. 1 — its warning that fourth-quarter results would post lower sounded a cautionary note for the home furnishings industry.

BB&B executives acknowledged the climate for home furnishings looks challenging — but they argued during the quarterly analyst call that Bed Bath & Beyond stands in the best competitive position to grow its share of market.

"Regardless of the economic environment, to which we are obviously not immune, we would expect to outperform others relative to our sector," said Warren Eisenberg, co-chairman.

Projecting flat comps for the full fourth quarter, BB&B said it expects earnings from 64 to 67 cents per share. Analysts had anticipated earnings in the range of 77 cents. For the full year, the company now estimates profit from $2.08 to $2.11 per share.

Earnings for the third quarter increased to $0.52 per share on a sales increase of 10.8% from $1.6 billion reported in the fiscal third quarter of 2006. Comps were essentially flat, up 0.8% against a comp increase of 4.6% a year ago.

Earnings were $138.2 million, down 2.9% from $142.4 million a year ago, which at that time generated EPS of $0.50. This year's profit got a boost from an $8.0 million gain following the resolution of an examination of stock option grants a year ago.

For the nine-month period, Bed Bath & Beyond reported earnings of $1.44 per share, or $389.9 million, up 5.9% from $1.36 per share, or $388.4 million, in the year-ago period.

Year-to-date sales of $5.1 billion were up 10.7% from $4.6 billion in the comparable period. Comps rose 1.5%, vs. 4.8% in last year's fiscal nine months.

Bed Bath & Beyond Inc.

Qtr. 12/1 ($millions) 2007 2006 % change
a.Net earnings in this year's third quarter included a net $8.0 million benefit due to the favorable resolution of discrete tax items required to be recorded in the quarter.
Sales $1,794.7 $1,619.2 10.8%
Oper. Income (EBIT) 203.2 211.1 (3.7)
Net income 138.2a 142.4 (2.9)
Per share (diluted) 0.52 0.50 4
Average gross margin 41.7% 43.5%
SG&A expenses 30.4% 30.4%
Nine months
Sales $5,115.8 $4,622.4 10.7%
Oper. Income (EBIT) 578.6 579.5 (0.2)
Net income 389.9 388.4 0.4
Per share (diluted) 1.44 1.36 5.9
Average gross margin 41.6% 42.7%
SG&A expenses 30.2% 30.1%


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