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BBB: the beat goes on

Morristown, N.J. - On the eve of its annual shareholders' meeting here later this month, Bed Bath & Beyond's release of its proxy statement shows a company continuing to operate at the top of its game but intensely aware that the rules of home furnishings retailing remain in constant motion.

While all of the financial performance data released in the 68-page document has been previously disclosed, the required filing offers a small window into the obsessively secret company. It shows a company continuing to watch its expenses and one where the "Beyond" side of the house is creeping up in share of store.

One crucial measurement - SG&A, or sales, general and administrative expenses - dropped to 26.7% of sales, a decline of 4.8% versus the 28.5% a year ago and 30.5% two years ago.
The company says it achieved this with lower payroll and rent, but also with lower advertising costs. Net ad costs were just under $200 million this past year, down from $231 million and $266 million the previous two years. All of these figures are miniscule compared to other national retailers.

One way BBB achieved those lower ad costs was by larger contributions from suppliers in co-op allowances. The company said it reduced its ad costs by $17.6 million last year versus $14.5 the year before through this method.

All of Bed Bath's expense percentage results were impacted by strong comp store sales for the year, up 7.8% in 2010 against 4.4% the year before and the company's first ever decline, 2.4%, in fiscal 2008.

Those sales continue to be driven by the hard goods side of the store. Domestics remained at 41% of overall sales last year, same as the previous year, but down from 43% in 2008. Bed linens, as the company refers to them, did decline to 12% of company sales, from 13% in each of the previous two years.

Bed Bath did not offer any explanation for the decline, but price deflation and what some in the industry have characterized as a weakened merchandise mix in bedding could be possible reasons.

In its letter to shareholders, the company said it remains worried about higher commodity prices, a concern virtually every retailer in the soft home space has voiced in their comments to investors.

Nevertheless, Bed Bath said it will remain aggressive in its expansion targets, planning to open 45 stores in all its nameplates this year versus 40 last year. And as always, it will fund that expansion internally: Its cash and cash equivalents position increased 15% to just under $2 billion against zero debt, an unheard-of ratio for a public company of this size.

At least a tiny portion of the company's wealth will be spread around over the next 12 months. It announced another substantial stock repurchase plan and it dramatically raised the total compensation package for Steven Temares, chief executive officer, from $8.7 million last year to $15.4 million this year, following no change in his compensation the year before. Arthur Stark, president and chief merchandising officer, also received a substantial increase in his total compensation, from $2.7 million to $3.2 million.
The company's annual meeting is set for June 23 at 9 a.m. in Morristown, N.J.

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