Bed Bath & Beyond coming down to Earth?

Bed Bath & Beyond coming down to Earth?

Union, N.J. – Showing signs of coming down to Earth after a quarter century of explosive growth, and entering a new cycle of slowing earnings growth, Bed Bath & Beyond reported its most disappointing quarterly results since going public. First-quarter costs rocketed higher, operating profits actually fell, and overall earnings were up a skimpy 1.5%.

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Indeed, if it weren’t for the money it earned on what it put in the bank – $9.7 million, up 35.9% from $7.1 million during the prior-year quarter – earnings in the opening quarter would actually have declined, underscoring the growing importance of the retailer’s investing activity as a profit center that creates a comfortable buffer during a transition period of plateauing growth.

Giving investors even less to cheer about, the retailer said in a conference call, it expects full-year earnings could come in slightly shy of expectations, at about $2.17 a share, beneath a consensus forecast of $2.19.

Wall Street and investors didn’t take the news lightly and headed for the exit after the company put the news out after the closing bell on June 21. In mid-day trading this afternoon, traders had driven the stock down by$2.25 a share, or 6.1% in value, to $34.67. The retailer’s stock is now just pennies above its 12-month low of $34.38, and the stock has lost 26.2% of its value after sliding from a 12-month high of $46.99.

Sales continued to grow as the company continues to open new doors, rising by12.2%, to $1.4 billion from $1.2 billion last year, and same-store sales remain strong, rising by 4.9%. On another strong note, BBB grew its margins by 50 basis points, or one half of a percentage point, to 42.3%.

The characteristically quiet retailer didn’t have much to say publicly about the results, and pointed instead to a growing store base, with 10 new units opened during the quarter, giving it 819 stores, including 751 core Bed Bath & Beyond stores in addition to a smaller base of specialty doors, including Harmon Stores and Christmas Tree stores. Since the start of the second quarter, the retailer has opened three new Bed Bath & Beyond stores and a Christmas Tree Shops store, bringing the total number of doors to 823.

Warren Eisenberg, co-chairman of the board, focused on outright growth, saying the company sees the potential to grow its total store count to 1,300 units.

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