- Although BBBY met analysts’ estimates on the bottom line and did not change its guidance for Q4, the stock plunged 7% after the report.
- The article discusses whether the market's response is justified or a great investment opportunity has shown up.
- By looking into the earnings report, one concludes that the company faces increasingly intense competition, which reduces its operating income in various lines of its income statement.
- Moreover, the company boosted its earnings by 14% via reducing its expected tax rate and by another 15% thanks to its extremely aggressive share repurchases.
- The company’s net income fell as a consequence of faltering gross profits which in effect have weakened because of higher coupon redemption rates and increasing direct-to-consumer shipping expenses.
- The company is rapidly developing its omni-channel services to cater to changing consumer behavior. Customers are more inclined to shop using online platforms like mobile apps and websites.
- The company’s online sales improved by 40% YoY during the recently ended quarter.
- Q3 2014 earnings for Bed Bath & Beyond showed revenues increased 2.7%, while net income fell 5.0%. Shares fell nearly 7% the following day.
- In the past 11 quarters, the company's stock price has fallen 8 times.
- Bed Bath & Beyond's problems include the lack of competitive advantages, too many brands, late start to e-commerce, and overall stale business model.
- Other issues that plague the company include being a showrooming victim to online retailers like Amazon.com and a declining birth rate in the U.S.
- Bed Bath & Beyond's $1.5 billion debt offering last July may become a huge liability long-term, as the retail environment in and around the company continues to evolve.
Bed Bath & Beyond's Q3 2014 Results Show Continued Gross Margin Pressure
- Company missed revenue estimates by roughly $30mm.
- Gross margins, once again, contracted both year-over-year and quarter-over-quarter.
- Share repurchase was accelerated during Q3 and newer share repurchase program aims to be completed in 2016.
- Earnings rose nearly 10% YOY.
- The company reported a 2.7% increase in its revenues, which amounted to $2.942 billion. The company’s reported earnings were below analyst expectations of $2.97 billion in revenues for the quarter.
- Net earnings for the quarter amounted to $225.4 million; 5% lower than the $237.2 million earnings that were reported in the third quarter last year.
- Basic earnings per share were nearly 10% higher than the previous year and amounted to $1.24 per share; higher than analysts’ estimates of $1.19 per share.
- Growth in the millennia population, higher disposable incomes, availability of wider payment and delivery options and technological advancements will boost top line growth in 2015.
- Margins may continue to remain depressed as BBBY invests in technological advancement to compete against investors. Top line growth seems highly possible and shares will remain bullish.
- Bed Bath & Beyond’s year-to-date revenue expanded slightly.
- Bed Bath & Beyond’s net income and free cash flow suffered due to heavy promotional spending.
- Bed Bath & Beyond operates in a highly competitive environment.
- When I last recommended BBBY it has just been punished after earnings and was cheap.
- The subsequent rally sent shares straight up from the low $60s to nearly $80.
- Shares are too expensive once more and investors should take profits.
Bed Bath & Beyond's Stock Has Taken A Hit Following Its Q3 Earnings Release - Should You Buy Now?
- Q3 2014 earnings were released on January 8.
- Earnings per share met expectations, but revenue fell short.
- Comparable-store sales increased 1.7%.
- The stock has reacted by falling over 3%.
- The whisper number is $1.23, four cents ahead of the analysts' estimate and showing strong confidence from the WhisperNumber community.
- BBBY has a 75% positive surprise history (having topped the whisper in 33 of the 44 earnings reports for which we have data).
- The overall average post earnings price move is 'negative' (beat the whisper number and see weakness, miss and see weakness) when the company reports earnings.
Is Bed Bath & Beyond's Gross Margin Pressure A Thing Of The Past? Q3 2014 Preview
- Same-store sales results were boosted by inclusion of e-commerce sales in the base.
- Gross margins have reached financial crisis levels.
- BBBY's share repurchase program masks net income pressures.
- Bed Bath & Beyond, Inc. is slated to report 3Q 2014 earnings after the bell on Thursday, January 8.
- Earnings Per Share: Company guidance is for $1.17 to $1.21. The Street estimate is $1.19 (range $1.17 to $1.22).
- Revenues: Analysts expect an increase of 3.6% y/y to $2.97 bln (range $2.95 bln to $3.00 bln).
- Sales are expected to rise 3.4% in FY15 following 5.4% growth in FY14.
- Project a reduction in the diluted share count due to share repurchases.
- Bed Bath & Beyond not only achieved better-than-expected comps this quarter, but did it in a sluggish home furnishings environment.
Bed, Bath & Beyond Exceptional Execution: A Growth And Value Target
- This business demonstrates a keen understanding of the future of retail.
- Strategic initiatives will drive growth for the next 3 to 5 years.
- Investment in infrastructure and people to drive their omnichannel initiative has been very successful.
- STRIDE 3 year fair value target of $90 is easily achievable for this management team.
- BBBY has trailed the market over the last year, after a period of outperformance.
- The company has a good track record of stable operating results.
- 15% upside under conservative assumptions.
Bed Bath & Beyond: Gains To Come Beyond 2014
- Despite double-digit cash flow growth, shares of Bed Bath & Beyond trade well below its retail peers.
- Headline results have been pressured by internal investments, which are set to begin yielding dividends in 2015.
- As a percent of sales, Bed Bath & Beyond generates far more operating cash flow than any of its direct peers.
- The company has a long-term track record of returning capital to shareholders, with over a third of the company's shares bought back in the past decade.
Bed Bath & Beyond's Transition From A Growth Stock To A Value Stock Is Not Yet CompletePraveen Chawla • Sep. 29, 2014
- BBBY's Compound Annual Growth Rate has been decelerating.
- While BBBY's P/E ratio has come down from nose bleed level, it is still not in "value" territory.
- BBBY's balance sheet remains strong and its a very well managed company with high Return on Equity and free cash flow.
- Key concern is sharply slowing organic growth.
Bed Bath & Beyond: Heading Towards A Brighter Future
- BBBY recorded a positive growth of 4.3% in its top line on the back of higher comparable store sales and new store openings.
- The company was able to report an EPS of $1.17 for the quarter, surpassing analyst estimates by 3 cents.
- The company has replaced equity with cheaper debt during the quarter, resulting in a net benefit of $0.03 per share as it moves towards the optimal capital structure.
- BBBY is planning on further expanding its retail network by inaugurating 22 new stores domestically and one in Mexican City during the remaining year.
- The stock upholds an upside potential of 26.47% based on PE valuation.
3 Takeaways From Bed Bath & Beyond's Latest Earnings Report
- Bed Bath & Beyond grew its revenue and free cash flow but not its net income.
- Bed Bath & Beyond took on debt to buy back shares.
- Bed Bath & Beyond possesses plenty of cash and liquid investments.
- Bed Bath & Beyond's earnings per share for the second quarter were flat, while sales gained modestly.
- While net earnings were down 10%, buybacks buoyed earnings per share. The company plans to repurchase up to $2.9B worth of stock, amounting to 23% of its current market cap.
- With all of the investments that the company is making to improve things, and the fact that the stock is trading at a historically-low multiple, BBBY may worth a look.
- Shares of Bed Bath & Beyond rose on Sept. 24 after the retailer reported strong sales and profits that were higher than forecasted.
- With shares trading so low, this confirmed my opinion that there's potential in the business, but falling margins are a concern going forward that investors should be cautious about.
- In my previous work on the business, I highlighted these concerns, but I didn't anticipate an earnings or sales beat. Rather, I said all factors make it an interesting prospect.
Thu, Jan. 8, 4:42 PM
- Bed Bath & Beyond's (NASDAQ:BBBY) comparable store sales rose 1.7% Y/Y in FQ3, a slowdown from FQ2's 3.4%.
- The retailer continues to expect FQ4 EPS of $1.78-$1.83, in-line with a $1.80 consensus.
- FQ3 gross margin fell 80 bps Y/Y to 38.4%. SG&A spend rose 4% to $776.3M, slightly outpacing revenue growth of 3%.
- A $1.1B accelerated buyback was finished in December. $200M had been spent via BBBY's $2B buyback program as of Nov. 29.
- FQ3 results, PR
Thu, Jan. 8, 4:18 PM
Wed, Jan. 7, 5:35 PM
Tue, Jan. 6, 11:29 AM
- Specialty retail is set up to see a strong year, according to Jefferies analyst Randal Konik.
- The sector enters the year in a better position than in 2014 with inventory clean and the macroeconomic backdrop looking supportive.
- Comp sales will lag a string of weak quarters and lower cotton prices will filter down to the bottom lines of the group, says Konik.
- Specialty retailers (partial list): EXPR, ZUMZ, PSUN, ARO, AEO, ANF, CACH, CHS, NWY, BEBE, ANN, CBK, GPS, GES, PIR, BBBY, TCS, LE, VRA.
- Related ETFs: XLY, XRT, VCR, RTH, RETL, FXD, FDIS, PMR, RCD
Mon, Jan. 5, 8:50 AM
- The PetSmart LBO strategy could be utilized again in the retail sector amid the current low interest rate environment, note analysts.
- Bloomberg picks some top candidates to see a LBO play this year.
- GameStop (NYSE:GME): Valuation has been driven down to a level that could attract P-E firms.
- Bed Bath & Beyond (NASDAQ:BBBY): Spinoff opportunities and a lagging stock price make BBBY a LBO natural, note sector watchers.
- Pier 1 Imports (NYSE:PIR): A buyer would have plenty of opportunities to cut costs and set a turnaround strategy.
- Dick's Sporting Goods (NYSE:DKS): Perhaps the surprise in the bunch, but analysts see upside potential in a LBO scenario as a shift in focus is enacted.
- Previous on LBOs in retail: Retail trends to watch
Fri, Jan. 2, 7:25 AM
- Canaccord Genuity upgrades Bed Bath & Beyond (NASDAQ:BBBY) to a Buy rating from Neutral.
- The investment firm increases the price target on the specialty retailer to $91 from $66.
- Channel checks on traffic and conversions for BBBY in December were positive.
- BBBY +1.2% premarket.
Nov. 20, 2014, 3:24 PM
- Home furnishing stocks stocks are in rally mode after Kirkland's (KIRK +22.9%) and Williams-Sonoma (WSM +8.3%) both top expectations.
- The development follows strong reports from Home Depot and Lowe's which also showed strong demand for home products.
- Gainers: Restoration Hardware (NYSE:RH) +6.4%, Pier 1 Imports (NYSE:PIR) +2.0%, Haverty Furniture (NYSE:HVT) +2.5%, Bed Bath & Beyond (NASDAQ:BBBY) +2.0%, Ethan Allen (NYSE:ETH) +2.9%.
Nov. 20, 2014, 10:45 AM
- The usual suspects topped a list of the businesses with the most foot traffic in October, compiled by location analytics firm Placed.
- The top five chains were Wal-Mart (NYSE:WMT), McDonald's (NYSE:MCD), Subway, Starbucks (NASDAQ:SBUX), and Walgreens (NYSE:WAG).
- Significant movers over the last month include KMart (NASDAQ:SHLD) +9 spots, KFC (NYSE:YUM) +6 spots, Bed Bath & Beyond (NASDAQ:BBBY) -7 spots, and Costco (NASDAQ:COST) -6 spots.
Oct. 31, 2014, 1:21 PM
- The odds aren't good for a national roll-out of smartphone payments solution CurrentC, according to USA Today's Jeff Graham.
- The retail consortium admitted to a hacking incident earlier this week and has lost momentum with Apple Pay dominating headlines.
- Inside the network, Meijer broke ranks with fellow MCX members by moving to accept Apple Pay with its hardware.
- CurrentC was created to help the retail industry bypass credit card fees.
- Partial list of MCX members: LUV, GPS, DNKN, KR, TGT, WMT, BBBY, KSS, SHLD, WEN, BBY.
Sep. 24, 2014, 9:20 AM
Sep. 24, 2014, 8:13 AM
- Retail sales could increase by 4.5% to $986B this holiday season on an improved macroeconomic backdrop, forecasts Deloitte Touche.
- The mark would easily top last year's 2.8% rise.
- Online sales are tipped to rise by 14%.
- Promotional activity across broad retail has been dialed back a touch during the back-to-school season, but is still a risk to margins heading into the crucial shopping period.
- What to watch: This holiday season could be an operational pressure cooker for UPS (NYSE:UPS) and FedEx (NYSE:FDX) with demand expected to be high.
- Related stocks: AAP, AEO, ANF, BBBY, BBY, BJ, CHS, COH, COST, DG, FDO, FL, GPS, JCP, JNY, JWN, KSS, LB, LULU, M, NDN, PIR, RL, TGT, TIF, TJX, UA, URBN, VFC, WMT, ZLC, PERY, SQBG, VNCE, KORS, GIII, KATE, GIL, VRA, ICON, PSMT, AMZN.
- Related ETFs: XLY, XRT, VCR, RTH, RETL, IYK, FXD, FDIS, PMR, UGE, RCD, SZK
Sep. 23, 2014, 5:35 PM
Sep. 23, 2014, 4:17 PM| 1 Comment
Sep. 23, 2014, 3:30 PM
- Shares of Bed Bath & Beyond (BBBY -1.4%) are skittish heading into today's earnings release from the retailer.
- It's not without good cause after peers The Container Store and Pier 1 Imports both lowered sales projections due to soft demand.
- What to watch: Channel checks have indicated the company's traffic has been driven by 20%-off deals. Margin rates could be well-off last year's levels.
Sep. 22, 2014, 5:35 PM
Sep. 17, 2014, 11:54 AM
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