Aristofanis Papadatos • Wed, Jan. 21
- 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.
Apr. 10, 2014, 9:12 AM
Apr. 10, 2014, 6:47 AM| Comment!
Apr. 9, 2014, 5:39 PM
Apr. 9, 2014, 4:17 PM
Apr. 9, 2014, 12:10 AM
Apr. 8, 2014, 5:35 PM
Mar. 27, 2014, 3:45 AM
- CEO salaries at companies that generate over $8B in revenues rose 4.1% to a median $9.8M in 2013 as shareholder activism kept a lid on pay, a WSJ-commissioned survey shows.
- While the increase was slightly greater than in 2012, it was well well under the median 25% shareholder return for the companies looked at.
- Clarence Otis of Darden Restaurants (DRI), which is a focus of investor activism, saw his pay drop 24% even as returns increased 4%, and while the compensation of Cisco's (CSCO) John Chambers jumped 49%, returns soared 65%. GameStop's (GME) Paul Raines enjoyed a 92% boost in his salary even though returns rose just 5.4%.
- Other relevant tickers: BBBY, ORCL, NKE, VIAB
Mar. 17, 2014, 3:28 PM
- Shares of J.C. Penney (JCP +0.1%) have been on the rise over the last month with the retailer's re-launch of its home goods business providing investors something to bite off on.
- Credit Suisse notes that what's good for JCP, could come at the expense of Bed Bath & Beyond (BBBY).
- Bed Bath & Beyond went to 9.3% share of the home goods market during the grand Ron Johnson experiment, but could see its sales slip as JCP gets back on track with consumers.
Mar. 7, 2014, 4:59 PM
- Bed Bath & Beyond (BBBY) cuts its FQ4 outlook after it says severe weather led to 464 times a store was closed for a full day and 1,923 times a store was closed for a partial day.
- Forecasts FQ4 (March) EPS of $1.57-$1.61 vs. prior guidance of $1.60-$1.67 and analyst consensus estimate of $1.65, and sees comparable store sales up 1.7% vs. previous guidance of 2%-4% gains.
- BBBY +0.2% AH.
Mar. 6, 2014, 9:19 AM
- Wedbush forecasts home sales will increase at a low single-digit pace in 2014 on a broad cyclical trend that could cut into momentum for housing-related stocks.
- The investment firm turns cautious on Home Depot (HD) with a PT cut to $78 - while Lumber Liquidators (LL) and Bed Bath & Beyond (BBBY) are downgraded to Neutral.
- Earlier: Wedbush chips away at Lowe's
Mar. 5, 2014, 9:06 AM
- A recent poll by the Wall Street Journal and NBC indicates 63% of American support raising the minimum wage.
- Though the Republicans are expected to challenge anything brought to the floor of the House, there's a growing consensus in DC that some minimum wage legislation will eventually pass.
- Democrats argue that the current minimum wage level of $7.25 per hour is low by historical standards when adjusted for inflation.
- Related stocks: CAKE, CBRL, CMG, DNKN, DPZ, DRI, EAT, JACK, MCD, PNRA, RRGB, RT, SBUX, SONC, WEN, BWLD, THI, BDL, NATH, CEC, LUB, BKW, CHUY, BLMN, PZZA, TXRH, DENN, KKD, BBRG, DFRG, BOBE, RUTH, IRG, DIN, AEO, ANF, ARO, BBBY, BJ, CHS, COST, DG, DLTR, GPS, HD, JCP, JWN, KR, KSS, LOW, LB, NDN, ODP, PIR, PLCE, RSH, SPLS, SWY, TGT, TJX, URBN, WMT
Feb. 26, 2014, 7:00 PM
- Eugene Castagna, Bed Bath & Beyond's (BBBY) CFO since '06, has been moved to the newly-created role of COO. Finance SVP Susan Lattmann is the retailer's new CFO. (PR)
- BBBY also says it's extending its employment agreements with co-chairmen Warren Eisenberg and Leonard Feinstein for three years to Feb. 25, 2017.
Feb. 26, 2014, 2:44 PM
- Three Senate Democrats have broken away from Majority Leader Harry Reid's $10.10/hour line in the sand on minimum wage legislation.
- Mary Landrieu of Louisiana, Mark Pryor of Arkansas, and Mark Warner of Virginia have all tipped off that they think there could be some room to negotiate over the amount of an increase over the current federal minimum wage of $7.25/hour. The GOP likes the status quo, but is viewed as likely to give some ground in an election year.
- Federal minimum wage legislation could create higher costs in the retail and restaurants sectors as companies adjust to the new higher floor.
- Last week, Gap made a preemptive move to raise its own hourly wage in a development that stirred the pot a little bit.
- Related stocks: CAKE, CBRL, CMG, DNKN, DPZ, DRI, EAT, JACK, MCD, PNRA, RRGB, RT, SBUX, SONC, WEN, BWLD, THI, BDL, NATH, CEC, LUB, BKW, CHUY, BLMN, PZZA, TXRH, DENN, KKD, BBRG, DFRG, BOBE, RUTH, IRG, DIN, AEO, ANF, ARO, BBBY, BJ, CHS, COST, DG, DLTR, GPS, HD, JCP, JWN, KR, KSS, LOW, LB, NDN, ODP, PIR, PLCE, RSH, SPLS, SWY, TGT, TJX, URBN, WMT.
Feb. 25, 2014, 10:41 AM
- ICSC reports retail sales fell off last week despite warmer temperatures across the U.S.
- Though traffic was on the light side, a few categories showed improvement. Sales at wholesale clubs (COST, PSMT) and furniture stores (PIR, BBBY, LZB, RH, ETH, HVT) continued to show more resiliency in 2014 to weather than broad retail.
- ICSC forecasts February comp sales will improve 3%-3.5% Y/Y.
Feb. 11, 2014, 9:35 AM
- ICSC attributes the weekly dip in retail sales to weather patterns, but a few bright spots did emerge.
- Despite slow traffic patterns, categories which showed strength included wholesale clubs (WMT, COST, PSMT) and furniture stores (LZB, ETH, HVT, PIR, BBBY)
- For the full month, the research group sees monthly comparable-store sales growth of between 3.0% and 3.5%. That mark reps solid sales growth for the period compared to prior forecasts, although ICSC warns the figure could change again with the weather.
- Related ETFs: XLY, XRT, VCR, RTH, RETL, IYK, FXD, FDIS, PMR, UGE, RCD, SZK, PEZ, PSCD
- ICSC PR
Jan. 9, 2014, 12:50 PM
BBBY vs. ETF Alternatives
Bed Bath & Beyond Inc operates a chain of retail stores. It operates under the names Bed Bath & Beyond, Christmas Tree Shops, Harmon and Harmon Face Values, buybuy BABY & World Market or Cost Plus World Market.
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