Bed Bath & Beyond: Earnings Preview

| About: Bed Bath (BBBY)
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Bed Bath & Beyond Inc. (NASDAQ:BBBY), one of the leading operators of specialty retail stores in the U.S. and Canada, is scheduled to report its first-quarter 2012 financial results after the market closes on June 20, 2012. The current Zacks Consensus Estimate for the quarter is 84 cents per share. Meanwhile, the Zacks Consensus Estimate for revenues is $2,243 million.

Fourth-Quarter 2011: A Synopsis

Bed Bath & Beyond reported a solid fourth-quarter 2011 with respect to earnings growth, cash flow generation and overall financial strength. Earnings in the fourth quarter rose 32% to $1.48 per share from the year-ago earnings of $1.12 a share, easily surpassing its earnings guidance range of $1.28 and $1.33 per share. Bed Bath & Beyond also outpaced the Zacks Consensus Estimate of $1.33 per share.

Bed Bath & Beyond's top line jumped almost 9.1% to $2,732.3 million in the fourth quarter from $2,505 million in the year-ago quarter. The company's top line also outdid the Zacks Consensus Estimate of $2,659 million.


Accounting for the additional 53rd-week period in fiscal 2012, management forecasts a comparable-store sales increase of 2% to 4% for both first quarter and fiscal 2012. Consequently, the company expects comparable-store sales to boost net sales by 4% to 6% in the first quarter and 5% to 7% in fiscal 2012.

Bed Bath & Beyond expects to deliver first-quarter 2012 earnings per share between 79 cents and 85 cents. Fiscal 2012 earnings per share are projected to increase by a high single- to a low double-digit percentage, including one additional week this fiscal year.

Zacks Consensus

The analysts following the stock expect Bed Bath & Beyond to post first-quarter 2012 earnings of 84 cents a share, higher than 72 cents delivered in the prior-year quarter. Currently, the Zacks Consensus Estimate ranges between 82 cents and 88 cents a share.

For fiscal 2012, the Zacks Consensus Estimate stands at $4.63 per share, higher than the year-ago fiscal earnings of $4.06. The current Zacks Consensus Estimate ranges between $4.48 and $4.75 per share.

Agreement of Estimate

For fiscal 2012, three of the 21 analysts covering the stock have revised their estimates upward, while none have revised their estimates in the downward direction over the last seven and 30 days. In the last seven and 30 days, two analysts have revised their estimates in the positive direction for first-quarter 2012, while no movement in estimates has been noticed in opposite direction.

Magnitude of Estimate Revisions

The magnitude of estimate revisions for Bed Bath & Beyond almost depicts a neutral outlook for the upcoming first quarter and fiscal 2012. Over the last seven and 30 days, estimates for the upcoming quarter remained unchanged at 84 cents. Estimates have been moved up by a penny to $4.63 per share for fiscal 2012 in the last seven days.

Surprise History

With respect to earnings surprises, Bed Bath & Beyond has topped the Zacks Consensus Estimate over the last four quarters in the range of approximately 8% to 16.1%. The average remained at 11.5%, indicating that Bed Bath & Beyond has surpassed the Zacks Consensus Estimate by that measure in the trailing four quarters.

Our Recommendation

With a 32% increase in earnings per share in the fourth quarter of fiscal 2012, Bed Bath & Beyond has reported 12 consecutive quarters of improving trends. Driven by its strong countrywide network of more than 1,100 stores coupled with strategic efforts to align merchandise based on regional climate and demographics, we believe the company will continue to boost its top and bottom lines.

Moreover, the company’s recent deal to acquire one of the leading casual home furnishings and entertainment products retailer Cost Plus Inc. (NASDAQ:CPWM) is expected to be accretive to the merged company’s fiscal 2012 earnings per share. The acquisition, which is expected to close during second-quarter 2012, is anticipated to increase Bed Bath & Beyond’s fiscal 2012 earnings in the high single-digit to low double-digit percentage range.

Bed Bath & Beyond offers merchandise under Bed Bath & Beyond, Harmon, Christmas Tree Shops (CTS) and buybuy BABY stores. The New Jersey-based company operated a total of 1,175 stores, including 995 Bed Bath & Beyond stores, 71 CTS stores, 45 Harmon stores, and 64 buybuy BABY stores spread across 50 states of the U.S., the District of Columbia, Puerto Rico and Canada. Apart from this, the company operates two retail stores in Mexico City under the name Home & More through a joint venture.

Bed Bath & Beyond operates in a highly fragmented industry and faces competition from larger retailers such as Target Corporation (NYSE:TGT) and Wal-Mart Stores Inc. (NYSE:WMT), as well as from departmental and specialty stores.

Currently, Bed Bath & Beyond holds a Zacks No. 2 Rank, implying a short-term Buy rating on the stock. However, the company retains a long-term Neutral recommendation on the stock.