Looking Ahead to Bed, Bath & Beyond’s Earnings Report

Bed, Bath & Beyond (BBBY) is due to report its fiscal second-quarter earnings on Wednesday. I’ve been eagerly awaiting this earnings report because last earnings report was surprisingly strong. The company was certainly helped by Linens ‘N Things going under, so I’m curious if last quarter’s earnings were an outlier or if BBBY’s business is truly recovering.
For the fiscal first quarter, Wall Street was expecting earnings of 25 cents a share, but Bed, Bath & Beyond actually earned 34 cents a share for a large earnings beat. This also topped the result from the first quarter of one year before which broke a five-quarter run of lower year-over-year declines. After the earnings report, the stock got a nice one-day bounced but didn’t really start to rally for another two weeks. Since then, the stock has been on an impressive run.
For the second quarter, the consensus on the Street is for earnings of 47 cents a share, which is a penny higher than one year ago. I’m expecting 50 cents a share. There’s a lot to like about BBBY. The balance sheet has $857 million in cash, or $3.27 a share, and zero debt. In July, the company was highlighted in Barron’s and Time.
The smart thing that BBBY did was to fight Linens ‘N Things on price. The downside is that there are too many coupons out there and it’s hurting their margins. Net margins for the last four quarters are down to 6% compared with 10% four years ago. That effectively erases the benefits of 66% jump in sales.

Posted by on September 21st, 2009 at 9:36 am


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