Give Some Comfort to Bed Bath & Beyond

Harshit is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Bed Bath & Beyond (NASDAQ: BBBY) is a chain of retail stores that offers an assortment of domestic merchandise, textile products, and other goods. The company, along-with its three subsidiaries under the names of Christmas Tree Shops (CTS), Harmon, and buybuy BABY, established a chain of 1,469 retail stores in all 50 states. The company recently reported weak quarterly results, with 1.7% Same Store Sales down from the 4.10% reported in the third quarter of fiscal 2011; however, Bed, Bath & Beyond managed to raise its Gross Profit by 12% and Operating Profit by 1.3%, a nice reversal from the -1.7% decline in the second quarter.

 Financial performance

With an excellent debt- to-equity ratio of 0, it doesn’t appear that Bed, Bath & Beyond has taken on any long-term debt. The company reported net sales for the fiscal third quarter 2012 of approximately $2.702 billion, an increase of 15.3% from net sales of $2.34 billion reported in the fiscal third quarter of 2011. Bed, Bath & Beyond also reported earnings of $1.03 per share versus the $1.02 per share estimates. EPS rose by 8.4% year over year.

Magnitude of Estimate Revisions

Bed, Bath & Beyond continues to invest in building more of the buybuy Baby stores, stating that the company intends to increase the number of stores from the year end 64 to an estimated 78. By providing an outstanding opportunity for diversified growth in cash flow and earnings over the long-term, it is expected that the growth trajectory in the store count continues at a reasonable pace. Also, the company announced a new, $2.5 billion share buyback (against a market capitalization of $14 billion) to be completed over the next three years.

Other Attractions

Macy’s, (NYSE: M), together with its subsidiaries, operates retail stores and websites in the United States that sell a range of merchandise, including apparel and accessories for men, women, and children, as well as other consumer goods. In the recent quarter the company reported revenue of $27 billion, resulting in a 5% profit margin and 4.30% quarterly earnings growth.

Target (NYSE: TGT) operates general merchandise stores with an assortment of household essentials, including pharmacy, beauty, personal care, baby care, cleaning, and paper products. The company sells its merchandise products under private-label and exclusive licensed brands. As of Dec. 12, 2012, the company operated 1,782 stores in the United States. Target had an operating profit of 7.30%, and has reported gross revenue of almost $22 billion with a diluted EPS of $4.51.

Guidance

A long-term investor doesn’t bail just because a company has a bad quarter, so even thought Bed, Bath & Beyond did not have a great quarter, with the management strategies it appears that the company is transitioning for diversity and has kept the balance sheet in an exceptional shape while reducing the public float. Investors should not lose patience, as with its robust outlook and store growth initiatives, it may be worth buying shares in Bed, Bath & Beyond.

 


harshitm has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Bed Bath & Beyond. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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