Bed Bath and Beyond Has a Few Things to Make You Feel Warm and Cozy

By Eric Lumsden - January 4, 2012 | Tickers: BBBY, CPWM, KIRK | 0 Comments

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Earnings per share at Bed Bath & Beyond (NASDAQ: BBBY) have climbed in an almost mesmerizing staircase pattern over the years.

Bed Bath & Beyond’s latest 10Q, filed today, details more of the same earnings growth story –diluted earnings per share of $0.95 versus $0.74 for the same quarter last year.  Other specialty home goods sellers Kirkland’s Inc (NASDAQ: KIRK), Cost Plus Inc (NASDAQ: CPWM) that stock home accent products, have been less fortunate in terms of earnings and stock price.

Bed Bath & Beyond has led the way in the sector with its superior margins and still manages to command a reasonable P/E multiple.

This quarter their cost of goods sold remains unchanged as a percentage year on year.  SGA expenses fell a percent as a portion of revenue which flowed through to increase net earnings as a portion of revenue a percentage point from 8.6% to 9.75% year on year.  Net cash provided by operating activities as a portion of revenue increased to 24.26% from 20.42% year on year, similarly signaling the company’s increasing profitability.

Not only was profitability improved with decreased SGA expenses, but comparable store sales increased by 4.1%.  This is a slower growth rate than last year’s 7% improvement.

The company has been dutifully repurchasing shares with its cash from operations.  The repurchase program has been a hallmark of Bed Bath & Beyond’s strategy to return value to shareholders.  They spent $859M retiring 15.6 million shares this quarter.  This comes out to an average cost of $55.08 per share compared to its closing price today of $59.45.

Management continues to pursue a strategy of growth.  Since last year they have opened 17 new Bed Bath & Beyond stores.  The company operates a number of different store types and opened 21 buybuy BABY stores, 1 Harmon store, and 5 Christmas Tree Shops in the last year as well.  None of this was externally financed.  In fact, the company carries no long term debt.

Little wonder Bed Bath & Beyond’s stock is faring so much better than Kirkland or Cost Plus.  There is a lot to be optimistic about.  Their earnings are solid, the company continues to grow, and management is returning value to shareholders through repurchases while being very careful with their balance sheet. 

Investors with cold feet about getting in to Bed Bath & Beyond may want a pair of these and to further peruse the company’s literature.  In my opinion, there is a lot to be excited about.

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