Earnings Lowdown: Bed Bath & Beyond
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Home furnishing mega chain Bed & Bath and Beyond (NASDAQ: BBBY) reported its first quarter FY2012 after market close on Wednesday. The report comes after twelve quarters of positive, double-digit EPS growth. It also follows the announced acquisitions of Cost Plus ($550 million) and Linen Holdings LLC ($105 million), the company’s first acquisitions since 2007 and moves that were generally well received by investors.
And yet the stock was down over 10% after market Wednesday. What spooked the shares into a plunge? Allow me to summarize the BBBY report in caveman speak:
Sales good. Profits pretty. Forecast bad.
Earnings: Nuts and Bolts
Sales were up 5%, year-over-year, from $2.11 billion to $2.22 billion. That comes just under analyst estimates of $2.25 billion. On the operation metrics side, same store sales were up 3%, within BBBY’s prediction of 2 to 4%.
Net income was up 24%, year-over-year, from $180.6 million to $206.8 million. The EPS rose from $0.72 to $0.89. Reuters analysts had predicted $0.85. BBBY had estimated $0.79 to $0.83.
Forecasted earnings for Q2 were weak. Remember, that’s the quarter when the Cost Plus acquisition is supposed to finalize. Predicted Q2 EPS ranges from $0.97 to $1.03, under analyst estimated $1.08.
Full year 2012 earnings are expected to increase by high single to low double digits.
Competitor Comparison
Here’s a handy dandy table comparing the first quarter performance of BBBY to its two major competitors: Pier 1 Imports (NYSE: PIR) and Williams-Sonoma (NYSE: WSM). Note that BBBY and WSM are starting FY2012 while and Pier 1 started its FY2013.
|
Company (Report Date) |
Sales |
Sales Growth |
Same Store Sales Growth |
Net Income |
Net Income Growth |
|
BBBY (06/20) |
$2.22 billion |
5.5% |
3.3% |
$206.8 million |
24% |
|
PIR (06/14) |
$361.1 million |
7.9% |
7.2% |
$17.8 million |
26% |
|
WSM (05/12) |
$817.6 million |
6.0% |
4.6% |
$30.7 million |
(2.8%) |
BBBY is falling behind both on same store sales growth and overall sales growth. It’s also coming in behind Pier 1 on net income growth. But its sales and income are much higher than its competitors, despite a lower overall price point and a comparable number of stores to Pier 1 (WSM has about half as many stores).
Should You Stay Or Should You Go, Now?
If you’re ready for the long haul, you might want to consider climbing into Bed during a dip. The home furnishing stores face a lot of fragmentation from discount outlets such as Big Lots and big box retailers like Wal-Mart and Target.
As I’ve mentioned previously, the Cost Plus acquisition will enable BBBY to expand its consumable offerings. That tucked into the Linen acquisition equals a chance for the company to stand out from its most direct competitors, Pier 1 and Williams-Sonoma.
The second quarter will be bumpy thanks to the Cost Plus deal but that will also add, if only slightly, to the year’s overall earnings. If you’ve looked around lately, the economy isn’t improving at the rate anyone hoped or desired. Customers are going to keep looking for good values, though overall spending is improving. And customers stuck in extended living arrangements due to the continued housing market stagnation may head to the local BBBY to spend that money.
LynBetz 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 and Williams-Sonoma. 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.If you have questions about this post or the Fool’s blog network, click here for information.
