logo
  Join        Login             Stock Quote

Bed Bath & Beyond Earnings Notes

 January 11, 2009 04:54 PM
 



Home goods retailer Bed Bath & Beyond (BBBY) released earnings last week, coming in on the higher end of the range given the first week of December. Total sales were down just under 1% looking at quarterly comparisons, and same-store comps clocked in down more than 5%. In addition to the standard poor macro environment, Bed Bath can point to the liquidation of rival retailer Linens ‘n Things as depressing results. Taken in that context, the top-line results were solid, although net earnings are still down substantially QoQ (-35%) and on an ongoing fiscal year basis (-24%) despite share count shrinking marginally.

[Related -Bed Bath & Beyond Inc. (NASDAQ:BBBY) Q3 Earnings Preview: Where Sales Go the Price Usually Follows]

Bed Bath's outlook continues to be grim, with next quarter's EPS estimates anticipating another -35% decline in QoQ EPS amid a mid-single digit decline in same-store comp sales. Including reclassified long-term investments in with cash, BBBY trades for 16x the low-end of this year's earnings. At face value, that's a very reasonable multiple, but earnings have been dropping of late and a major risk now is that trailing multiples bear no representation to the future of the business. For what they're worth, consensus estimates put next fiscal year's earnings as being flat to slightly higher at $1.57; this could prove optimistic, although the disappearance of a major competitor will help. Still, I think a lower earnings range of $1.30 to $1.40 is more accurate to work with, and that implies a forward valuation around 18x earnings net of cash.

[Related -Restoration Hardware Holdings Inc (RH): This Housing Side Play Is Due For A Double-Digit Pop, Chart Says]

Operating cash flow for the fiscal year remains positive at $100 million, although that's down sharply from the comparable period last year. The full year results will be much more telling to see how Bed Bath managed and worked through inventories in Q4. Free cash flow could actually end up higher year-over-year because CapEx has been cut from 2.2x depreciation last fiscal year to 1.25x so far this year. Additionally, total book value has increased more than 15% in the last year, and after accounting for the share repurchase effect, book value per share is up 18% YoY – impressive, to say the least.

Bed Bath's earnings call was relatively non-eventful because they do not have a public Q&A. As would be expected, sales are slow and margins are down somewhat. Less capital spending is planned, but the emphasis is on striking the right balance between preserving the strong balance sheet and optimal long-term positioning. And, as a side note, about 20% of the auction-rate securities were redeemed at par during the quarter, although more than $200 million are still outstanding.

iOnTheMarket Premium
Advertisement

Advertisement


Comments Closed


rss feed

Latest Stories

article imageWinter is Coming! Here's My Favorite Seasonal Trade

Over the years, I've been successful trading weather patterns as they relate to commodities such as crude read on...

article imageHow To Avoid 5 Common Investing Mistakes

When it comes to successful investing, the field of behavioral finance has shown that sometimes the worst read on...

article imageSector Detector: Bulls Go Down Swinging, Refusing To Give Up Much Ground

Although the stock market displayed weakness last week as I suggested it would, bulls aren’t going down read on...

article imageThe Bumpy Road Ahead To Policy Normalization

When the dust clears from tomorrow’s Fed announcement, the crowd’s expecting that the slow but persistent read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.