Surprise Profit seen by Bed, Bath & Beyond
Cited: Newsdaily
By cutting costs to offset slumping demand for home furnishings, Bed Bath & beyond Inc. has seen an unexpected rise in their poorly profit and retailer’s shares have risen more than 6%. Bed Bath & Beyond stated in June that their fiscal first-quarter that ended in May rose to $87.17 million, that is $.37 per share from $.30 per share or $76.78 million at the same time last year.
“The beat really was on the expense line although they had good operating performance across the board,” said Bernstein analyst Colin McGranahan, who has an “outperform” rating on the stock. “They have absolutely tightened the labor model up. I think they’re reducing advertising costs, which had gone way up.”
Analysts, on average, were expecting earnings of $.25 per share, according to Reuters Estimates, which would have meant a decline in profit compared with a year earlier. Sales rose 2.8% to $1.69 billion as it opened more stores, but sales at stores open at least a year, a key retail measure known as same-store sales, fell 1.6%. Selling, general and administrative expenses declined to $524.5 million in the quarter from $537.18 million a year earlier.
The company also said it expected its second-quarter earnings per share to rise to $.42, with fiscal 2009 earnings per share expected to be $1.59. Capital expenditures are expected to be around $250 million for the 2009 fiscal year as Bed Bath & Beyond upgrades its information technology equipment, refurbishes old stores, and opens about 57 new stores. Depreciation for the 2009 fiscal year is expected to be about $180 million. the company said.
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“We are confident that we will be able to look back at this period as one that afforded us an exceptional opportunity to gain market share and to improve our competitive position,” company executive Steven Temares said during the company’s quarterly conference call.
Bed Bath & Beyond and peers like Pier 1 Imports Inc and Williams-Sonoma Inc have seen sales weaken as the crumbling U.S. housing market erodes demand for the home furnishings that they sell. Bed Bath & Beyond has sought to battle the recessionary environment by cutting costs and scaling back expansion plans. In the first quarter, it opened six Bed Bath & Beyond stores, one Christmas Tree Shops store, and one buybuy Baby store. It also closed one Bed Bath & Beyond store.
These results show that Bed Bath & Beyond gained market shares when its rival Linens ‘n Things closed after filing for bankruptcy protection in 2008. Losing a major competitor gives Bed Bath & Beyond the advantage by no longer needing to distribute as many coupons or discounts as it did in the past to attract new consumers into the Bed Bath & Beyond stores. This helps to lower expenses according to analysts. Bed Bath & Beyond also saw its shares on NASDAQ rise 6.4% to $30.20 after closing at $28.38 last month..
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My Take: This is great news! That means businesses are beginning to bounce back from this recession. Well, at least some of them are. It also means that people are trying to fix up their homes. They are probably going to try to sell them or rent them out.
I myself have never been in a Bed Bath & Beyond or even a Pier 1. However, I have seen plenty of their ads on TV and the Internet to know that they have some nice stuff. Stuff that will make anybody’s home look better and nicer. They are going to sell it or keep it, buying something for the home makes them feel better.
I really do not care whether a business’s stock has risen or fallen. That makes no difference to me. What make some difference are their products and their service. If they provide a good product and good customer service, that will bring customers in as well as a sale items.
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