This is a summary of the second quarter fiscal 2008 earnings call conducted by Bed Bath & Beyond Inc. (BBBY) on September 24, 2008.
Management:
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Co-Chairman of the Board: Warren Eisenberg
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Chief Executive Officer, Director: Steven H. Temares
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Senior VP, Investor Relations: Ronald Curwin
Key Investor Issues:
- Net income fell to $119.3 million, or 46 cents a share, for the second quarter, from $147 million, or 55 cents a share, a year ago.
- Net sales for the quarter rose nearly 5% to $1.85 billion from $1.77 billion.
- Same-store sales fell by about 0.1%, compared with an increase of 2.2% in last year''s fiscal second quarter.
- Profit margin declined to 39.9% in the second quarter from 41.4% a year earlier.
- For the third quarter, Bed Bath & Beyond forecast net earnings of 41 cents to 47 cents per share compared with the 52 cents it reported in the third quarter of fiscal 2007.
Second Quarter Highlights:
The company earned $0.46 per diluted share in the fiscal second quarter ended August 30, 2008. In the challenging macroeconomic environment, the company continues to focus on customers and seek to further distance from competitors.
The company opened 13 new Bed Bath & Beyond stores during the fiscal second quarter, including the second store in Canada and 22 in the first half of fiscal 2008.
Including the four additional Bed Bath & Beyond store and one Christmas Tree Shop store opened in the beginning of the third fiscal quarter, the company has 907 Bed Bath & Beyond stores in 49 states, the District of Columbia, Puerto Rico, and Canada, as well as 42 Christmas Tree Shop stores, 10 buybuy BABY stores, and 40 stores under the names Harmon and Harmon Face Value. Consolidated store space at August 30, 2008 was approximately 30.8 million square feet.
In addition, as announced in May, the company is also participating in a joint venture in Mexico, which presently operates two stores in the Mexico City market under the name Home and More.
For all of fiscal 2008, including stores already opened, the company continues to expect to open approximately 50 new Bed Bath & Beyond stores throughout the United States and in Canada, where Bed Bath & Beyond looks to expand aggressively over the next few years. The company has signed or is in final documentation for approximately a dozen additional sites in Canada and is actively negotiating another dozen or so as it strives to become the leading home furnishings retailer in Canada.
The company continues to believe that within the United States, there is an opportunity to open in excess of 400 additional Bed Bath & Beyond stores.
Bed Bath & Beyond is also accelerating the growth of Christmas Tree Shops, buybuy BABY, and Harmon concepts. For all of fiscal 2008, the company expects to open approximately 12 Christmas Tree Shop stores and several buybuy BABY stores, while the freestanding Harmon Face Value store is also scheduled to open in the third quarter.
The company continues to put emphasis on opening additional Harmon Face Value health and beauty care department within Bed Bath & Beyond and Christmas Tree Shops locations.
While the number of store openings in these newer concepts is expected to grow significantly, the company is moderating the number of Bed Bath & Beyond store openings. In doing so, the company remains flexible to take advantage of additional real estate opportunities that may occur as a result of the ongoing consolidation in the industry.
The company consistently strives to increase productivity of existing stores by introducing new merchandising initiatives, as well as by expanding, renovating, remodeling, and/or relocating stores to enhance customer shopping experience. The bridal, baby, and gift registry business and the continuing development of the online sales capabilities afford Bed Bath & Beyond additional opportunities to attract new shoppers. The company continues to add associates in key areas throughout the company’s organization and to implement new systems and procedures in all concepts.
Bed Bath & Beyond continues to work to control its assets, costs, and expenses while expanding the business prudently.
While others in the industry are curtailing operations and otherwise limiting their growth and in some cases may be precluded from investing in their infrastructure and making necessary improvements in their stores, Bed Bath & Beyond has the resources and is committed to investing in the company’s future.
The capital spending plan for all of fiscal 2008 is estimated at approximately $250 million.
This represents a spending reduction of approximately $110 million as compared to last year when among other projects, a new distribution center and e-service fulfillment center were built. Yet the company is pleased to continue to make significant investments in the company, principally for new stores, existing store improvement, and other projects whose near and long-term impact is viewed as essential to the future.
Net earnings per diluted share for the second quarter were approximately $0.46 per share compared with approximately $0.55 a year ago.
- For the fiscal first half, net earnings per diluted share were approximately $0.76 compared with approximately $0.92 reported for last year’s first half.
- Net sales for the fiscal second quarter were approximately $1.9 billion, about 4.9% higher than in the corresponding fiscal 2007 period.
- Second quarter comp store sales were negative 0.1%.
In addition to sale being negatively affected by the tough overall economic environment during the quarter, Bed Bath & Beyond experienced severe weather, as well as competitors’ going out of business sales in a number of the markets.
