This is a summary of the second quarter fiscal 2007 earnings call conducted by Bed Bath & Beyond, Inc. (BBBY: chart) on September 26th, 2007.
Management:
Senior Vice President, IR: Ron Curwin
CEO, Director: Steven H. Temares
Co-Chairman of the Board: Warren Eisenberg
Key Investor Issues
- Net income increased to $147 million, or 55 cents a share, from $145.5 million, or 51 cents, a year ago.
- Sales jumped 10% from a year ago to $1.77 billion.
- Same-store sales jumped 2.2%.
- The company plans to repurchase an additional $1 billion shares, its fourth buyback plan since 2004.
Second Quarter Highlights
Net earnings in the second quarter benefited from a tax rate that was lower than last year’s second quarter. This rate was also lower than originally planned and discussed in June, and includes a $5.8 million benefit due to discrete tax items recorded in the quarter.
For the six months, net earnings per diluted share were 92 cents, or $252 million, compared with 86 cents, or $246 million, reported for last year’s first half.
Net sales for the quarter were $1.8 billion, about 10% higher than a year ago, while same-store sales were up 2.2%.
For the first half, net sales advanced to $3.3 billion, which was about 10.6% higher than in the similar six-month period last year. Same-store sales for the six months increased by approximately 1.9%.
Gross profit for the fiscal second quarter was approximately $732 million, or 41.4% of net sales.
This compares with approximately $678 million, or 42.2% of net sales during the second quarter of 2006. The approximately 80 basis point decrease in the gross profit margin resulted from a number of factors, including an increase in inventory acquisition costs, a heightened promotional environment, and a change in the mix of merchandise sold as the company experienced a higher percentage of sales of hard line goods.
Selling, general and administrative expenses for the fiscal second quarter were about $511 million, compared with $459 million a year ago.
SG&A deleveraged by approximately 40 basis points during the quarter, due primarily to a relative increase in advertising expense. Although the number of advertising events remained relatively constant, increased distribution resulted in higher postage and paper costs. As always, the company continues to look for ways to reduce and eliminate costs throughout its operations.
Reflecting the movements in the gross profit margin and SG&A expenses, the operating profit margin for the quarter was lower by 120 basis points.
For the fiscal six months, the operating profit margin decreased by approximately 100 basis points compared with last year’s first half.
Over the past 15 years, including the eight stores opened since the beginning of the fiscal third quarter, the company’s store count has grown from 34 stores in nine states, doing about $168 million in net sales, to expecting to end this year with over 970 stores in 49 states, the District of Columbia, Puerto Rico, and Canada, with sales exceeding $7 billion.
In the last five years, the company has have acquired buybuy BABY, Christmas Tree Shops, and Harmon stores, and vastly improved its infrastructure.
The company continues to test new merchandise initiatives throughout its stores.
The company has continued to open new fine china and Harmon health and beauty care departments within Bed Bath & Beyond stores, and increased its capabilities to service its bridal and gift registry customers. In addition, the management continues the efforts to increase the productivity of existing stores by expanding, remodeling, and/or relocating them.
The company anticipates opening approximately 70 new Bed Bath & Beyond stores, including its first store in Canada, for fiscal 2007.
