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Bed Bath & Beyond (BBBY) Jumps on Q4 Earnings & Sales Beat
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After disappointing investors for quite some time, Bed Bath & Beyond Inc. reverted to reporting positive earnings and sales surprise in fourth-quarter fiscal 2016. This marked a comeback for the company, which posted top-line and bottom-line misses in the trailing three quarters. Following the earnings announcements, shares of the company rose 3.8% in the after-market trading session yesterday.
However, the Bed Bath & Beyond stock showcased a dismal performance year to date as the sluggish mall traffic plagued the company’s results. This Zacks Rank #4 (Sell) stock declined 5.3% year to date, wider than the Zacks categorized Retail – Miscellaneous industry’s fall of 1.2%.
The company’s quarterly earnings of $1.84 per share declined by a marginal 0.5% year over year, but surpassed the Zacks Consensus Estimate of $1.77.
Deeper Insight
The home-furnishing retailer’s net sales climbed 3.4% to $3,534 million and beat the Zacks Consensus Estimate of $3,504 million. Sales primarily gained from a 3% rise in non-comp sales including PMall, One Kings Lane and new stores as well as comparable store sales (comps) increase of 0.4%.
Comps improvement was backed by rise in average transactions amount, partly offset by lower transactions count at stores. While comps from customer-facing digital networks improved more than 20%, comps at stores fell at a low-single digit rate.
Bed, Bath & Beyond’s gross profit improved 1.8% to $1,343.1 million in the reported quarter, while the gross profit margin contracted 60 basis points (bps) to 38%. The fall in gross margin stemmed from higher shipping expenses due to increase in promotional shipping, alongside rise in coupon expense on account of increased redemptions and average coupon amount.
The decline in gross profit, along with a rise in selling, general and administrative expenses led the operating profit to deteriorate 13.8% to $429.9 million. Likewise, the operating profit margin contracted about 240 bps from the prior-year quarter to 12.2%.
Financial Position
Bed Bath & Beyond ended fiscal 2016 with cash and cash equivalents of about $488.3 million, long-term debt of $1,491.6 million, and total shareholders' equity of roughly $2,719.3 million.
In fiscal 2016, the company generated cash flow of about $1,041.8 million from operating activities, while deploying $373.6 million toward capital expenditure.
The company projects capital expenditure for fiscal 2017 to be relatively flat with fiscal 2016 level. Further, the company guides positive cash flow for the fiscal.
Share Buyback & Dividend
During the fiscal fourth quarter, the company bought back 4.1 million shares for nearly $171 million, under current buyback plan of $2.5 billion. As of Feb 25, 2017, Bed Bath & Beyond had shares worth $1.7 billion remaining under its existing program, which is likely to conclude in fiscal 2020.
Further, the company, which paid first quarterly dividend in Jul 2016, raised quarterly cash dividend to 15 cents per share from the prior dividend rate of 12.5 cents per share, marking a 20% increase. The raised dividend is payable on Jul 18, 2017, to shareholders on record as of Jun 16.
Store Update
The company opened nine new stores in the fiscal fourth quarter, while it shut down four stores. In fiscal 2016, the company opened 29 and closed 13 stores. Store openings during the fiscal included new store formats like BEYOND at Liberty View and the two new andThat! Stores as well as Bed Bath & Beyond and buybuy BABY stores in Canada. Additionally, the company opened new markets primarily for Cost Plus World Market and Harmon Face Values.
In fiscal 2017, the company targets opening 30 new stores and closing nearly 15 to 20 stores. Its store opening plans pertain to all store concepts, including new formats and new markets.
Outlook
Management remains committed toward driving future growth on the back of strategic investments, omni-channel development and enhancement of product assortments through innovation. Considering these factors, its planning assumptions and the current business trends, management provided fiscal 2017 earnings guidance. The company stated that the guidance for fiscal 2017 is likely to benefit from the additional 53rd week in the fiscal.
Considering the additional week, Bed Bath & Beyond projects net sales for fiscal 2017 to increase in the low to mid-single digit percentage range. While the company anticipates comps to improve in fiscal 2017, the range is likely to be between relatively flat and slightly positive. Further, the company anticipates the strong comps growth in the customer-facing digital channels to persist.
Moreover, management expects gross margin to decline in fiscal 2017 owing to rise in shipping and coupon expenses. However, the rate of decline in the fiscal is expected to be less than the fiscal 2016 level.
Also, selling, general and administrative expense deleverage is anticipated in fiscal 2017 due to payroll and payroll-related expenses as well as technology expenses including depreciation and the impact of current expense structures of One Kings and PMall. Depreciation expense is likely to be in the range of $310–$320 million, while interest expense is anticipated at about $80 million.
Considering all factors, the company envisions fiscal 2017 earnings per share to decline in the range of low-single digits percentage to 10%.
Bed Bath & Beyond Inc. Price, Consensus and EPS Surprise
Big 5 Sporting has an average positive earnings surprise of 1.6% in the trailing four quarters. The stock, with a long-term growth rate of 12%, has seen positive estimate revisions in the last 60 days.
Michaels Companies, with a long-term earnings growth rate of 18%, has advanced 9.8% year to date.
Foot Locker has jumped 4.8% in the last six months. The stock has a long-term earnings growth rate of 9.7%.
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Bed Bath & Beyond (BBBY) Jumps on Q4 Earnings & Sales Beat
After disappointing investors for quite some time, Bed Bath & Beyond Inc. reverted to reporting positive earnings and sales surprise in fourth-quarter fiscal 2016. This marked a comeback for the company, which posted top-line and bottom-line misses in the trailing three quarters. Following the earnings announcements, shares of the company rose 3.8% in the after-market trading session yesterday.
However, the Bed Bath & Beyond stock showcased a dismal performance year to date as the sluggish mall traffic plagued the company’s results. This Zacks Rank #4 (Sell) stock declined 5.3% year to date, wider than the Zacks categorized Retail – Miscellaneous industry’s fall of 1.2%.
The company’s quarterly earnings of $1.84 per share declined by a marginal 0.5% year over year, but surpassed the Zacks Consensus Estimate of $1.77.
Deeper Insight
The home-furnishing retailer’s net sales climbed 3.4% to $3,534 million and beat the Zacks Consensus Estimate of $3,504 million. Sales primarily gained from a 3% rise in non-comp sales including PMall, One Kings Lane and new stores as well as comparable store sales (comps) increase of 0.4%.
Comps improvement was backed by rise in average transactions amount, partly offset by lower transactions count at stores. While comps from customer-facing digital networks improved more than 20%, comps at stores fell at a low-single digit rate.
Bed, Bath & Beyond’s gross profit improved 1.8% to $1,343.1 million in the reported quarter, while the gross profit margin contracted 60 basis points (bps) to 38%. The fall in gross margin stemmed from higher shipping expenses due to increase in promotional shipping, alongside rise in coupon expense on account of increased redemptions and average coupon amount.
The decline in gross profit, along with a rise in selling, general and administrative expenses led the operating profit to deteriorate 13.8% to $429.9 million. Likewise, the operating profit margin contracted about 240 bps from the prior-year quarter to 12.2%.
Financial Position
Bed Bath & Beyond ended fiscal 2016 with cash and cash equivalents of about $488.3 million, long-term debt of $1,491.6 million, and total shareholders' equity of roughly $2,719.3 million.
In fiscal 2016, the company generated cash flow of about $1,041.8 million from operating activities, while deploying $373.6 million toward capital expenditure.
The company projects capital expenditure for fiscal 2017 to be relatively flat with fiscal 2016 level. Further, the company guides positive cash flow for the fiscal.
Share Buyback & Dividend
During the fiscal fourth quarter, the company bought back 4.1 million shares for nearly $171 million, under current buyback plan of $2.5 billion. As of Feb 25, 2017, Bed Bath & Beyond had shares worth $1.7 billion remaining under its existing program, which is likely to conclude in fiscal 2020.
Further, the company, which paid first quarterly dividend in Jul 2016, raised quarterly cash dividend to 15 cents per share from the prior dividend rate of 12.5 cents per share, marking a 20% increase. The raised dividend is payable on Jul 18, 2017, to shareholders on record as of Jun 16.
Store Update
The company opened nine new stores in the fiscal fourth quarter, while it shut down four stores. In fiscal 2016, the company opened 29 and closed 13 stores. Store openings during the fiscal included new store formats like BEYOND at Liberty View and the two new andThat! Stores as well as Bed Bath & Beyond and buybuy BABY stores in Canada. Additionally, the company opened new markets primarily for Cost Plus World Market and Harmon Face Values.
In fiscal 2017, the company targets opening 30 new stores and closing nearly 15 to 20 stores. Its store opening plans pertain to all store concepts, including new formats and new markets.
Outlook
Management remains committed toward driving future growth on the back of strategic investments, omni-channel development and enhancement of product assortments through innovation. Considering these factors, its planning assumptions and the current business trends, management provided fiscal 2017 earnings guidance. The company stated that the guidance for fiscal 2017 is likely to benefit from the additional 53rd week in the fiscal.
Considering the additional week, Bed Bath & Beyond projects net sales for fiscal 2017 to increase in the low to mid-single digit percentage range. While the company anticipates comps to improve in fiscal 2017, the range is likely to be between relatively flat and slightly positive. Further, the company anticipates the strong comps growth in the customer-facing digital channels to persist.
Moreover, management expects gross margin to decline in fiscal 2017 owing to rise in shipping and coupon expenses. However, the rate of decline in the fiscal is expected to be less than the fiscal 2016 level.
Also, selling, general and administrative expense deleverage is anticipated in fiscal 2017 due to payroll and payroll-related expenses as well as technology expenses including depreciation and the impact of current expense structures of One Kings and PMall. Depreciation expense is likely to be in the range of $310–$320 million, while interest expense is anticipated at about $80 million.
Considering all factors, the company envisions fiscal 2017 earnings per share to decline in the range of low-single digits percentage to 10%.
Bed Bath & Beyond Inc. Price, Consensus and EPS Surprise
Bed Bath & Beyond Inc. Price, Consensus and EPS Surprise | Bed Bath & Beyond Inc. Quote
Stocks to Consider
Some better-ranked retail stocks are Big 5 Sporting Goods Corp. (BGFV - Free Report) sporting a Zacks Rank #1 (Strong Buy), The Michaels Companies Inc. and Foot Locker Inc. (FL - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Big 5 Sporting has an average positive earnings surprise of 1.6% in the trailing four quarters. The stock, with a long-term growth rate of 12%, has seen positive estimate revisions in the last 60 days.
Michaels Companies, with a long-term earnings growth rate of 18%, has advanced 9.8% year to date.
Foot Locker has jumped 4.8% in the last six months. The stock has a long-term earnings growth rate of 9.7%.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>