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Bed Bath & Beyond Inc. (BBBY - Analyst Report), one of the leading operators of specialty retail stores in the U.S. and Canada, is scheduled to report its second-quarter 2012 financial results following the close of trade on September 19, 2012.

We presently expect earnings of $1.02 per share for the quarter, which is near the higher end of the company’s projected earnings range of 97 cents and $1.03. Meanwhile, the Zacks Consensus Estimate for revenues is $2,538 million.

Looking Back - First-Quarter 2012

Bed Bath & Beyond reported a solid first-quarter 2012 result with respect to earnings growth, cash flow generation and overall financial strength. Earnings in the first quarter rose approximately 24% to 89 cents per share from the year-ago earnings of 72 cents, handily surpassing its earnings guidance range of 79 cents and 85 cents per share. Bed Bath & Beyond also outpaced the Zacks Consensus Estimate of 84 cents per share.

Bed Bath & Beyond's top line augmented almost 5.1% to $2,218.3 million in the first quarter from $2,110 million in the year-ago quarter. However, the company's top line missed the Zacks Consensus Estimate of $2,243 million.

Guidance

Accounting for the additional 53rd week in fiscal 2012, management forecasts a comparable-store sales increase of 2% to 4% for both the second quarter and fiscal 2012. Consequently, the company expects comparable-store sales to boost net sales by 5% to 7% in the second quarter and 6% to 8% in fiscal 2012.

Bed Bath & Beyond expects to deliver second-quarter 2012 earnings per share between 97 cents and $1.03. Moreover, the company continues to expect fiscal 2012 earnings per share to increase by a high-single to a low-double-digit percentage, including one additional week this fiscal year.

In addition to 12 stores opened so far in 2012, the company expects to open a total of 40 stores across all concepts in fiscal 2012. The company expects the 2012 mix of store openings by concept to remain similar to fiscal 2011.

Agreement of Estimate

For the second quarter of 2012, 1 of the 20 estimates was revised upwards in the last 30 days and 1 was revised in the opposite direction. In the last 7 days, 1 estimate moved up, while none moved down. Estimates for fiscal 2012 witnessed 1 and 2 (out of 19) upward revisions in the last 7 and 30 days, respectively, with no downward movements.

For fiscal 2013, in both 7 and 30 days, 1 out of 17 estimates moved in the positive direction, while there were no negative revisions.

Magnitude of Estimate Revisions

The magnitude of estimate revisions for Bed Bath & Beyond almost depicts a neutral outlook for the upcoming quarter and fiscal 2012. Over the last 7 and 30 days, estimates for the upcoming quarter and fiscal 2012 remained unchanged at $1.02 and $4.68, respectively. However, estimates moved down by 2 cents to $5.17 per share for fiscal 2013 in the last 30 days, while it remained stable in the last 7 days.

Surprise History

With respect to earnings surprises, Bed Bath & Beyond has topped the Zacks Consensus Estimate over the last four quarters in the range of approximately 5.95% to 11.28%. The average remained at 8.97%, indicating that Bed Bath & Beyond has surpassed the Zacks Consensus Estimate by that measure in the trailing four quarters.

Our Recommendation

With an escalation of 24% in earnings per share in the first quarter of fiscal 2012, Bed Bath & Beyond has been continuously posting an improving earnings trend. Driven by its strong countrywide network of more than 1,100 stores coupled with strategic efforts to align merchandise based on regional climate and demographics, we believe the company will continue to boost its top- and bottom line.

Moreover, the company’s recent deal to acquire one of the leading casual home furnishings and entertainment products retailer, Cost Plus Inc. is expected to be accretive to the merged company’s fiscal 2012 earnings per share. The acquisition, which is expected to close during second-quarter 2012, is anticipated to increase Bed Bath & Beyond’s fiscal 2012 earnings in the high-single digit to low double-digit percentage range.

Bed Bath & Beyond Inc. offers merchandise under Bed Bath & Beyond, Harmon, Christmas Tree Shops (CTS) and buybuy BABY stores. The New Jersey-based company operates a total of 1,180 stores, including 995 Bed Bath & Beyond stores, 72 CTS stores, 45 Harmon stores and 68 buybuy BABY stores spread across 50 states of the US, the District of Columbia, Puerto Rico and Canada. Apart from this, the company operates two retail stores in Mexico City under the name Home & More through a joint venture.

Bed Bath & Beyond operates in a highly fragmented industry and faces competition from larger retailers such as Target Corporation (TGT - Analyst Report) and Wal-Mart Stores Inc. (WMT - Analyst Report) as well as from departmental and specialty stores.

Currently, Bed Bath & Beyond holds a Zacks #2 Rank, implying a short-term Buy rating on the stock. However, the company retains a long-term Neutral recommendation on the stock.

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