After the stock being knocked down by a disappointing forecast last month, Bed Bath & Beyond Inc. (BBBY - Free Report) is here with a plan to provide some solace to its shareholders through the repurchase of $2 billion worth of shares over the next fiscal year.
The company highlighted that it will commence the share repurchases under the new program following the completion of its existing program which had about $861 million worth of shares left to be bought back as of May 31, 2014. Moreover, the company stated that it expects to complete the new buyback plan by fiscal 2016.
Looking back, we note that the company has constantly rewarded its shareholders for about a decade with nearly $6.6 billion returned in the form of buybacks. Moreover, the latest authorization is an indication of the board’s confidence in the company’s long-term growth potential, financial outlook and ability to generate cash flow.
We believe that share repurchases not only enhance shareholder return but raise the stock’s market value as well. However, looking from another perspective, companies’ with declining share prices and confidence in its operations may take advantage of the lower prices to reward shareholders as well as boost earnings per share. This strategy appears to be ideal for a company like Bed Bath & Beyond, which has seen a 26% decline in its share price year-to-date.
The company believes that apart from the share repurchase programs its strong operations provide scope for continued infrastructure investments as well as to make the best of potential opportunities.
Bed Bath & Beyond’s strong balance sheet, along with its cash flow generation ability, provides financial flexibility to undertake shareholder-friendly moves. The company generated cash flow of $186.9 million and had cash and cash equivalents $536.6 million as of the end of first-quarter fiscal 2014.
Share repurchase programs are frequent among companies with a stable cash position and healthy cash flow. Apart from Bed Bath & Beyond, Nokia Corp. (NOK - Free Report) , IMAX Corp. (IMAX - Free Report) and CR Bard Inc. (BCR - Free Report) raised buyback programs in the recent past.