UNION, N.J.-Rising costs offset a healthy increase in sales as Bed Bath & Beyond experienced a rare mediocre financial quarter, with net income slipping 2.2 percent to $224.3 million.
Selling, general and administrative expenses in the second quarter, which ended on Aug. 25, rose 15.2 percent in dollars and 70 basis points as a percentage of sales, to 25.7 percent. In a conference call yesterday to financial analysts, Bed Bath’s CEO, Steve Temares, said operating expenses spiked because of rising payroll and payroll-related costs, occupancy costs and advertising expenses from the retailer’s acquisition of Cost Plus World Market, which was completed during the quarter and which the retailer will henceforth refer to simply as World Market.
Temares said that deal also played a role in reducing Bed Bath’s gross margin in the quarter, along with an increase in coupons and a shift in the mix of merchandise sold to lower-margin categories. Gross margin fell 127 basis points to 39.8 percent.
These two factors counteracted an increase of 12.1 percent in net sales, which totaled $2.6 billion. This included a gain of 3.5 percent in same-store sales.
The second quarter also brought the closing of Bed Bath’s acquisition of Linen Holdings, a business-to-business distributor of textile products, amenities and other goods. In addition, the company finished the relocation of its offices in Farmingdale and Garden City, N.Y., to its corporate headquarters here.
During the conference call, Warren Eisenberg, Bed Bath’s co-founder and co-chairman, said the opportunity exists for the company to operate more than 1,300 Bed Bath & Beyond stores throughout the United States and Canada, along with growing the World Market, Christmas Tree Shops and buybuy BABY concepts from coast to coast. Eisenberg added that Bed Bath will also look to open more Harmon Face Value stores and specialty food and beverage departments in selected Bed Bath & Beyond stores.