Bed Bath & Beyond Net Edges Up 1.8 Percent in Sluggish Q3
UNION, N.J.-In what was clearly a difficult period for the home furnishings specialty retailer, Bed Bath & Beyond managed a gain of just 1.8 percent in third-quarter net income, which totaled $232.8 million.
The meager bottom-line increase occurred in spite of a jump in net sales of 15.3 percent to $2.7 billion. As Steven Temares, Bed Bath's CEO, noted in a conference call in financial analysts yesterday, much of the sales uptick was due to the inclusion of sales from Cost Plus World Market and Linen Holdings, both of which Bed Bath acquired earlier this year. Same-store sales for the quarter, which ended on Nov. 24, rose by just 1.7 percent.
Temares told the analysts that Hurricane Sandy, which struck the Eastern Seaboard in late October, clearly had a lasting effect on Bed Bath's sales. The storm "resulted in many of our stores being closed and many of our customers either not having the ability to shop or having much greater concerns than shopping, including property damage, electrical outages, and gasoline shortages, which include rationing in a number of our markets," he said.
Bed Bath's other metrics in the quarter left something to be desired as well, analysts said. Gross profit was down 116 basis points to 39.8 percent, the result of the increases in both coupon redemptions and average coupon amount, along with a shift in merchandise mix to lower-margin products, according to Temares. Selling, general and administrative expenses rose 18.4 percent in dollars and 60 basis points as a percentage of sales, which Temares attributed to rises in payroll costs, advertising expenses and occupancy costs--much of which were due to the inclusion of World Market and Linen Holdings into the Bed Bath overall equation.
A report from Wells Fargo Equity Research said, "Bed Bath's weakening comps are in sharp contrast to other home-related companies that experienced strong comps over the past few quarters, including Pier 1 (FQ3 comps up 9 percent ex-Sandy), Williams-Sonoma (FQ3 comparable brand revenue up 8.5 percent), and even Home Depot (FQ3 comps up 4.2 percent)."
Also on the conference call, Gene Castagna, Bed Bath's chief financial officer and principal accounting officer, said the company has projected a fourth-quarter sales increase of from 24 to 26 percent, including a same-store sales gain of 2 to 4 percent. For the full year, Castagna said, sales should show an overall pickup of 15 percent, along with a rise of 2 to 4 percent in same-store sales.
Castagna added that Bed Bath has begun to develop an enhanced website experience for shoppers. Part of this effort will be the opening of a new, 800,000 square-foot e-commerce fulfillment in Pendergrass, Ga.