Bed Bath Net Climbs 14.5 Percent in First Quarter
UNION, N.J.-With sales rising and expenses remaining under control, Bed Bath & Beyond posted an increase of 14.5 percent in its first-quarter net income, which totaled $206.8 million.
Net sales in the quarter, which ended on May 26, rose 5.1 percent to $2.2 billion, including a 3 percent gain in same-store sales. Selling, general and administrative expenses edged up 0.9 percent in dollars but dropped 108 basis points as a percentage of sales to 25.9 percent. In a conference call summarizing the quarter's results yesterday, Steve Temares, Bed Bath's CEO, said SG&A was held in check due to lower payroll and occupancy expenses as a percentage of sales.
Gross margin declined 64 basis points to 40 percent. Temares told the analysts that increases in average coupon amount and in coupon redemptions, along with a shift in the mix of merchandise sold to lower-margin categories, were the prime downward drivers in gross margin.
Although the first-quarter numbers met the company's expectations, Bed Bath's stock price fell nearly 15 percent to $62.77 a share during trading this morning. Press reports speculated that this drop was based on the company's expectations, as mentioned by Chief Financial Officer Eugene Castagna during yesterday's conference call, that Bed Bath would achieve same-store sales of from 2 to 4 percent for the second quarter and the whole fiscal year. Castagna also said the company is projecting total sales gains of from 5 to 7 percent for the second quarter and from 6 to 8 percent for the fiscal year.
Among the highlights of the first quarter were the agreement for Bed Bath to acquire retailer Cost Plus World Market and the completion of the acquisition of Linen Holdings, a distributor of textile products, amenities and other merchandise to the hospitality, cruise-line, food-service, health-care and other industries.
Speaking to the analysts, Temares also stressed Bed Bath's commitment to its fundamental business strategy: offering a broad assortment of merchandise at everyday low prices, providing "superior customer service" and investing in the company's stores, online and customer experience through social media and mobile devices. "In taking this long-term approach to the growth and development of our business and through the ongoing efforts to cross-merchandise and leverage our best practices throughout our organization, we expect over time to do more for and with our customers," he said.