Rising Expenses Slim Bed Bath Q1 Net 2.1 Percent

Bed_Bath_and_BeyondUNION, N.J.-A jump in operating expenses offset a healthy sales gain to trim net income 2.1 percent, to $202.5 million, for Bed Bath & Beyond in its fiscal first quarter.

Selling, general and administrative expenses in the quarter, which ended on June 1, were up 23.7 percent in dollars and 131 basis points as a percentage of sales, to 27.2 percent. In a conference call to retail analysts yesterday, Steve Temares, Bed Bath’s CEO, explained that the inclusion of World Market and Linen Holdings, both acquired last year, into Bed Bath’s financial equation pushed up payroll and advertising expenses. Gross margin also dropped 55 basis points to 39.6 percent, the result of an increase in coupons and a shift in the sales mix to lower-margin products, Temares said.

The inclusion of World Market and Linen Holdings was a prime reason for the 17.8 percent jump in net sales, to $2.6 billion. Same-store sales also contributed by rising 3.4 percent, which Temares attributed to an increase in the number of transactions and in the average ticket.

Also on the conference call, Gene Castagna, Bed Bath’s chief financial officer, said the retailer is modeling a 2 to 4 percent increase in same-store sales for both the second quarter and the fiscal year as a whole. Net sales are expected to gain 7 to 9 percent in the second quarter and from 5 to 7 percent for the fiscal year, Castagna said.

Temares added that Bed Bath is “advancing several major initiatives” during this fiscal year, which include advancing its omnichannel strategy. The company debuted its new website for buybuy Baby in early June and is on track to launch the new Bed Bath & Beyond website by the end of the second quarter. It has already invested in upgrading its mobile sites and applications, enhancing network communications in the stores and in point-of-sale improvement. In addition, the company has added to its information-technology, analytics and e-commerce groups.