Bed Bath Finds it Must Go Beyond Just Good

By Don Hogsett -- Home Textiles Today, 1/2/2006 12:00:00 AM

Union, N.J. — —

Union, N.J. — Helped by wider margins and a big chunk of change it earned on money it has in the bank, Bed Bath & Beyond recorded a third-quarter profit of $134.6 million, up 10.4 percent from $121.9 million last year.

But that wasn't enough for antsy investors who've come to expect more. So when same-store sales came in lower than expected last week — gaining 3.1 percent — investors headed for the exits, triggering a stampede in the stock and a 12-plus percent drop in its price.

Overall sales at the company climbed higher by 11.0 percent, to $1.4 billion, driven by continued expansion. And profits were in line with Wall Street expectations, at $0.45 per share.

Helping to fuel the earnings gain, average gross margin improved by 50 basis points, or half a percentage point, to 42.5 percent from 42.0 percent the prior year.

Costs rose 70 basis points to 28.3 percent of sales from 27.4 percent a year ago, largely from stock-based compensation costs due to early adoption of a new accounting standard. Pull that item out of the equation and operating costs actually declined by 10 basis points, or a tenth of a percentage point.

Earned interest on cash and investments was $9.6 million — slightly more than 7 percent of the total third-quarter profit.

At the close of the third quarter, the retailer had $1.3 billion in cash and securities — without taking on any debt.

Bed Bath & Beyond