Bed Bath & Beyond (NASDAQ: BBBY) earnings release for the 1st quarter of their 2020 fiscal year
Category: Stock Market and Bed Bath & Beyond (BBBY)
Date: 3 October 2020 Stock Price of Bed Bath and Beyond : $20.60 We take a look at the 2nd quarter earnings report of their 2020 fiscal year of Bed Bath and Beyond, a struggling home furnishings firm whose fortunes seems to have turned around. Net sales for the quarter came in at $2.68 billion and net earnings for the quarter came in at $217 million.
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Our growth strategy is unlocking improved financial performance, and the marked improvement in our second quarter financial results reflects the potential of our digital-first, omni-always transformation and our efforts to build a modern, durable platform for success - Mark Tritton, Bed Bath & Beyond's President and CEO"
About Bed Bath and Beyond
Bed Bath & Beyond Inc. and subsidiaries is an omnichannel retailer selling a wide assortment of domestics merchandise and home furnishings which operates under the names Bed Bath & Beyond, Christmas Tree Shops, Christmas Tree Shops andThat! or andThat!, Harmon, Harmon Face Values, or Face Values, buybuy Baby and World Market, Cost Plus World Market or Cost Plus. Customers can purchase products either in-store, online, with a mobile device or through a customer contact center. The Company generally has the ability to have customer purchases picked up in-store or shipped direct to the customer from the Company’s distribution facilities, stores or vendors. In addition, the Company operates Of a Kind, an e-commerce website that features specially commissioned, limited edition items from emerging fashion and home designers; One Kings Lane, an authority in home décor and design, offering a unique collection of select home goods, designer and vintage items; PersonalizationMall.com, an industry-leading online retailer of personalized products; Chef Central, a retailer of kitchenware, cookware and homeware items catering to cooking and baking enthusiasts; and Decorist, an online interior design platform that provides personalized home design services. The Company also operates Linen Holdings, a provider of a variety of textile products, amenities and other goods to institutional customers in the hospitality, cruise line, healthcare and other industries. Additionally, the Company is a partner in a joint venture which operates retail stores in Mexico under the name Bed Bath & Beyond.
Overview of Bed Bath & Beyond's 2nd quarter 2020 earnings report
- Net sales: $2.678 billion (down from $2.719 billion for the same quarter of the previous year)
- Net sales decreased by -1.2% over the last 12 months
- Cost of sales: $1.7 billion (down from $1.992 billion for the same quarter of the previous year)
- Cost of sales decreased by -14.6% over the last 12 months
- Strong margin gains for Bed Bath and Beyond as their cost of sales declined by a lot more than their net sales.
- Net income: $217.9 million (up from -$138.7 million for the same quarter of the previous year)
- Diluted earnings per share: $1.75 (up from -$1.12 per share for the same quarter of the previous year)
- Dividend per share: No dividend declared
- Diluted weighted-average shares outstanding: 124.211 million (up from 123.349 million for the same quarter of the previous year)
- Cash and cash equivalents: $1.441 billion
- Cash and cash equivalents per share: $11.60
- Cash and cash equivalents makes up 56.3% of Bed Bath and Beyond's market capital
- Cash and cash equivalents makes up 19.4% of Bed Bath and Beyond's total assets
- Inventories: $2.052 billion
- Inventories makes up 27.6% of Bed Bath and Beyond's total assets
- Stockholders equity of Bed Bath and Beyond: $1.697 billion
- Stockholders equity per share for Bed Bath and Beyond's : $13.66
- So Bed Bath and Beyond's is trading at 1.5 times it stockholders equity per share which is well outside the expected range of between 2 and 4 times most companies tend to trade at. Most firms tend to trade at a least 1 times its stockholders equity.
- For some perspective the average price to book value of firms in the S&P 500 is 3.7
- Stockholders equity per share for Bed Bath and Beyond's : $13.66
- Cash generated from operations $543.487 million
- Cash generated from operations per share: $4.37
- Cash generated from operations per share: $4.37
Bed Bath and Beyond's management commentary on the results
UNION, N.J., Oct. 1, 2020 /PRNewswire/ -- Bed Bath & Beyond Inc. (Nasdaq: BBBY) today reported financial results for the second quarter of fiscal 2020 ended August 29, 2020.
Mark Tritton, Bed Bath & Beyond's President and CEO said, "Our growth strategy is unlocking improved financial performance, and the marked improvement in our second quarter financial results reflects the potential of our digital-first, omni-always transformation and our efforts to build a modern, durable platform for success. We've taken direct action to stabilize our business, including reducing our cost structure, enhancing our financial flexibility, and investing where it matters most to our customers. At the same time, we have assembled a world-class and experienced leadership team to rebuild our authority in Home and modernize our operations to deliver a truly customer-inspired and omni-always shopping experience.
"During this unprecedented time when our homes have become the center of our lives, our Company continues to respond with agility to the changing needs of our customers. We are delighted by the continued strong response to our BOPIS and contactless Curbside Pickup service offerings, and we believe the recent launch of our new Same Day Delivery service will make it even easier to shop with us, as we help families across North America unlock the magic of holidays at home."
Mark Tritton, Bed Bath & Beyond's President and CEO said, "Our growth strategy is unlocking improved financial performance, and the marked improvement in our second quarter financial results reflects the potential of our digital-first, omni-always transformation and our efforts to build a modern, durable platform for success. We've taken direct action to stabilize our business, including reducing our cost structure, enhancing our financial flexibility, and investing where it matters most to our customers. At the same time, we have assembled a world-class and experienced leadership team to rebuild our authority in Home and modernize our operations to deliver a truly customer-inspired and omni-always shopping experience.
"During this unprecedented time when our homes have become the center of our lives, our Company continues to respond with agility to the changing needs of our customers. We are delighted by the continued strong response to our BOPIS and contactless Curbside Pickup service offerings, and we believe the recent launch of our new Same Day Delivery service will make it even easier to shop with us, as we help families across North America unlock the magic of holidays at home."
Financial Position Update
During the fiscal 2020 second quarter, the Company generated cash flow of over $750 million including operational earnings and working capital, net of capital investments; reduced its gross debt by approximately $500 million or 30% through a bond tender offer and repayment of a bank loan; and further enhanced its liquidity position by approximately $400 million to approximately $2.2 billion through strong cash generation and a new $850 million secured asset-based lending facility.
Outlook
Given the ongoing uncertainty related to the impact of the COVID-19 pandemic, including around consumer behavior especially during the upcoming holiday season, the Company maintains its position of not providing fiscal 2020 financial guidance. It is closely managing operational costs, including working capital to ensure it can remain agile and adjust to any unexpected changes in the market. The Company continues to believe it has a strong financial position to manage through these uncertain times.
As previously disclosed on July 14, 2020 in an Investor FAQ Document, Bed Bath & Beyond plans to accelerate its comprehensive restructuring program to drive profit improvement over the next two-to-three years. It expects to achieve significant annualized improvement in Earnings before Interest, Income Taxes, Depreciation and Amortization (EBITDA) of between approximately $250 million to $350 million, excluding one-time costs. This is in addition to the expected $85 million in SG&A savings associated with the strategic restructuring program announced in February 2020. Importantly, the Company has assumed reinvestment of between approximately $150 to $200 million of the expected cost savings into future growth initiatives.
Key components of the additional expected profit improvement include:
On a preliminary basis, monthly sales for September show positive comparable sales growth, with similar store and digital sales as in the second quarter and accelerated BOPIS trends.
During the fiscal 2020 second quarter, the Company generated cash flow of over $750 million including operational earnings and working capital, net of capital investments; reduced its gross debt by approximately $500 million or 30% through a bond tender offer and repayment of a bank loan; and further enhanced its liquidity position by approximately $400 million to approximately $2.2 billion through strong cash generation and a new $850 million secured asset-based lending facility.
Outlook
Given the ongoing uncertainty related to the impact of the COVID-19 pandemic, including around consumer behavior especially during the upcoming holiday season, the Company maintains its position of not providing fiscal 2020 financial guidance. It is closely managing operational costs, including working capital to ensure it can remain agile and adjust to any unexpected changes in the market. The Company continues to believe it has a strong financial position to manage through these uncertain times.
As previously disclosed on July 14, 2020 in an Investor FAQ Document, Bed Bath & Beyond plans to accelerate its comprehensive restructuring program to drive profit improvement over the next two-to-three years. It expects to achieve significant annualized improvement in Earnings before Interest, Income Taxes, Depreciation and Amortization (EBITDA) of between approximately $250 million to $350 million, excluding one-time costs. This is in addition to the expected $85 million in SG&A savings associated with the strategic restructuring program announced in February 2020. Importantly, the Company has assumed reinvestment of between approximately $150 to $200 million of the expected cost savings into future growth initiatives.
Key components of the additional expected profit improvement include:
- Approximately $100 million in annual savings from its previously described Store Network Optimization project which includes the closure of approximately 200 mostly Bed Bath & Beyond stores over the next two years. These stores collectively generated about $1 billion in annual net sales in fiscal 2019, and many of them were EBITDA negative by the end of fiscal 2019. The Company expects to be able to transition at least 15% to 20% of these sales to its digital channels or other store locations.
- The Company continues to believe that its physical store channel is an asset for its transformation into a digital-first company, especially with new omni-fulfillment capabilities in Buy-Online-Pick-Up-In-Store, Curbside Pickup and Same Day Delivery.
- Approximately $200 million in annual savings from product sourcing, through renegotiations with existing vendors.
- Approximately $150 million in annual SG&A savings from continued optimization of its corporate overhead cost structure and reductions in other discretionary expense.
- As previously disclosed on August 25, 2020, the Company announced that it had executed a workforce reduction of approximately 2,800 roles from across its corporate headquarters and retail banner stores and expects this action to generate future annual pre-tax cost savings of approximately $150 million, which is at the upper end of the Company's initially stated range of $100 to $150 million dollars in annual SG&A savings described above. This action was designed to further reduce layers at the corporate level, significantly reposition field operations to better serve customers in a digital-first shopping environment, as well as realign technology, supply chain and merchandising teams to support strategic growth initiatives.
On a preliminary basis, monthly sales for September show positive comparable sales growth, with similar store and digital sales as in the second quarter and accelerated BOPIS trends.
Bed Bath & Beyond (NASDAQ: BBBY) stock price history
The image below, obtained from Google, shows the stock price history of Bed Bath & Beyond for the last 5 years. And it's been a torrid time for Bed Bath & Beyond stockholders. 5 years ago the stock was trading at around $58 a stock and its currently trading at $20.60 a stock. That's a very negative return of -64.5% lost by Bed Bath & Beyond over the last 5 years.
The stock of Bed Bath & Beyond is trading at a its 52 week high and is far away from its 52 week low right now, which to us is a clear indication that the short term sentiment and momentum of Bed Bath and Beyond's stock price is very positive at this point in time.
The stock of Bed Bath & Beyond is trading at a its 52 week high and is far away from its 52 week low right now, which to us is a clear indication that the short term sentiment and momentum of Bed Bath and Beyond's stock price is very positive at this point in time.
Bed Bath and Beyond (BBBY) stock vs Ethan Allen (ETH) stock
The image below shows the stock price performance of Bed Bath and Beyond (BBBY) and Ethan Allen (ETH). Both companies are active in the interior decorating space. As the image above shows the stock price history of BBBY is pretty depressing, but they are not the only ones active in this space that is struggling. As the stock price comparison between BBBY and ETH show both these firms stocks have had a pretty dismal time over the last 5 years. The summary below shows the stock price returns of both firms over the last 5 years.
- Ethan Allen (ETH): -48.8%
- Bed Bath and Beyond (BBBY): -64.4%
Recent coverage of Bed Bath and Beyond
The extract below shows some of the latest coverage on Bed Bath and Beyond obtained from CNBC
Bed Bath & Beyond said Wednesday its sales tumbled nearly 50% during its latest quarter, even as online sales surged more than 100% during April and May, with consumers stocking up on cleaning supplies and home decor.
The company said it plans to permanently close roughly 200 of its namesake stores over the next two years, starting later in 2020, as it works toward getting back to profitability against the backdrop of the coronavirus pandemic. As of May 30, it operated a total of 1,478 stores, including 955 Bed Bath & Beyond shops.
Its shares were falling nearly 7% in after-hours trading. Bed Bath — which also owns the chains Buybuy Baby, Christmas Tree Shops and Harmon Face Values — said these actions should generate annual cost savings of between $250 million and $350 million, excluding related one-time costs. “We saw there were a number of stores dragging us down,” Chief Executive Mark Tritton told CNBC in a phone interview. “We will continue to look at the rest of our concept doors, now that we have established the data criteria.”
Read the full article here
Bed Bath & Beyond said Wednesday its sales tumbled nearly 50% during its latest quarter, even as online sales surged more than 100% during April and May, with consumers stocking up on cleaning supplies and home decor.
The company said it plans to permanently close roughly 200 of its namesake stores over the next two years, starting later in 2020, as it works toward getting back to profitability against the backdrop of the coronavirus pandemic. As of May 30, it operated a total of 1,478 stores, including 955 Bed Bath & Beyond shops.
Its shares were falling nearly 7% in after-hours trading. Bed Bath — which also owns the chains Buybuy Baby, Christmas Tree Shops and Harmon Face Values — said these actions should generate annual cost savings of between $250 million and $350 million, excluding related one-time costs. “We saw there were a number of stores dragging us down,” Chief Executive Mark Tritton told CNBC in a phone interview. “We will continue to look at the rest of our concept doors, now that we have established the data criteria.”
Read the full article here
Bed Bath and Beyond (NASDAQ: BBBY) latest stock valuation
So what is Bed Bath and Beyond (NASDAQ: BBBY) stock worth based on the release of their latest earnings report? Based on their latest earnings report and the fact that the group is back to profitability, our valuation model provides a target price (full value price) for Bed Bath and Beyond at $26.20 a stock. We therefore believe that the stock is undervalued.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $26.20 So a good entry point into Bed Bath and Beyond's stock would be at $23.50 or below. Since the stock of Bed Bath and Beyond is trading at well below our suggested entry point we rate the stock of BBBY as a buy
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $26.20 So a good entry point into Bed Bath and Beyond's stock would be at $23.50 or below. Since the stock of Bed Bath and Beyond is trading at well below our suggested entry point we rate the stock of BBBY as a buy
Next earnings release of Bed Bath and Beyond
It is expected that Bed Bath and Beyond will release their 3rd quarter 2020 earnings report in early January 2021