Bed Bath & Beyond Pays Cash for Growth: Fool by Numbers

On Sept. 26, home furnishings retailer Bed Bath & Beyond (Nasdaq: BBBY) released second-quarter earnings for the period ending Sept. 1, 2007.

• Same-store sales improved just 2.2% over the year-ago period, but there are many ways to skin a growing cat. This company does it by building lots of new stores. Eleven stores opened in the quarter, bringing the total to 914 locations under four different names.
• The company remains debt free and plans to fund its fourth repurchase program since 2004 with present and expected future free cash flows.
• Higher inventory acquisition costs, a change in the mix of merchandise sold, and higher postage and paper costs all contributed to the falling margins.
• Bed Bath & Beyond sports a three-star rating (out of five) here at the Motley Fool CAPS community. The company's rating falls between competitor Target (NYSE: TGT), which garners four stars, and Williams-Sonoma (NYSE: WSM), which has only two stars.

(Figures in millions, except per-share data.)

Income Statement Highlights

	Q2 2008	Q2 2007	Change
Sales	$1,768	$1,607	10.0%
Net Profit	$147	$146	1.0%
EPS	$0.55	$0.51	7.8%
Diluted Shares	269.5	284.7	(5.3%)

Get back to basics with the income statement.

Margin Checkup

	Q2 2008	Q2 2007	Change*
Gross Margin	41.4%	42.2%	(0.8)
Operating Margin	12.5%	13.7%	(1.2)
Net Margin	8.3%	9.1%	(0.7)

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets	Q2 2008	Q2 2007	Change
Cash + ST Invest.	$584	$817	(28.6%)
Inventory	$1,603	$1,422	12.7%

Liabilities	Q2 2008	Q2 2007	Change
Accounts Payable	$649	$592	9.6%

The balance sheet reflects the company's health.

Cash Flow Highlights

	Q2 2008	Q2 2007	Change
Cash From Ops.	$160	$152	5.7%
Capital Expenditures	$76.8	$57.0	34.6%
Free Cash Flow	$83.5	$94.6	(11.8%)
Owner Earnings	$109	$120	(9.2%)

Free cash flow is a Fool's best friend.

Bed Bath & Beyond is a Motley Fool Inside Value selection and also a Motley Fool Stock Advisor pick. Try either service free for 30 days.