After a wild ride in 2006, shares of Bed Bath & Beyond (NASDAQ:BBBY) look like they may eke out a gain for the year. They started the year at $36.40, almost fell below $30 in mid-July and eventually recovered to a recent $40.68. Those ups and downs actually had little to do with actual financial results reported.
Bed Bath & Beyond -- whose fiscal year ends Feb. 25 -- began 2006 by announcing that full-year sales advanced almost 13% and earnings grew 16.4%. Earnings grew for the 14th consecutive year, and the company ended 2006 with 809 stores in 46 states. In other words, it continued its impressive run of double-digit sales and earnings growth. So what about the rest of the calendar year?
Glad you asked. In the first quarter, solid sales growth continued but earnings grew only 6.1%. Trouble in paradise? Not really, because results included stock-based compensation expenses that weren't necessary last year. Also, same-store sales held up, growing 4.9%. But the market wasn't impressed as management reduced earnings by a whole cent.
So far, so good. In the second quarter, Bed Bath & Beyond continued its solid top-line ways, and earnings grew 8.5%. Not stellar by any means, but fellow Fool Jeremy MacNealy pointed out that things could have been much worse because some investors were getting pummeled by falling sales at competitor Pier 1 Imports (NYSE:PIR), and archrival Linens 'n Things had already succumbed to a private equity buyout prompted by weak results. He also pointed out that "with plenty of growth opportunities supported by a well-run operation, Bed Bath & Beyond still holds value for long-term-minded shareholders."
Phew, that wasn't so bad. Bed Bath & Beyond management isn't overly verbose on earnings press releases and conference calls, preferring to let the numbers speak for themselves. And while 2006 wasn't particularly exciting on the news front, Mr. Market's mood swings had led to a 30% fluctuation in the stock price so far. In fact, a number of retailers went along for the ride, including the big boxes Wal-Mart (NYSE:WMT) and Target (NYSE:TGT), and the smaller fry such as Cost Plus (NASDAQ:CPWM).
Indeed, Mr. Market was unduly worried about individual company fortunes, overall consumer sentiment, to what extent the housing market may cool, and what these might mean for retailers. But Bed Bath & Beyond went about its business of generating oodles of cash flow to buy back stock and open new stores across the country.
What does the future hold? Luckily for us, Bed Bath & Beyond -- a recommendation in both Stock Advisor and Inside Value -- will release fiscal third-quarter results on Wednesday. Be sure to check back for our Take on how things turned out.
If waiting until then seems like an eternity, feel free to check out our Motley Fool CAPS and what the community members have to say about the company's outlook. Just take a look at how the overall sentiment stacks up:
|
CAPS summary |
Data |
|---|---|
|
Total Bulls |
360 |
|
Total Bears |
47 |
|
Bull Ratio |
88.5% |
|
Bear Ratio |
11.5% |
You can see that the majority of CAPS players think Bed Bath & Beyond, a three-star stock, is a core holding. In fact, idahofisherman believes that it will benefit from any slowdown in the housing market:
"I believe the housing market has started to fall and homeowners will improve their current residences instead of buying new homes and higher interest rates."
JMJeffrey puts it even more succinctly:
"Marriage and bathrooms lead to a solid BBBY."
My money is where the CAPS bulls' mouths are on this one. And while 2006 certainly was exciting, I can't wait to see what 2007 has in store.
Check out the other companies featured in " The Motley Fool's 2006 in Review and 2007 Preview " special.
If you're excited by what's been happening at Bed Bath & Beyond, you can see what other companies have been recommended in Motley Fool Stock Advisor or Inside Value. Wal-Mart is also an Inside Value recommendation.
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Fool contributor Ryan Fuhrmann is long shares of Bed Bath & Beyond but has no financial interest in any other company mentioned. The Fool has an ironclad disclosure policy. Feel free to email him with feedback or to discuss any companies mentioned further.
