Home-furnishings retailer Bed Bath & Beyond
What analysts say:
- Buy, sell, or waffle? Twenty-one analysts follow Bed Bath, down four from last quarter. Six of them rate it a buy, 13 a hold, and two say "sell." The Motley Fool CAPS community rates the company three out of five stars.
- Revenue. On average, analysts are looking for 9% sales growth, to $1.77 billion.
- Earnings. Profits are predicted to rise 4% to $0.52 per share.
What management says:
Citing "continued confidence in our Company's long-term growth potential, financial outlook and excess cash flow generation," Bed Bath announced in last quarter's earnings release that it has renewed its share-buyback program, with an additional $1 billion in repurchase authorizations.
What management does:
Emphasis on "potential." As far as actuality goes, last quarter didn't go too far toward realizing that potential. While sales grew 10% and per-share earnings grew about 8%, net profit growth was helped by a lower tax rate and share buybacks that concentrated what profits there were among fewer shares. Meanwhile, margins continued to slump, as you can see below.
|
5/06 |
8/06 |
11/06 |
3/07 |
6/07 |
9/07 |
|
|---|---|---|---|---|---|---|
|
Gross |
42.9% |
42.9% |
43.1% |
42.8% |
42.7% |
42.5% |
|
Operating |
14.7% |
14.3% |
14.0% |
13.4% |
13.2% |
12.9% |
|
Net |
9.6% |
9.4% |
9.3% |
9.0% |
8.8% |
8.7% |
One Fool says:
That said, I'd be remiss in failing to mention that I think Bed Bath has a lot farther to fall before it gets anywhere near the performance of its competitors. The best of these -- Target
Also worth noting is that Bed Bath isn't just whistling past the graveyard when it says it's got the cash-production prowess to buy back as many shares as it likes. As anemic as things may have looked under GAAP last quarter, cash profits told an entirely different tale. Through the first six months of Bed Bath's fiscal year, the chain generated just less than $125 million in free cash flow -- a 27% increase compared to last year's first two quarters. And it did this while increasing capital expenditures to grow its store count.
With the home-furnishings industry suffering through a slump, and Bed Bath's share price languishing along with it, now might be precisely the right time to buy back shares on the cheap -- for Bed Bath, and for you.
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