Bed Bath & Beyond Inc (BBBY) 2001 Q4 法說會逐字稿

Ladies and gentlemen, thank you very much for standing by and welcome to Bed, Bath & Beyond's fiscal fourth quarter and fiscal year 2001 results conference call.

All participants are in a listen-only mode for the duration of the call. This call is being recorded. There will be a rebroadcast of this call on Thursday, April 4, 2002 at 11 a.m. Eastern Standard Time and again on Friday, April 5, 2002 at 3 p.m. Eastern Standard Time.

The dial-in number for the rebroadcast is 1-800-553-0349. I will now turn the call over to Ron Curwin, Chief Financial Officer and Treasury of Bed, Bath & Beyond. Please go ahead.

Thank you. Good afternoon and welcome to Bed, Bath & Beyond's fourth quarter of fiscal 2001 conference call. We're pleased to report that our principal financial and operation goals for the period and for the entire fiscal year were not only achieved, but exceeded.

We hope that management's review of the results of the operation, financial positions, cash flows, and comments relative to our business will be useful to you. Before proceeding I will leave the following statements and I quote, "Bed Bath & Beyond's fiscal fourth quarter press release and comments made during this call may contain forward-looking statements. Many of these forward-looking statements can be identified by the use of words such as may, will, expect, anticipate, estimate, assume, continue, project, plan and similar words and phrases.

The company's actual results and future financial conditions may differ materially from those expressed in any such forward-looking statements as a result of many factors that may be outside of the company's control. Please refer to Bed Bath & Beyond's SEC filings including its Form 10K for the year ended

2001. The company does not undertake any obligation to update its forward-looking statements."

The company's fiscal fourth quarter of 2001 and fiscal year 2001 comprise 13 weeks and 52 weeks respectively compared with 14 weeks and 53 weeks in the prior year. Same store sales percentages for fiscal 2001 are based upon the respect that 13-week and 52-week periods in each year and are therefore truly comparable.

Leonard Feinstein, who co-founded our company in 1971 with Warren Eisenberg and serves together with Warren as co-chief executive officer and co-chairman of Bed Bath & Beyond, leads off today's call. Steven Temares, President and Chief Operating Officer and a member of the board of directors will then review the fiscal fourth quarter and fiscal year 2001 results.

At the conclusion of Steve's comments, I'll provide some guidance with respect to fiscal 2002, which began on March 3, 2002 and review some fiscal fourth quarter financial highlights. If you have any questions at the completion of this conference call, you may reach us at 1-908-688-0888.

, our director of financial planning is at extension 4554. I'm at extension 4550. If neither of us is immediately available, please try

at extension 4552. We will respond as quickly as possible.

I'm now very pleased to introduce Leonard Feinstein.

Len?

Good afternoon. After concluding fiscal 2001 our thirtieth anniversary year with an earnings increase of approximately 27.7 percent and a fiscal fourth quarter earnings improvement of approximately 28.5 percent the strong net sales and comparable store sales we continue to be very pleased with the performance of our company.

This is especially so because of the continuing impact of the aftermath of the criminal acts of September 11, the economic slowdown and increased promotional activities by many other retailers particularly during the important holiday selling period. So we're most pleased to have been able to maintain our record of meeting or exceeding our operating plan in every quarter, now totaling 39 since our June 1992 IPO. Our unique decentralized operating philosophy continues to demonstrate its strength and flexibility.

During fiscal 2001, we added 85 new stores, five more than originally planned, ending the year with 396 stores in 44 states. Included in the openings was a store in

, Puerto Rico, our first store outside the continental United States. We added about 2.5 million square feet, approximately 20.6 percent, bringing total store space to over 14.7 million square feet at year-end. You may recall that in a prior year, fiscal 2000, we opened 70 new stores, adding approximately 24 percent to total store space.

In fiscal 2002, we expect to add approximately 88 new Bed Bath & Beyond stores. These new stores would add an estimated 2.5 million square feet or approximately 17 percent to total store space.

Despite our substantial growth over the years, our share of the approximately $75 billion market for home goods remains relatively small affording us substantial opportunities to continue growth. We continue to benefit from the ongoing consolidation within the home goods specialty segment of retailing.

Although it is still quite early in our fiscal year, I'm pleased to say that we are on plan for our projected 2002 store openings. We now believe that we can operate at least 950 stores in the United States. We continue to refine our ability to size new stores to better the needs of the particular markets being served. This has resulted in stores that are smaller on average than those opened in prior years. Top line growth going forward, therefore is expected to reflect not only the number of new store openings but also the total square feet of store space being added.

With no debt and cash and long-term investments approaching half a billion dollars, about twice that of a year ago and positive cash flow, our financial condition at the end of the year was solid. We continue to look at opportunities to make the best possible use of our growing financial resources and will in the meantime continue to maintain a conservative investment position.

At Bed Bath and Beyond, we are always focused on the bottom line. Fiscal 2001 was a great year for us. I'm pleased that both our sales growth and earnings growth have been consistent and that net and comp sales came in above expectations. The organization we've built, combined with our unique corporate culture, continues to establish and achieve impressive goals. We are pleased that the performance gap between ourselves and our direct competitors continues to widen.

We're working hard to continue this trend. Shortly after our new fiscal year began, we announced on March 5, 2002 the acquisition of New Jersey based Harmon

a health and beauty aids retailer. I'm very pleased to welcome all of our new associates at Harmon into Bed, Bath & Beyond's extended family.

Steve and Ron will comment on Harmon during their remarks.

On June 4th we will mark our 10th anniversary as a publicly traded company. We will like those of you who are our shareholders to know that your support over this decade is most appreciated, and we remain committed to building shareholder value in the years ahead. We believe that the resources and infrastructure to accomplish this are firmly in place. Our over 19,000 associates from coast to coast are more dedicated than ever to providing our customers with the very best shopping experience possible and despite the challenges to making fiscal 2002 our best year ever.

I'm highly confident that they will do just that. I will now turn the call over to Steven Temares.

Steven?

Thank you, Len.

Good afternoon and thank you for participating in this conference call. This afternoon we were pleased to have reported a solid fiscal fourth quarter and an above planned fiscal 2001 performance. As previously mentioned, fiscal 2001 was a 52-week year. Fiscal year 2000, which had one additional week in the fiscal fourth quarter consisted of 53 weeks.

To briefly touch upon the highlights, net earnings for our fiscal fourth quarter were $82.7 million equivalent to 28 cents per share, up approximately 28.5 percent from the $64.3 million or 22 cents per share earned in the final quarter a year ago. For the full year, net earnings were approximately $219.6 million or 74 cents per share compared with $171.9 million or 59 cents per share earned in fiscal 2000.

On a percentage basis, full year net earnings advanced by 27.7 percent. These results continue an almost 10-year record of uninterrupted earnings growth achieved by Bed, Bath & Beyond since our June 1992 IPO. During this time, our net earnings more than doubled every three-year period, a rare accomplishment of which we are extremely proud.

Our primary financial goals have always been and remain the generation of strong net earnings combined with a solid balance sheet and positive cash flow. By almost any measurement, this is our most successful year and for that we once again give credit to our highly valued customers, to our unique corporate culture and to our Bed, Bath & Beyond associates who continue to demonstrate their exceptional abilities and extraordinary efforts in better serving our customers.

Net sales for the 13 weeks ended March 2, 2002 were approximately $879.1 million, about 17.8 percent higher than in the 14 weeks that ended March 3, 2001, fourth quarter comps 13 weeks versus 13 weeks were 11.9 percent versus 4.9 percent a year ago. These were our strongest quarterly comps in over seven years and were achieved in what some perceive as a challenging economic environment we are pleased that our customer's response both in our stores and online was very positive.

Looking ahead our comp store sales growth target remains three to 5 percent, a goal that continues to be a key component of our long term earnings model. For all of fiscal 2001 net sales advanced to $2.928 million, about 22.2 percent higher than the $2.397 million achieved a year ago. Comps for all of fiscal 2001 52 weeks versus 52 weeks grew by 7.1 percent. In fiscal 2000 same store sales were up by five percent.

In addition to crediting our customers and our store associates for their contribution to our fiscal 2001 success it can also once again site more effective merchandising, more efficient promotional efforts and enhanced information technology, all of which contributed to the achievement of better than planned net sales and earnings.

Gross profit for the fiscal fourth quarter is about $370.2 million or 42.1 percent of net sales compared with the 311.8 million, both 41.8 percent of net sales during the fiscal fourth quarter of 2000. The 30-basis-point improvement in gross profit for the quarter as well as the 10-basis-point improvements for the year were consistent with plans.

Given the recent promotional environment, we're pleased that our gross margin remains solid and that we continue to limit net promotional expenditures to a level consistent with prior periods.

Selling, general and administrative expenses were about $238.2 million during fiscal fourth quarter compared with approximately $209.9 million from the corresponding quarter a year ago. As a percentage of net sales, the experience leverage of approximately 100 basis points for the fourth quarter and 30 basis points for the year.

This leverage for the year resulted primarily from lower payroll and payroll related items. This was the fifth consecutive year that we showed SG&A leverage for the full year and we would expect to experience additional operating efficiencies going forward. Nonetheless, having noted that, we intend to continue our long standing policy of investing heavily in our infrastructure to support our vision of where we expect Bed Bath & Beyond to be in the future.

Almost daily we see the benefits of those investments, which not only support our current operations, but are expected to reinforce the much larger, more successful company, which we have always envisioned and which we continue to become. We expect to continue the balanced strategy of providing for the company's future needs while achieving our operating plan.

As the result of the improvements in the gross profit and selling, general and administrative expense ratios for the full year we experienced an approximately 40-basis-point improvement in our operating profit margin. We continue to be excited about and focused on initiatives that address specific opportunities in each aspect of our business and we are confident that through this focus we will continue to show improvement in every area of our operation.

Our decentralized culture, which puts much of the decision making closest to our customers, has been responsible for much of the success we have achieved over the past three decades. We believe this operating philosophy and the entrepreneurial and dedicated associates it produces, continue to provide us with a unique competitive advantage in the marketplace.

Earlier, Len commented on our acquisition at the beginning of our new fiscal year of Harmon Stores Inc. Now our March 5th press release announcing this transaction, we provided certain information including that Harmon currently operates 27 stores in three states representing an aggregate of approximately 178,000 square feet of store space and that we believe the benefits of this all cash acquisition will not have a material effect on the overall results or financial condition of Bed Bath and Beyond Inc. for fiscal 2002.

As we have constantly maintained, we believe it is not in the best interest of our shareholders to lay out our plans for any currently, non-material initiative. As with all proprietary initiatives, our objectives remain focused on creating the strongest, most dominate company possible and, as such, returning ever-increasing value to our shareholders. In the interest of clarity, Ron will have some additional comments regarding Harmon and how it relates to fiscal 2002 reporting.

So to recap, Bed Bath & Beyond's fiscal fourth quarter produced record earnings of $82.7 million or 28 cents per share, about 28.5 percent higher than a year ago and a 17.8 percent increase in net sales and an 11.9 percent gain in same store sales. For the full year net earnings were $219.6 million or 74 cents per share, up about 27.7 percent from fiscal 2000 on a net sales increase of approximately 22.2 percent and a comp store sales increase of 7.1 percent.

Our 30th anniversary year with its opportunities and challenges were successful by any measurement and we remain steadfast in our dedication to serving our customers and in so doing achieving our performance objectives. We look forward to reviewing our fiscal first quarter of 2002 results with you on our next conference call scheduled for 5 p.m. on Thursday, June 20, 2002.

I will now turn the call back to Ron, who at the conclusion of this call will be in his office to answer any questions that you might have.

Ron?

Thanks Steve. As Len and Steve both said, we are pleased with our fiscal fourth quarter and full year 2001 results, the best in our 30-year history. In our remarks this afternoon, we'd first like to reiterate some comments made in our last call regarding the effects of reporting calendar differences on our fiscal 2001 versus fiscal 2000 comparisons, then we'll provide updates for fiscal 2002 guidance, outline the major playing assumptions underlying such guidance, and conclude with some comments relative to our fiscal 2001 year-end balance sheet and cash flow.

First the changes in the reporting calendar. As you may recall, the important week after Thanksgiving was included in the fiscal fourth quarter in fiscal 2000. In fiscal 2001, it was part of the fiscal third quarter, which ended on December 1, 2001. In addition, this year's fiscal fourth quarter had one week less than a year ago -- 13 weeks versus 14 weeks. As a result of these two changes, we had modeled our top line percentage increase in this year's fiscal fourth quarter in the "low double-digit range" and an increase for all fiscal 2001 of "approximately 20 percent."

As reported this afternoon, our actual growth in net sales

fiscal quarter and for all of fiscal 2001 were approximately 17. 8 percent and 22.2 percent respectively -- both higher than expectations. Comp sales, on the other hand, are calculated on an apples-to-apples basis with each week, each month and each quarter compared with the identical weeks, months or quarter of the prior year. For comp purposes, each

13 weeks -- the same 13 weeks as in the prior year.

Turning now to our fiscal 2002 guidance. In our last conference call on December 20, we reaffirmed our commitment to achieving the then consensus earnings estimates of 88 cents per share for fiscal 2002. However, as a result of our favorable Q4 2001 results and taking updated

assumptions into consideration, we are now targeting fiscal year 2002 net earnings of 91 cents per share, three cents per share above the prior EPS goals.

Our fiscal first quarter began on March 3, 2002. We now expect to achieve earnings per share of 13 cents in the quarter, one cent above the current consensus earnings estimate of 12 cents per share. The aforementioned fiscal 2002 and first fiscal quarter estimates are based on, among others, the planning assumptions enumerated below. As announced, the benefit of the acquisition on March 5 of Harmon Stores is not expected to have a material affect on our overall results for financial conditions in fiscal 2002.

In outlining some of the assumptions, we make reference to Harmon solely to qualify such assumptions. One, approximately 88 Bed Bath & Beyond stores comprising approximately 2.5 million square feet or approximately 17 percent will be added to total store space during fiscal 2002. We call the five stores which were originally part of our fiscal 2002 program were actually opened prior to the end of fiscal 2001.

Bed Bath & Beyond stores quarterly 2002 openings are presently estimated to be as follows, Q1: 13; Q2: 23; Q3: 42; Q4: 10. So far this quarter five new Bed Bath & Beyond stores and one Harmon store, which was planned prior to the acquisition have been opened. As of today we are now operating 401 Bed Bath & Beyond stores and 28 Harmon stores. Going forward, we will provide quarterly updates with respect to new Bed Bath & Beyond and Harmon store openings.

Two, we continue to project Bed Bath & Beyond new store net sales of between $150 and $175 per square foot in the first 12 months of operation. We expect a company wide net sales percentage increase for the fiscal first quarter and for all of fiscal 2002 to be in the low 20s.

As Steve mentioned, our comp store sales growth target remains 3 to 5 percent.

Three, the combination of another modest increase in gross profit margin and additional SG&A operating efficiencies is expected to result in continued improvement in the company's net operating profit margin.

Four, interest income earned given the low interest rate environment is expected to remain flat in fiscal 2002 despite the much higher investment balances anticipated during the year.

Five, the effective tax rate for fiscal 2002 will remain at 38.5 percent.

Six, capital expenditures principally for new Bed Bath & Beyond stores and information technology enhancements and depreciation and amortization for fiscal 2002 are estimated at approximately $150 million and $80 million respectively.

Based on these and other assumptions and as previously mentioned, we are now targeting net earnings of 91 cents per share in fiscal 2002, of which 13 per share is expected to be earned in the fiscal first quarter ending on June 1, 2002.

Our long-term goal of doubling net earnings every three years remains, in our view, realistic and achievable.

Before concluding this afternoon's call, a few additional comments relative to fiscal 2001.

One, our balance sheet and cash flow has continued to strengthen year-over-year. As of March 2, 2002 cash and cash equivalent approximated $429.5 million. In addition, we had $51.9 million invested in government agency securities classified as a long-term investment. This compares with approximately $239.3 million in cash and cash equivalent year ago.

Two, we continue to tailor inventory by store to meet our customers demands. Merchandise inventories at March 2, 2002 of approximately $754 million, about a 3 percent increase on a per square foot basis year-over-year was solidly on plan. We continue to utilize some of our extra cash flow to modestly increase merchandise inventory where appropriate.

Three, shareholders equity at March 2, 2002 was approximately $1.1 billion. A year earlier it was about $817 million.

Four, capital expenditures primarily from each store and information technology were approximately $121.6 million for the fiscal year compared with $140.4 million in the prior year. Reduced outlay principally related to new store lease hold improvements resulted in cap ex below prior estimates.

Although we are never satisfied, we are pleased with the operating results reported today and with our financial position and cash flow. We continue to believe that with a small, but expanding share of the retail marketplace for home goods, Bed, Bath & Beyond's growth opportunities in the years ahead are exceptional. We remain dedicated to providing the best possible shopping experience for our millions of valued customers and by so doing over time to continue building shareholder value.

As always, we very much appreciate your ongoing interest in Bed, Bath & Beyond. This concludes today's conference call.

Thank you all for listening.

Ladies and gentlemen that does conclude your conference call for today. Thank you very much for your participation and for using AT&T Executive Teleconference. You may now disconnect.

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