Bed Bath & Beyond Inc (BBBY) 2002 Q1 法說會逐字稿

Welcome to the Bed Bath and Beyond fiscal year 2002 results conference call. All participants are in a listen-only mode for the duration of today's conference. This call is also being recorded. Replays of this conference will be available beginning at 8:30 p.m. eastern daylight savings time this evening through 8:30 p.m. eastern daylight savings time on Saturday, June 22nd. You may access the replays by dialing 1-800-475-6701. At the voice prompt, enter today's conference ID of 637716. I'll now turn the call over to Ron Curwin, chief financial officer and treasurer of Bed Bath and Beyond. Please go ahead.

Thank you. Good afternoon. And welcome to Bed Bath and Beyond's first quarter of fiscal 2002 conference call. We're very pleased that our financial objectives for this period were easily achieved and, in many cases, exceeded. We hope that management's review of the operations, financial position, cash flows and other comments relative to our business will be useful to you. Before proceeding, I'll read the following statement, and I quote: Bed Bath and Beyond's fiscal first 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 condition may differ materially from those expressed in any such forward-looking statements as a result of many factors that may be outside the company's control. Please refer to Bed Bath and Beyond's SEC filings, including its Form 10-K for the year ended March 2, 2002. The company does not undertake any obligation to update its forward-looking statements. Warren Eisenberg, who co-founded our company in 1971 with Leonard Feinstein, and chairs together with Len as co-chief executive officer and co-chairman of Bed Bath and Beyond, leads off today's call. Steve Temares, president and chief operating officer and member of the board of directors will then review the fiscal first quarter results. At the conclusion of Steve's comments I'll discuss our outlook for the balance of fiscal 2002 and review some of the fiscal first quarter financial highlights. I'm now very pleased to introduce Warren Eisenberg.

Good afternoon. Fiscal 2002 has gotten off to a strong start with net sales up 34.9 percent, net earnings up 54.3 percent. And comparable store sales up by 13.2 percent. These results continued our record of uninterrupted growth and making or exceeding our operating plan in each and every one of the 40 fiscal quarters since we became a public company 10 years ago. Over the last decade our Bed Bath and Beyond's storehouse has grown from 34 stores in nine states to 415 stores in 44 states and Puerto Rico. In fiscal 1992, our net sales were about 216 million dollars. And we were earned about 16 million. For fiscal 2002, analysts are estimating net sales of three and a half billion and earnings of over 270 million. We're proud of the fact that this growth was achieved with internally generated funds and that we've been debt free for about six years. In fact, as of the end of our fiscal first quarter, despite our growth and significant investment in our infrastructure and after our all cash acquisition of Harmon stores, our cash and investments exceeded 527 million dollars. During the fiscal first quarter of 2002, we added 13 new Bed Bath and Beyond stores, ending the period with 409 stores. A year ago we had 322 stores. We've added six additional stores since the beginning of our fiscal second quarter, bringing our current total to 415 stores in 44 states. Our expansion plans are closely monitored and reviewed regularly. Including stores already opened, we continue to project 88 Bed Bath and Beyond store openings for fiscal 2002. With new stores being sized beneath the markets they serve, the 2002 openings are expected to add an estimated two and a half million square feet over about 17 percent the total store space. Despite our rapid growth, our share of the approximately 75 billion dollar market remains relatively small affording us substantial opportunity. Industry growth and demographics remain quite strong and we now believe we can operate at least 950 Bed Bath and Beyond stores in the United States. We also continue to explore other growth opportunities recognizing we have the capital and the organization to do so. At Bed Bath and Beyond we've always been dedicated to serving our customers and have always focused on the bottom line. The organization we've built, combined with our unique corporate culture, continues to achieve impressive goals. As the retail industry continues to consolidate we're pleased that by any measure the performance gap between ourselves and our direct competitors is widening. We are determined to continue this trend. As previously announced on March 5th, 2002, Bed Bath and Beyond acquired New Jersey based Harmon stores, Inc.. health and beauty care retailer presently operates 20 stores in three states. I'm pleased to note that the integration of Harmon's activities into Bed Bath and Beyond is proceeding very smoothly. Our over 19,000 associates are intensely dedicated and through their talents and by remaining committed to the principles upon which we were founded we're well on our way to making 2002 another record year. Now I'll turn the call over to Steven Temares. Steven.

Thank you, Warren. Good afternoon, everyone, and thank you for participating in this conference call. As Warren noted a short while ago, we released the news of another quarter of strong earnings growth, positive operating cash flows and new store developments. In addition, we were pleased to report a solid balance sheet that continues to grow stronger each quarter. In achieving these results we once again give credit to our highly valued customers and to our now over 19,000 associates from coast to coast who continue to demonstrate their ability to provide superior customer service and to perform at a high level of execution. The credit to our associates and the recognition given them cannot be overstated. To briefly touch on the highlights of our first quarter, net earnings were 46.3 million dollars, equivalent to 15 cents per share, up approximately 54.3 percent from the 30 million, or 10 cents per share earned in the first quarter a year ago. On a percentage basis, this was the strongest net earnings gain in any quarter in our ten years as a public company. Net sales for the first quarter were approximately 776.8 million dollars, about 34.9 percent higher than in the corresponding fiscal 2001 period. First quarter comp sales were up 13.2 percent versus a comp store gain of 4.4 percent a year ago. Although we're pleased to have achieved our second consecutive quarter of double digit comp sales growth, we, nevertheless, continue to include among our major planning assumptions an increase in comp sales in the range of three to five percent. This projected growth in same store sales when combined with the other major planning assumptions should enable us to achieve our primary financial targets for the year. In establishing the major planning assumptions which support our business plan, we attempt to take into consideration all significant factors, both internal and external, which might affect our operating performance. We continue to believe that in the current environment it remains prudent to establish conservative achievable goals. Gross profit for the first quarter was 318.4 million dollars, or 41 percent of net sales, compared with 235 million or 40.8 percent of net sales during the first quarter of 2001. The gross profit improvement resulted from a combination of factors, including the mix of sales that occurred during the quarter. Selling general administrative expenses were about 245.7 million dollars during the first quarter, compared with approximately 189.4 million in the corresponding quarter a year ago. As a percentage of net sales, selling general and administrative expenses for our first quarter were at 31.6 percent compared to 32.9 percent a year ago. The principal component of our SG and A leverage were occupancy expenses and payroll and payroll related items. Against the back drop of our ongoing desire to continue to invest in and strengthen our infrastructure, we nonetheless continue to systematically reduce and eliminate costs through our operations. Warren commented earlier about our fiscal 2002 expansion plans, approximately 88 new stores we plan to open this year. Today there are 415 Bed Bath and Beyond stores serving our customers in 44 states and Puerto Rico. I'm pleased to say that most of the projected fiscal 2002 locations are well underway and that our progress is being made on our fiscal 2003 program. As we've often said, 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 this produces continue to provide us with a unique competitive advantage in the marketplace, leading to our consistent long-term performance. As I mentioned before, we intend to continue our long standing policy of investing heavily in our infrastructure to support our vision of where we expect Bed Bath and Beyond to be in the future. We continue to see the benefits of those investments which not only support current operations but are also expected to support the much larger, more successful company, which we are rapidly becoming. We will continue to utilize this balance and strategy of reinvesting for the company's future while achieving planned current operating results. So to recap, Bed Bath and Beyond's fiscal first quarter produced earnings of 46.3 million dollars, or 15 cents per share. About 54.3 percent higher than a year ago on an approximately 34.9 percent increase in net sales, and 13.2 percent gain in same store sales. We're extremely well positioned to take advantage of any opportunities and respond to all challenges that may lie ahead. Our entire organization is dedicated to giving our customers the very best shopping experience possible. And through these efforts producing exceptional financial results. While we're obviously pleased with our first quarter results which reflect strength in sales, improvement in the gross profit, and expense leverage, while maintaining a superb balance sheet and positive operating cash flows, as I mentioned earlier we believe it prudent to remain conservative in establishing our financial objectives the remainder of fiscal 2002. I look forward to our next call on September 25th, 2002, at which time we will review with you the fiscal second quarter and the fiscal first half. I'll now turn the call back to Ron. At the conclusion of the call, Ron and Ken (Frankel) our director of financial planning will be in their offices to take your comments and questions. Ron.

Thanks Steve. In our fiscal 2001 year-end conference call on April 3rd we introduced our major planning assumption for fiscal 2002. Taking the just reported fiscal first quarter results and Steve's comment relative to our financial planning process into consideration, here are our updated major planning assumptions for the balance of fiscal 2002. One, of the approximately 88 new Bed Bath and Beyond stores planned for the full year, 13, as previously noted, were opened during our fiscal first quarter. Bed Bath and Beyond store openings for the remainder of the year continue to be estimated as follows: Q-2, 23, of which six have already been opened. Q-3, 42. Q-4, 10. Two, our expansion will continue to be funded with internally generated funds. 3, net sales of new Bed Bath and Beyond stores in their first full year of operation continue to be projected at between 150 and 175 dollars per square foot. We believe this remains a reasonable first year sales productivity target, despite the fact that current rates, actual in store sales productivity has been exceeding this range. Net sales and comp store sales are now projected to grow in the fiscal second quarter and for all of fiscal 2002, including the now concluded first quarter, in the low to mid 20s, and three to five percent ranges, respectively. Four, improved gross profit combined with SG and A expense leverage are expected to produce an improvement in operating profit. Five, higher projected levels of investable funds combined with a lower average interest rate are expected to result in relatively flat interest income in fiscal 2002. Six, capital expenditures for all of fiscal 2002 continue to be planned at approximately 150 million dollars. Mostly for new Bed Bath and Beyond stores and information technology enhancement. Depreciation and amortization continue to be estimated at approximately 80 billion dollars for the year. Seven, income taxes will continue to be divided at 38 and one-half percent of pretaxed earnings. Eight, as previously mentioned the benefit of the acquisition on March 5th of Harmon stores is not expected to have a material effect on our overall results or financial condition in fiscal 2002. In our year-end conference call on April 3rd we introduced a net earnings target for all of fiscal 2002 and for the fiscal first quarter. As such, we are now providing our initial projections for the second quarter and the second half of the fiscal year. Based upon the foregoing and other assumptions, we're now targeting earnings of 23 cents per share in the fiscal second quarter, versus 18 cents per share in last year's comparable quarter and 55 cents per share for the second half of fiscal 2002. This brings the revised earnings target for all of fiscal 2002 to 93 cents per share. This is two cents higher than our prior estimate provided during our conference call on April 3rd of 91 cents per share. You'll also recall that prior to our April 3rd conference call, targeted earnings were 88 cents per share. The attainment of our revised earnings target of 93 cents per share would once again represent a doubling of our net earnings over three years. Before concluding this call, a few additional comments relative to our fiscal first quarter: One, our (inaudible) balance sheet as of June 1, 2002 remains strong and flexible. Cash and cash equivalents are approximated 380 million dollars. In addition, as of June 1, 2002 we had 147 million invested in investment securities. The combined total of cash and investment security of 577 million compares with cash and cash equivalents of about 276 million a year ago, an increase of about 251 million, or 91 percent. Two, merchandise inventories at June 12002 were 850 million, compared with 697 million a year ago. On a per square foot basis, inventories were consistent with last years, and continue to be tailored by store to meet the demands of our customers. Three, capital expenditures for the fiscal first quarter primarily for new stores and information technology amounts to approximately $12 million. Four, depreciation and amortization, approximated 17 million dollars, up from about 14 million dollars a year ago. Five, shareholders equity as of June 1, 2002, was approximately 1.2 billion. A year ago it was about 869 million. Although in the company we're 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 marketplace for home goods, Bed Bath and Beyond growth opportunities in the years ahead are exceptional. We remain dedicated to providing the best possible shopping experience for millions of valued customers and by so doing over time to continue building shareholder value. As Steve said, the next conference call will be on September 25th, 2002, at which time we will review our fiscal second quarter and fiscal first half results. If you have any questions, call us at 1-908-688-0888. Ken (Frankel), our director of financial planning, is at extension 4554. I'm at 4550. You may also try (Arbach) at extension 4552. We'll do our best to respond quickly. As always, we very much appreciate your interest in Bed Bath and Beyond. This concludes today's conference call. Thank you all for listening.

Ladies and gentlemen, this concludes today's conference call. Thank you all for listening. You may now disconnect.