Bed Bath & Beyond Inc (BBBY) 2002 Q2 法說會逐字稿

Welcome to the Bed Bath and Beyond fiscal second quarter 2002 conference call.

All participants are in a listen only mode for the duration of the call.

This call is being recorded.

A replay of this conference will be available September 25th, 2002 beginning at 6:30 p.m.

Eastern Standard Time through 11:59 p.m.

Eastern Standard Time on Friday, September 27th, 2002.

To access the replay, you may dial 888-266-2081, access code 616-1383.

I'll turn the call over to your host Mr. Ron Curwin, chief financial officer and treasurer of Bed Bath and Beyond.

Sir, you may begin.

[Disconnected from Internet.]

[Inaudible] 2002 results conference call.

All participants are in a listen-only mode for the duration of the call.

This call is being recorded. a replay of this conference will be available on September 25th, 2002 beginning at 6:30 p.m. eastern time through - I'm going to redo that.

My apologies.

That's okay.

You're doing a good job.

It's Bed Bath and Beyond fiscal second quarter.

Yes, I tripped over that a little bit.

My apologies.

Also, if you do have [inaudible] you want to start over again, as long as you say we're going to start over, you pause, give it 5 seconds, we can edit that.

Okay.

Come back to it.

[Inaudible] May, will, expect, anticipate, estimate, assume, continue, project, plan and similar words.

The company's actuality 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, including, but not limited to, a substantial change in the business environment.

Please refer to Bed Bath and Beyond SEC filings, including its Form 10(q) K, for year-ended March 2nd, 2002. the company does not undertake any obligation to update its forward looking statements, end of quote.

Warren Eisenberg, the co-founder of our company in 1971, with Leonard Feinstein and serves together with Len as co-chief executive officer and cochairman of Bed Bath and Beyond [inaudible] on today's call.

Steve Temares will then review the fiscal second quarter and fiscal first half records.

At the conclusion of Steven's comments, I'll discuss our outlook for the balance of fiscal 2002 and review some of the fiscal second quarter and fiscal first half financial highlights.

I now am very pleased to introduce Warren Eisenberg.

Warren?

Thank you.

I am pleased to report that the strong [inaudible] we experienced during the initial quarter of fiscal 2002 was followed by another excellent period in the fiscal quarter ended August 31, '02.

During the quarter we maintained a performance [inaudible] our company among the top tier of all of retailing [inaudible] [Poor audio quality]

Over the last decade [inaudible] to 443 stores in 34 states and Puerto Rico.

In fiscal '92 our net sales were about $260 million in year-end, about $60 million.

For the current year analysts are estimating [inaudible] 3.$6 billion and earnings of $280 million.

We are proud of the fact we've achieved this goal.

We've internally generated money and we've been debt free for over six years. with that as of the end of our fiscal second quarter, [inaudible] and significant infrastructure enhancement, our cash and investments exceeded $560 million. the highest balance in our 31- year history.

During the fiscal quarter ended August 31, 2002, we added a total of [inaudible], ending the period with 443 compared with 344 a year ago.

We've opened [inaudible] additional stores [inaudible].

We expect to end the fiscal year with approximately 484 stores, an increase of 88 stores representing our largest ever number of annual store openings.

Our expansion plans are closely monitored and reviewed regularly [inaudible] to meet the needs of the market they serve. the approximately 88 openings this year are expected to add two and a half million square feet, about 17 percent of total store space on an annual basis. [inaudible].

We continue to believe we can operate at least 950 Bed Bath and Beyond stores in the U.S. we also continue to regularly explore other [inaudible] recognizing we have the capital and the organization to do so. the organization we built provided with a unique [inaudible] continues to achieve these sales that few companies can match.

As the retail industry continues to consolidate, we're pleased [inaudible] direct competitors [inaudible]. [inaudible] we remain confident that the dedication of our over 20,000 associates [inaudible] another record year for 2002.

Now I'll turn the call over to Steve Temares.

Steve?

Thank you, Warren.

Good afternoon, everyone, and thank you for participating in this call.

In the past hour we released the news of another yet very solid performance.

As we have previously stated, generation of strong consistent net earnings combined with the solid balance sheet, a positive operating cash flow, remain our primary financial goal.

As most of you know, over 30 years we have brought our company as a decentralized organization.

This is consistent with our belief and the dedication and talent of our associates.

We believe our decentralization has led to better decision making and better execution.

Through the efforts of our associates and their focus on servicing our customers and providing them with the very best possible shopping experience, we have been able to achieve our consistent long term performance.

We believe our operating philosophy continues to provide us with the unique competitive advantage in the marketplace.

Turning to the financial highlight of our second quarter, net earnings were approximately $75.5 million, equivalent to 25 cents per share compared with net earnings of $54 million or 18 cents per share a year ago. an increase of approximately 39.9 percent.

For the six months net earnings were approximately $121.8 million equivalent of 40 cents per share compared with $84 million or 28 cents per share earned a year ago, an increase of about 45 percent.

Net sales for the second quarter were approximately $903 million, 26 and a half percent higher than in the corresponding quarter a year ago.

For the first half net sales advanced to $1.6798 billion and approximately 43 percent higher than a similar period last year.

Comp store sales for the quarter increased by approximately 8 percent versus a 4.8 percent comp increase from last year's second quarter.

These sales results in part reflect the successful back to school season.

For the six months comp store sales came in at about 10.4 percent compared with 4.6 percent in the similar six month period of fiscal 2001.

You may recall that after we experienced double digit comp sales growth in last year's fiscal fourth quarter and in this year's fiscal first quarter, we continued to include among our major planning [inaudible] an increase in comp sales in the range of 3 to 5 percent, and we have repeatedly said we tried to be truant in establishing our internal plan. [prudent] since the second quarter comp gain of 8 percent exceeded our [inaudible] range, the strong sale contributed to better than planned earnings for the third consecutive quarter. the 3 to 5 percent planned increase in comp sales combined with the other major planning factors should enable us to achieve our financial objectives for the year.

Gross profits for the second quarter was approximately $370.3 million or 31 percent of net sales compared with $291.3 million or 40.8 percent of net sales during the second quarter of 2001. 20 basis point increase in the gross profit margin was consistent with plan and we expect [inaudible] comparison to continue to improve over the balance of the year. [inaudible] general and administrative expenses were about $250.6 million during the second quarter [inaudible] approximately 206.7 million for the corresponding quarter a year ago.

As a percent percentage of net sales 27.8 percent versus 29 percent last year. the principal component of the SG and A leverage, the occupancy and free opening expenses partially offset the payroll and payroll related items.

Against the backdrop, there were ongoing desire to continue to invest in and strengthen our infrastructure, we nonetheless strive to systematically reduce and eliminate [inaudible] throughout our operation.

We will continue to employ the balanced strategy and reinvesting for the company's future [inaudible] current operating results. [inaudible] commented earlier about our fiscal 2002 expansion plan that approximately 88 new stores we plan to open this year.

I add at this juncture there might be some modest up side to the number of our 2002 openings.

This would result in the earlier than planned opening of some of our fiscal 2003 new stores.

If this were to occur, the effect on our operating performance for either 2002 or 2003 would be minimal.

As Warren said, there are 443 bed bath and beyond stores serving our customers in 44 states and Puerto Rico.

We remain extremely well positioned to take advantage of any opportunities that arise and to respond to any challenges that might 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 for our shareholders.

We are pleased with our year to date operations which will strengthen sales, improve gross profit and expense leverage.

Our balance sheet at August 31st was our best ever, and operating cash flow remain strong.

Our financial strength which has always been a key management focus seems to have taken on added importance in the current economy and we see our balance sheet continue to strengthen as we move to the future.

Having said that, and as I said earlier, [inaudible], we remain conservative as always in establishing our financial target and have a high degree of confidence that our targets will be met. to recap, net earnings in our fiscal second quarter was approximately 39.9 percent for $75.5 million or 25 cents per share compared with $54 million or 18 cents per share in last year's fiscal second quarter on an approximately 26 and a half percent increase in net sales and 8 percent gain same store sales. [inaudible] 18th, 2002, one day earlier than previously scheduled.

At that time we will review with you the accomplishments of the fiscal third quarter and the first nine months of fiscal 2002.

I will now turn the call back to Ron.

At the conclusion of the call, Ron and Ken Frankel [phonetic], the Director of Financial Planning will be in their offices to take your comments and questions.

Ron?

Thanks, Steve.

Taking the [inaudible] one, of the approximately 88 new Bed Bath and Beyond stores planned for the full year, 37 have as previously noted were opened during our fiscal first half.

With the exception of a two stores, the balance of our store opening program is expected to be concluded prior to the end of our fiscal third quarter.

At the end of fiscal 2002 we expect the to be operating approximately 484 Bed Bath and Beyond stores, occupying a total of approximately 17.2 million square feet.

Two, our expansion will continue to be entirely funded with internally generated funds.

Three, with respect to projected net sales, two factors should be considered.

First, are the changes in the retail caliber which will result in six fewer shopping days between Thanksgiving and Christmas.

This shift principally affects our fiscal third quarter which will have 7 fewer post Thanksgiving shopping days than last year's third quarter. the second factor affecting net sales volumes is that our new stores continue to be so much smaller on average than those previously opened.

Taking the calendar shift, the small average sized new stores and other factors into consideration, net sales in the fiscal third quarter are planned to have a percentage increase in the low 20s range and approximately 25 percent for all of fiscal 2002.

Comp sale as previously mentioned are expected to grow in the 3 to 5 percent range.

Four, a modest improvement in gross profit combined with SG and A expense leverage are expected to result in an increase in the operating profit margin.

Five, at the end of the third quarter we anticipate a modest increase over last year in inventory on a per square foot basis due to the previously discussed shift in our fiscal calendar.

At this time we would expect fiscal year-end inventories to be in line with historic trends.

Six, higher projected levels of investable funds provided historically low average interest rate. [inaudible] relatively flat or even slightly lower interest income for all of fiscal 2002. 7, [inaudible] expenditures for all of fiscal 2002 are planned to be approximately $160 million, mostly for new Bed Bath and Beyond stores and information technology enhancements.

Depreciation and amortization continue to be estimated at approximately $80 million for the year. 8, income taxes will continue to be provided at 32 and one half percent of pretax earnings. 88 and one half percent.

I'm sorry. [38 and one half percent.

Go on?

I'm sorry.

Can we go back?

Go back to number 6.

Start it over.

Okay.

Take it back, go 30 seconds.

Give yourself five seconds and go ahead.

Seven, capital expenditures for all of fiscal 2002 will planned to be approximately $160 million, mostly for new bed bath and beyond stores and information technology enhancements.

Depreciation and amortization continue to be estimated at approximately $80 million for the year. 8, income taxes will continue to be provided at 38 and one half percent of pretax earnings.

We provided our initial fiscal year 2002 earnings guidance last December.

During our fiscal third quarter of 2001 conference call.

At that time we indicated that we were comfortable with the [inaudible] estimates of 88 cents per share.

This target was subsequently increased to 91 cents per share in April and then to 93 cents per share in June.

Based on the foregoing year to date results and other assumptions, we are now for the third time this year again raising our earnings target for all of fiscal 2002, this time to 95 cents per share.

We remain comfortable with the 55 cents per share earnings target for the fiscal second half of 2002 which is unchanged for from prior guidance.

At the present time we expect that this target will be achieved and earnings per share of 23 cents and 32 cents in the fiscal [inaudible] and four quarters respectively.

Before concluding this afternoon's call, additional comments [inaudible] fiscal second quarter.

One, [inaudible] August 31, 2002 remaybe strong and flexible. the combined total of $560 million in cash and cash equivalent and investment securities compares with cash and cash equivalent of about $339 million a year ago, an increase of about $221 million or 65 percent.

Two, merchandise inventories on August 31st, 2002 were on plan at $859.9 million compared with $733.2 million a year ago.

On a per square foot basis inventories were about $53.90.

We continue to [inaudible] inventories by store to best meet the needs of the customers of each store. 3, capital expenditures for the first fiscal half, primarily for new store and information technology amounted to approximately $58 million compared with approximately - excuse me, approximately $50 million in last year's first half.

Four, shareholders equity at August 31, 2002 is approximately $1.238 billion.

A year ago it was [inaudible].

We are pleased with the operating results, financial position and cash flows reported today.

We continue to bring about the small but expanding share of the retail marketplace for home goods.

Bed Bath and Beyond growth opportunity in the years ahead are exceptional.

We remain dedicated to providing the best possible shopping experience [inaudible] valued customers by so doing over time to continue to build shareholder value. to repeat, our next conference call will be on December 18th, 2002, one day earlier than previously scheduled.

If you have any questions, you may call us at 1-908-688-0888.

Ken Frankel is at extension 0554, [inaudible] is at extension 4552.

You can reach me at extension 4550.

We will respond as quickly as possible.

As always, we very much appreciate your interest in Bed Bath and Beyond.

This concludes today's conference call.

Thank you all for listening.

Okay.

That sounded very good.

Can you read the conclusion?

I thought since -