Bed Bath & Beyond Inc (BBBY) 2003 Q1 法說會逐字稿

Welcome to Bed Bath & Beyond's fiscal first quarter results conference call. All participants are in a listen only mode for the duration of the call. This call is being recorded. A rebroadcast of this conference callwill be available beginning on Wednesday, June 18th, 2003 at 6:30P.M. Eastern Time through 6:30 P.M. Eastern Time on Friday, June 20th, 2003. To access the rebroadcast you may dial 1-800-428-6051, with a pass code ID number of 292689. I'll now turn the call over to Mr. Ron Curwin, Chief Financial Officer and Treasurer of Bed Bath & Beyond. Please go ahead sir.

Thank you. Good afternoon and welcome to Bed Bath & Beyond's first quarter of fiscal 2003 conference call. We are very pleased that our financial and operational objectives for the period were achieved. We hope that management's review of the results of operations, financial condition, cash flows and other comments relative to our business will be useful.

Before proceeding I will read the following statement, and I quote, Bed Bath & Beyond's fiscal first quarter press release and comments made during this call may contain forward-looking statements within the meaning of Section 21-E of the Securities Exchange Act of 1934, as amended. 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 & Beyond's SEC filings, including its form 10-K for the year ended March 1, 2003. The company does not undertake any obligation to update its forward-looking statements. End of quote.

Leonard Feinstein who co-founded our company in 1971 with Warren Eisenberg and serves together with Warren as co-Chairman of Bed Bath & Beyond leads off today's call. Steven Temares, President and Chief Executive Officer and member of the Board of Directors will then review the fiscal first quarter results. After Steve's comments, we will update fiscal 2003 guidance, and review financial highlights of the recently concluded first fiscal quarter. I am now pleased to introduce Leonard Feinstein. Len?

Good afternoon. Fiscal 2003 has gotten off to a strong start. With net earnings up 24.2%, net sales up 15.1%, and comparable store sales up by 4.4%. We are particularly pleased to report that despite the challenging economy, heightened promotional activity, international tensions, including the Iraq war, and severe weather, we were able to maintain our record of meeting or exceeding our operating plan in each and every one of the 44 fiscal quarters since we became a public company in 1992.

Since then, our Bed Bath & Beyond store count has grown from 34 stores in p states to 503 stores in 44 states and Puerto Rico. In fiscal 1992, our net sales were about $216m. And we earned about $16m. For fiscal 2003, analysts are estimating net sales of approximately $4.3b, and earnings of approximately $360m. We are proud of the fact that our growth was achieved with internally generated funds and that we've been debt free for over seven years. In fact, as of the end of our fiscal first quarter, despite our growth and continuing investment in our infrastructure, cash and investment exceeded $875m.

During the fiscal first quarter of 2003, we added 8 new Bed Bath & Beyond stores, ending the period with 498 stores. At the end of last year's first quarter, we had 409 stores. We've added 5 additional stores since the beginning of our fiscal second quarter.

We continue to refine the size of our new stores to better meet the needs of the particular markets being served. Resulting in stores that are smaller, on average, than those opened previously. Top line growth going forward, as we have seen in recent years, is expected to continue to reflect not only the number of new store openings, but also more moderate increases in total square feet being added. Including stores already opened, we continue to estimate that the number of new Bed Bath & Beyond store openings for all of fiscal 2003, in a range from 80 to 90 locations.

At Bed Bath & Beyond, we've always been dedicated to better 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 results. As consolidation in the retail industry continues, we are pleased that by any measure, the performance gap between ourselves and our direct competitors continues to widen. We're working hard to maintain this trend. We are well on our way towards making 2003 another record year, and our best year ever. Now I'll turn the call over to Steven Temares. Steve?

Thank you, Len. Good afternoon, everyone. And thank you for participating in this conference call. As Len noted, a short while ago we released the news of another quarter of strong earnings growth, positive operating cash flows, and new store development. 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 the now over 23,000 dedicated people who daily take the core principle of customer service, and seize the opportunity and empowerment of our decentralized structure to make Bed Bath & Beyond a better company. Our financial results are a continuing testimony to the talent and effort of our people.

To briefly touched on the highlights of our first quarter. Net earnings were $57.5m, equivalent to $0.19 per share up approximately 24.2% from the $46.3m or $0.15 per share earned in the first quarter a year ago. Last year's first quarter increase on a percentage basis was the strongest net earnings gain in any quarter in our 11 years as a public company. On a per share basis, earnings were almost double the $0.10 per share earned in the fiscal quarter just two years ago. We have experienced 44 consecutive quarters of uninterrupted earnings growth since our IPO in June 1992. Since that date, our net earnings have more than doubled in every three-year period. An accomplishment that I believe is unmatched in all of retailing and 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. In line with our prior guidance, net sales for the first quarter were approximately $894m, about 15.1% higher than in the corresponding fiscal 2002 period. First quarter comps were up 4.4% versus a comps store gain of 13.2% a year ago. So the average first quarter increase in comp sales over the past two years was over 8%. Going forward, we continue to model an increase in comp sales in the range of 3% to 5%, which 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.

Gross profit for the fiscal first quarter was about $367m or 41.1% of net sales, compared with $318.4m, or 41% of net sales during the first fiscal quarter of 2002. The gross profit improvements resulted from a combination of factors, including the mix of sales that occurred during the quarter. We continue to model favorable gross profit margin comparisons going forward. Selling, general and administrative expenses were about $277m during the first quarter, compared with approximately $246m in the corresponding quarter a year ago. As a percentage of net sales, selling,general and administrative expenses for our fiscal first quarter were 31%, compared to 31.6% a year ago.

The principle components of our SG&A leverage were occupancy costs, costs associated with new store openings, and payroll and payroll-related items, partially offset by advertising expenses. Against a backdrop of our ongoing desire to continue to invest in and strengthen our infrastructure, we nonetheless continue to systematically reduce and eliminate costs throughout our operations. As a result of the improvement in the gross profit margin, and selling, general and administrative expenses, we experienced an increase in operating profit margin of approximately 70 basis points during the fiscal first quarter.

Today there are 503 Bed Bath & Beyond stores serving our customers in 44 states and Puerto Rico. I'm pleased to say that many of the additional locations planned to open this year are well under way, and that substantial progress has been made on our fiscal 2004 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 it produces continue to provide us with a unique competitive advantage in the marketplace, leading to our consistent long-term performance. Our rapid growth notwithstanding Bed Bath & Beyond's share of the approximately $85b home goods market remains relatively small. Affording us substantial expansion opportunities. Industry growth demographics remain quite strong and we continue to be comfortable with our long-term target of at least 950 Bed Bath & Beyond stores in the United States. Our financial strength, which has always been a key management focus, has taken on added performance -- excuse me, added importance in the current business environment, and we are pleased that our balance sheet and operating cash flow remain strong.

So to recap, Bed Bath & Beyond's fiscal first quarter produced earnings of $57.5m or $0.19 per share, about 24.2% higher than a year ago, on an approximately 15.1% increase in net sales, and a 4.4% gain in same-store sales. We are 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 are obviously pleased with our fiscal first quarter results, we believe it is prudent, in light of the current operating environment, to remain conservative in establishing our financial objectives for the remainder of fiscal 2003. As you'll hear from Ron, we remain comfortable with our performance and growth targets for the year. I look forward to our next call on September 24th, 2003, at which time we will review with you the fiscal second quarter, and the fiscal first half.

I'll now turn the call over to Ron. At the conclusion of the call, he and Ken Frankel (ph), our Director of Financial Planning, will be in their offices to take your comments and questions. Ron?

Thanks, Steve. In our fiscal 2002 year-end conference call on April 2nd, we introduced our major planning assumptions for fiscal 2003. Taking the just-reported fiscal first quarter results, and Steve's comments relative to our financial planning process into consideration, here are our updated major planning assumptions for the balance of fiscal 2003.

One, as previously stated, the company plans to open approximately 80 to 90 new Bed Bath & Beyond stores this year. 8 of these will open during our first fiscal quarter. Approximately 16 stores, including 5 which have already opened, are now expected to open during our fiscal second quarter. This does reflect certain weather-related construction delays. A majority of the remaining stores are expected to open during our fiscal third quarter.

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

Three, net sales of new Bed Bath & Beyond stores in their first full year of operation continue to be projected at between $150 and $175 per square foot. We believe this remains a reasonable first year sales productivity target, despite the fact that currently actual new stores sales productivity has been exceeding this range. We continue to expect a mid-teens percentage increase in net sales for the fiscal second quarter, and for all of fiscal 2003. And comp sales growth in the range of 3% to 5%.

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

Five, interest income, given the current interest rate environment, is expected to show little change. Despite higher investable cash balances anticipated during the year.

Six, income taxes will continue to be provided at 38.5% of pretax earnings.

Seven, capital expenditures for fiscal 2003 continues to be planned at approximately $165m, mostly for new Bed Bath & Beyond stores, and information technology enhancements. Depreciation and amortization for the year continue to be estimated at between $75m and $85m.

Based on the foregoing and other planning assumptions, we are comfortable with consensus earnings estimates of $0.30 per share in the fiscal second quarter versus $0.25 per share in last year's comparable quarter, and consensus earnings estimates of $0.72 per share for the second half of fiscal 2003, versus $0.60 per share in the last half of fiscal 2002. Reflecting the fiscal first quarter results reported today, the revised earnings target for all of fiscal 2003 is now $1.21 per share. The achievement of earnings of $1.21 per share would represent a doubling of the earnings per share reported for fiscal year 2000. The fiscal year ended March 3, 2001, and would maintain our record of doubling earnings in every three-year period since Bed Bath & Beyond went public in 1992.

Before concluding this afternoon's call, a few additional comments relative to our fiscal first quarter. One, our debt-free balance sheet as of may 31, 2003, remains strong and flexible. Cash and cash equivalents approximated $683.8m. In addition, as of May 31, 2003, we had $191.4m invested in investment securities. For a combined total of cash and investment securities of $875.2m with about $348m or 60% higher than cash and investment securities of about $527.1m a year ago. I'm sorry about that. The increase in the cash and investment securities should have been 66%. I think I said 60%.

Two, merchandise inventories at May 31, 2003, were on plan at approximately $927m, compared with $850m a year ago. Inventories continue to be tailored by store to meet the anticipated demands from our customers and are in excellent condition.

Three, capital expenditures for the fiscal first quarter, primarily for eight new stores and information technology amounted to approximately $8.8m compared with about $11.6m in the year-ago period when 13 new stores were opened.

Four, depreciation and amortization approximated $19.8m, up slightly from a year ago.

Five, shareholders equity at May 31, 2003, was approximately $1.53b. A year ago it was about $1.15b.

Although as a company 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 Steve said, our next conference call will be on September 24, 2003, at which time we will review our fiscal second quarter and fiscal first half results. If you have any questions, you may call us at 1-908-688-0888. Ken Frankel is at extension 4554. I'm at extension 4550. You may also try Paula Marback (ph) at extension4552. We'll do our best to respond quickly. We very much appreciate your interest in Bed Bath & Beyond. This concludes today's conference call. Thank you all for listening.

Thank you. Ladies and gentlemen, this now concludes our conference call for today. Thank you all for participating and have a great evening. All parties may now disconnect.