Bed Bath & Beyond Inc (BBBY) 2004 Q1 法說會逐字稿

Welcome to Bed Bath & Beyond's first quarter of fiscal 2004 results conference call.

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

This call is being recorded.

A rebroadcast of this conference call will be available beginning Wednesday, June 23, 2004, at 6:30 p.m.

Eastern time through 6:30 p.m.

Eastern time on Friday, June 25, 2004.

To access the rebroadcast, you may dial 1-800-428-6051 with a passcode ID of 357332.

I will now turn the call over to Ron Curwin, Chief Financial Officer and Treasurer of Bed Bath & Beyond.

Please go ahead, sir.

Good afternoon.

Welcome to Bed Bath & Beyond's first quarter of fiscal 2004 conference call.

As many of you are by now aware, we have achieved of exceeded all of our financial and operational objectives for the period.

During this call, we will review the operating highlights of the quarter and comment on our financial position which continues to strengthen.

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 and 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 February 28, 2004.

The Company does not undertake any obligation to update forward-looking statements, end of quote.

Warren Eisenberg, who co-founded our company in 1971 with Leonard Feinstein and serves together with Len 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 2004 guidance and provide an overview of certain highlights of the recently concluded fiscal first quarter.

I am now pleased to introduce Warren Eisenberg.

Warren?

Good afternoon.

Fiscal 2004 has gotten off to a strong start with net earnings up 42.7% and net sales up 23.2%.

And comparable store sales up by 5.1%.

During the first quarter of 2004, we added 17 new Bed Bath & Beyond stores, ending the period with 592 stores in 44 states and Puerto Rico.

At the end of last year's first quarter, we operated 498 Bed Bath & Beyond stores.

Since the beginning of our fiscal second quarter on May 30, 2004, we have added three additional Bed Bath & Beyond stores.

In addition, we operated 24 Christmas Tree Shops and 31 Harmon Stores at quarter end which included a new Harmon Store which opened in late May.

As we said in our previous conference call, we expect to open between 80 and 90 new Bed Bath & Beyond stores during fiscal 2004.

We also are currently planning to open a few Christmas Tree Shops and Harmon Stores as well.

Furthermore, in order to take full advantage of increased sales, productivity and ongoing merchandising initiatives, we expect that new Bed Bath & Beyond stores will be slightly larger on average than those opened last year.

Our performance for over three decades has been based on an unique decentralized culture which places our customers first.

As we continue to improve and grow our company, we will continue to strive for long-term profitable performance based on prudent planning and superior execution.

Homes -- home goods has been and continues to be one of the most attractive sectors of all of retailing.

We believe we are in the best position to benefit from this.

Despite our substantial growth, our share of the approximately $85 billion home goods market remains relatively small, affording us the opportunity to grow to well over 1,000 stores, 1,000 Bed Bath & Beyond stores in the U.S.

We strive to enhance the performance of all our stores through both superior customer service and new merchandising initiatives and expect that the size of a number of our existing stores will be expanded in order to achieve their full potential in the years ahead.

The organization we built, combined with our unique corporate culture, continues to achieve impressive results.

In an industry that remains competitive, we expect to continue to widen the growing performance gap between ourselves and other operators in our sector.

I feel confident that 2004 will be another record year for our company.

Now I will turn the call over to Steven Temares.

Steve.

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 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 over 29,000 associates in our Bed Bath & Beyond, Christmas Tree Shops and Harmon operations.

We 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 continuing testimony to the talent and effort of our people.

To briefly touch on highlights of our first quarter, net earnings were $82 million, equivalent to 27 cents per share, up approximately 42.7% from the $57.5 million or 19 cents per share heard in the first quarter a year ago.

On a fundamental basis, we have now experienced 12 consecutive years of uninterrupted earnings growth since our IPO in June of 1992.

We are pleased with this performance, and believe we have never been better positioned for a continued growth.

Our primary financial goals have been and remain the generation of strong net earnings combined with a solid balance sheet and positive operating cash flow.

As we have also consistently pointed out, as Warren noted, since our founding in 1971, we have grown our company as a decentralized organization.

Our decentralization has led to better decision making and better execution.

By focusing our efforts on creating a culture that enables us to better serve our customers, we have been able to achieve our consistent long-term performance.

Decentralization continues to provide us with a unique competitive advantage in the marketplace.

In line with prior guidance, net sales for the fiscal first quarter were approximately $1.1 billion, about 23.2% higher than in the corresponding fiscal 2003 period.

First-quarter comps were up 5.1%, versus a comp store gain of 4.4% a year ago.

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 financial targets for the year.

Gross profit for the first quarter was about $456.8 million or 41.5% of net sales, compared with $367.2 million, or 41.1% of net sales during the first quarter of 2003.

The gross profit improvement resulted from improvements in both the mark-up and mark-downs taken.

Selling, general, and administrative expenses were about $328.1 million during the first quarter, compared with approximately $276.7 million in the corresponding quarter a year ago.

As a percentage of net sales, selling, general and administrative expenses for the first quarter were 29.8% compared to 31% year ago.

The decrease in SG&A as a percentage of net sales was primarily attributable to a decrease in occupancy costs and other expenses.

We will continue to invest in and strengthen our infrastructure, which could mitigate the degree of SG&A leverage obtained in the nearer term, while better positioning our company for our continued long-term growth.

Reflecting these movements in our gross profit margin and selling and general and administrative expenses we experienced an increase in operating profit margin of approximately 160 basis points during the first quarter.

Today, there are 595 Bed Bath & Beyond stores serving our customers in 44 states and Puerto Rico.

Many of the additional locations planned to open this year are well under way, and we have made substantial progress with respect to our fiscal 2005 program.

Though we are never satisfied, we are pleased that in the aggregate, the Bed Bath & Beyond stores continue to achieve results unmatched in most of retailing.

As mentioned last quarter, we are also extremely -- we are also excited about the abundant opportunities presented with our partnership with Christmas Tree Shops.

Since last June we have been integrating our organizations, and focusing our efforts on the long-term opportunities presented by the acquisition.

Progress has been made to date, and it is continuing.

First quarter sales of Christmas Tree Shops were slightly positive, comp store sales were slightly negative, and there was no additional promotional activity year-over-year.

We are confident that our long-term approach to building the Christmas Tree Shops business, including essential infrastructure enhancements, some of which are in progress, will likely result in substantial and growing sales and earnings contributions from Christmas Tree Shops for many years into the future.

During our last conference call in March, we also told that you most of our new stores were producing sales at the high end of the expected annual target range of $160 to $185 per square foot.

This remains the case, and we continue to be extremely pleased with both the sales and the profitability of our new stores.

For reasons outlined at that time, we continued to discourage reliance on new store productivity calculations, which are inherently inaccurate.

So let's be very clear and repeat that we are extremely pleased with the operating performance of our new stores.

As I said earlier, over the last 12 years, Bed Bath & Beyond store count has grown from 34 stores in 7 states to 595 stores in 44 states and Puerto Rico.

We have also completed two acquisitions.

Harmon Stores in fiscal 2002 and Christmas Tree Shops last June.

And we have vastly improved our infrastructure.

Our organization has never been stronger.

Our growth was achieved with internally generated funds, and we have been debt-free for over eight years.

Cash and investments at quarter end exceeded $1.1 billion.

Our balance sheet and operating cash flow continue to strengthen, and we enjoy considerable financial flexibility.

Our entire organization is dedicated to giving our Bed Bath & Beyond, Christmas Tree and Harmon customers the best shopping experience possible and through these efforts, continuing to produce significant financial results.

As you will hear from Ron, we expect that our performance goals for fiscal 2004 will be achieved.

So to recap, Bed Bath & Beyond's fiscal first quarter produced earnings of $82 million or 27 cents per share, about 42.7% higher than a year ago on an approximately 23.2% increase in net sales, a 5.1% gain in same-store sales.

With our annual meeting scheduled to take place one week from tomorrow, we would like to thank our shareholders for their continuing support.

We would, again, encourage those shareholders who have not yet voted to take advantage of electronic voting either via the Internet or by telephone.

Our next quarterly conference call will be on September 22, 2004, at which time we will review with you the fiscal second quarter and the fiscal first-half results.

I will now turn the call over to Ron.

At the conclusion of the call, he 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 2003 year-end conference call on March 31, we introduced our major planning assumptions for fiscal 2004.

These planning assumptions, which are essentially unchanged since then, are as follows: One, as previously stated, we expect to open between 80 and 90 new Bed Bath & Beyond stores for all of fiscal 2004, of which 17 were opened during our fiscal first quarter.

Approximately 15 stores, including 3 which have already opened, are now expected to open during the current fiscal quarter.

The majority of the remaining 2004 new store openings, including a few Christmas Tree Shops and Harmon Stores, are expected to occur 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 $160 and $185 per square foot.

Many of our newer stores have actually 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 2004, and comp sales to continue to grow in the 3% to 5% range.

Four, continued improvement in net operating margin is anticipated.

Five, interest income is expected to significantly increase modestly, principally due to anticipated higher cash balances.

Six, income taxes will continue to be provided at 37.75% of pretax earnings.

Seven, capital expenditures for fiscal 2004, principally for new Bed Bath & Beyond stores, information technology enhancements and other infrastructure investments are expected to be approximately $190 million.

Depreciation and amortization for fiscal 2004 is expected to be approximately $95 million.

Taking fiscal first-quarter results taken into consideration, we believe at this time that earnings per share estimates in the range of $1.55 per share to as high as $1.58 per share for all of fiscal 2004 are reasonable.

Also at this time, we believe that consensus earnings estimates of approximately 38 cents per share throughout fiscal second quarter appear reasonable based on our planning assumptions and other factors that might affect our results.

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 29, 2004 remains strong and flexible.

Cash and cash equivalents approximated 71.8 million.

In addition as of May 29, 2004, we had $365.5 million invested in investment securities.

The combined total of cash and investment securities of $1.1 billion was about 240 points -- $243.4 million or 27.8% higher than cash and investment securities of about $875.2 million a year ago.

Two, merchandise inventories and May 29, 2004 were on plan at approximately $1.1 billion, compared with $926.9 million a year ago.

Inventories continue to be tailored by store to meet the anticipated demands of our customers and are in excellent condition.

Three, capital expenditures for the fiscal first quarter primarily for 17 new stores and information technology amounted to approximately $22.6 million, compared to about $8.8 million in the year-ago period when eight new stores were open.

Four, depreciation and amortization for the fiscal first-quarter approximated $22.4 million, compared with $19.8 million in the year-ago period.

Five, shareholders equity at May 29, 2004, was approximately $2.1 billion.

A year ago it was about $1.5 billion.

As another reminder, our next conference call will be on September 22, 2004, at which time we will review our fiscal second quarter and fiscal first-half results and update our outlook for the remainder of fiscal 2004.

If you have any questions, we will be in our offices beginning this evening, June 23, to take your calls.

As always, we very much appreciate your interests in Bed Bath & Beyond.

Thank you all for listening.

Ladies and gentlemen, this concludes our conference for today.

Thank you all for listening.

You may now disconnect.