Bed Bath & Beyond Inc (BBBY) 2008 Q4 法說會逐字稿

And welcome to Bed Bath & Beyond's fourth quarter of fiscal 2008 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 the conference will be available beginning on Tuesday, April 7, 2009 at 6:30 PM Eastern Time through 6:30 PM Eastern Time on Thursday, April 9, 2009.

To access the rebroadcast, you may dial 1-888-203-1112 with a passcode ID of 4323119.

At this time it is now my pleasure to turn the conference over to Gene Castagna, Chief Financial Officer and Treasurer of Bed Bath & Beyond.

Mr.

Castagna, please go ahead.

Thank you and good afternoon.

Welcome to Bed Bath & Beyond's fourth quarter of fiscal 2008 conference call.

Within the past hour, we issued a press release announcing Bed Bath & Beyond's results for the three and twelve month periods ended February 28, 2009.

During this call we will comment on some of the fourth quarter's highlights and provide our fiscal 2009 planning assumptions.

Before proceeding, I will read the following statement and I quote: "Bed Bath & Beyond's fiscal fourth quarter press release and comments made during this call may contain forward-looking statements within the meaning of Section 21E 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 March 1, 2008 and its Form 10-Q for the quarter ended November 29, 2008.

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

Warren Eisenberg, Co-Chairman of Bed Bath & Beyond, leads off today's call.

Steven Temares, Chief Executive Officer and a Member of the Board of Directors, will follow Warren.

Some additional financial commentary will conclude today's call.

I'm now very pleased to introduce Warren Eisenberg.

Warren....

Good afternoon.

Our press release, issued within the past hour showed that our Company earned $0.55 per diluted share in the fiscal fourth quarter and $1.64 per diluted share in the fiscal year ended February 28, 2009.

Despite the challenges of the macroeconomic environment and operating during a period where a significant competitor, as well as other retailers, were running liquidation sales and thereby inundating the market with our category of merchandise, we continued to outpace the performance reported by others.

During the fiscal fourth quarter, we opened 9 new Bed Bath & Beyond stores, including our fourth store in Canada, 4 Christmas Tree Shops stores and 4 buybuy BABY stores, as well as added Harmon Face Values departments in Bed Bath & Beyond, Christmas Tree Shops and buybuy BABY stores.

Consolidated store space at February 28, 2009 was approximately 32.1 million square feet.

For all of fiscal 2008, we opened a total of 67 new stores, consisting of 49 Bed Bath & Beyond stores throughout the United States and Canada, 11 Christmas Tree Shops stores, 6 buybuy BABY stores and 1 Harmon Face Values store, as well as added additional Harmon Face Values and Fine China departments in existing stores.

Including the stores we have opened since the beginning of the 2009 fiscal year, which consists of one Bed Bath & Beyond store and one buybuy BABY store, we currently operate 931 Bed Bath & Beyond stores in 49 states, the District of Columbia, Puerto Rico and Canada, as well as 52 Christmas Tree Shops stores, 16 buybuy BABY stores and after the closing of one store, 40 stores under the names Harmon or Harmon Face Values.

In addition, we are in a joint venture in Mexico, which operates two stores in the Mexico City market under the name "Home & More."

In fiscal 2009, we anticipate opening approximately 50 to 54 new stores across our concepts, including approximately 35 Bed Bath & Beyond stores in the United States and Canada, approximately 6 to 8 Christmas Tree Shops, approximately 8 to 10 buybuy BABY stores, and 1 Harmon Face Values store.

Currently, the aggregate number of openings is expected to be fewer than in fiscal 2008.

This reflects the continued application of our stringent standards in today's tumultuous real estate market.

We believe that within the United States and Canada, there is an opportunity to open in excess of 400 additional Bed Bath & Beyond stores and we also strive, over time, to become the leading home furnishings retailer in the other countries in which we do business.

We also continued to increase productivity of existing stores by introducing new merchandising initiatives as well as by expanding, renovating, remodeling, and/or relocating stores to enhance our customers' shopping experience.

Our bridal, baby, and gift registry business, and the continuing development of our online sales capabilities, afford us additional opportunities to attract new shoppers to the Bed Bath & Beyond experience.

As we have repeatedly said, we will continue to capitalize on the unique strength of our decentralized culture, which has enabled us, since 1971, to build the strong, exciting business we have today.

This culture, which takes advantage of the knowledge, independence and customer focus of our associates, has always been the foundation of our long-term performance.

In today's difficult times, the benefits of decentralization become even more apparent.

We fully expect that, despite the challenging macroeconomic environment, we will be able to look back on this period as one which afforded us an exceptional opportunity to solidify and enhance our position in the merchandising categories we offer our customers.

We are confident that we have the people, the resources, and the capability to achieve our near-term and long-term goals.

I'll now 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 said, the fourth quarter results we just reported were accomplished during a difficult macroeconomic period in general, and very trying conditions with respect to the sale of merchandise for the home.

We believe our results again demonstrate what can be achieved through the talents and dedication of our associates.

In a sector of retailing that has been broadly affected by the current economic challenges, our operating results, though never satisfactory to us, continue to significantly outpace on a comparative basis, the performance reported by others.

In these challenging times, we continue to focus on managing costs and have made good progress in doing so.

We have intensified our efforts on expense control and reduction, and continue to systematically review the scope and frequency of services, as well as reduce the costs associated with running our corporate offices.

At the same time, we remain committed to making the required investments in our Company's infrastructure to help position us for our continued success.

As our balance sheet and overall financial health remain extremely strong, we are able to focus on building a business that stands the test of time.

We continue to look for ways to enhance our customers' overall shopping experience.

We are committed to becoming our customers' first choice for the merchandise products we offer, domestically, interactively, and over the longer-term, internationally, and we strongly believe that the current retailing environment, though difficult, provides an excellent opportunity for us to strengthen our long-term prospects.

Our capital spending for fiscal 2008 was approximately $216 million, about $20 million less than our previous estimate due in part to the timing of projects.

This also represents an approximately $142 million reduction as compared to last year, when among other projects, a new distribution center and e-service fulfillment center were built.

As always, we continue to scrutinize and prioritize our capital needs while making investments in our Company, principally for new stores, existing store improvements, and other projects whose impact is viewed as essential to our future.

In taking a long-term approach to building our Bed Bath & Beyond, Christmas Tree Shops, buybuy BABY and Harmon Face Values concepts, we expect, over time, to do more for, and with, our customers.

Turning to our fiscal 2008 performance, while we believe our recent operating results continue to set the standard for the home furnishings industry, we are not satisfied and we continue to work hard to achieve improved results over time.

As reported earlier today, net earnings per diluted share for the quarter were $0.55 compared with $0.66 a year ago.

For all of fiscal 2008, net earnings per diluted share were approximately $1.64 compared with $2.10 reported for fiscal year 2007.

Net sales for the fiscal fourth quarter were approximately $1.9 billion, a decrease of approximately a half of a percent from the corresponding fiscal 2007 period.

Fourth quarter comp store sales were down approximately 4.3%, which was at the better end of the range of our comp store sales planning assumption.

For all of fiscal 2008, net sales were approximately $7.2 billion, about 2.3% higher than a year ago.

Comp store sales for the fiscal year were down 2.4%.

As we have said, net sales and comp sales for fiscal 2008 were negatively affected by the economic slowdown including issues specific to the housing industry and the liquidation sales of a number of retailers, including a significant competitor.

Gross profit for the fiscal fourth quarter was approximately 40.8% of net sales, compared with approximately 41.3% of net sales during the fourth quarter of 2007.

The approximate 50 basis point decrease in the gross profit margin resulted from an increase in coupon redemptions, an increase in inventory acquisition costs, albeit not at the rate of increase in costs that we have been experiencing in recent quarters, and the shift in the mix of merchandise sold, to lower margin categories.

Selling, general, and administrative expenses for the fiscal fourth quarter were 28.8% of net sales, an increase of approximately 90 basis points as compared to last year's quarter.

As a result of the 4.3% decline in comp store sales this quarter, we experienced relative increases in fixed costs, such as occupancy costs including rent, depreciation and real estate taxes, as well as relative increases in advertising expenses, due to increases in postage, paper and other production costs.

Reflecting the movements in gross profit margin and SG&A expenses, the operating profit margin for the fiscal fourth quarter was lower than in the period a year ago by approximately 140 basis points.

For all of fiscal 2008, the operating profit margin decreased by approximately 260 basis points, compared with last year.

Our tax rate continues to fluctuate as taxable events occur and exposures are reevaluated.

For the fiscal fourth quarter, our tax rate was approximately 39%, compared to approximately 34.8% for the comparable quarter last year.

For all of fiscal 2008, our tax rate was approximately 37.8% versus approximately 35% for fiscal 2007.

Though challenging, as we have consistently stated, we are confident that we will be able to look back at this period as one which afforded us an exceptional opportunity to gain market share and to improve our competitive position.

By providing the best possible shopping experience for our customers, our entire organization remains dedicated to accomplishing our longterm goals.

We again want to thank our associates for their ongoing efforts which produced Bed Bath & Beyond's long-term success.

Through their efforts, we look forward to meeting the challenges presented in 2009, and seizing the opportunities to satisfy our customers; and by doing so, widening the gap between Bed Bath & Beyond and our competitors in the merchandise categories that we offer.

We look forward to our next call, on June 24, 2009, when we will review our fiscal first quarter of 2009 results.

I'll now turn the call back to Gene.

Gene....

Thanks Steve.

As you heard from Warren and Steve, we earned $0.55 per diluted share in our fiscal fourth quarter and $1.64 per diluted share for all of fiscal 2008.

Looking ahead to our fiscal year 2009, we have assumed, consistent with what economists and other government officials are predicting, that the overall business climate will not show marked improvement.

While we will continue to assess our prospects as the year develops and will reflect changes in our outlook, if any, in future conference calls, the following are our major planning assumptions for fiscal 2009:

1.

We expect to open approximately 50 to 54 new stores across all concepts, including approximately 35 new Bed Bath & Beyond stores throughout the U.S.

and Canada, approximately 6 to 8 Christmas Tree Shops, approximately 8 to 10 buybuy BABY stores, and 1 Harmon Face Values store.

We also plan to add Harmon Face Values departments within all our concepts as well as Fine China departments within our Bed Bath & Beyond stores.

New store openings will occur throughout the year with the majority in our fiscal second half.

2.

We are modeling a low single digit percentage decline in consolidated comparable store sales for the first quarter and full fiscal year 2009.

3.

Consolidated net sales are expected to increase by a low single digit percentage in the first quarter and for all of fiscal 2009.

4.

The operating profit margin is expected to continue to deleverage in the first quarter and for all of fiscal 2009.

5.

Interest income is expected to be lower than in fiscal 2008 as a result of anticipated lower interest rates.

6.

The full year tax provision is estimated in the mid to high 30's percentage range, with variability as much as 200 to 300 basis points in quarterly tax rates as taxable events occur.

7.

Capital expenditures for fiscal 2009, principally for new stores, existing store refurbishment and information technology enhancements, are presently planned at approximately $250 million, and will continue to be reviewed on an ongoing basis.

8.

Depreciation for fiscal 2009 is estimated to be approximately $180 million.

9.

Our share repurchase program will be influenced by several factors, including business and market conditions and developments in the auction rate securities market.

Based on these and other planning assumptions, and the current and prospective business environment, we are comfortable with current estimates of approximately $0.23 to $0.24 for net earnings per diluted share for the fiscal first quarter ending May 30, 2009, compared with $0.30 per diluted share reported in the comparable period last year.

For all of fiscal 2009, based on an assumption of low single digit negative comp store sales, the current full year consensus estimate of $1.50 appears reasonable.

We have a strong balance sheet and have remained debt free since 1996.

We expect to continue to generate positive cash flow in fiscal 2009 and entirely fund operations from internally-generated sources.

Before concluding this afternoon's call, a few additional comments relative to our recently concluded fiscal fourth quarter.

We ended fiscal 2008 with cash and cash equivalents and investment securities of approximately $891 million.

This includes approximately $219 million of investments related to auction rate securities.

During the fourth quarter, we had redemptions of approximately $12 million at par.

As we previously mentioned, during the third quarter, we entered into a commitment with an investment firm for the redemption of approximately $43 million of these investments at par commencing no later than June 30, 2010.

The remaining balance of approximately $176 million of our auction rate securities has an estimated temporary valuation adjustment of approximately $2.6 million to reflect their current lack of liquidity.

Since this valuation adjustment is deemed to be temporary, it did not affect the Company's earnings.

As we have said in the past and as we have experienced to date, we believe that given the high credit quality of these investments we will ultimately recover at par all amounts invested in these securities.

Inventories continue to be tailored by store to meet the anticipated demands of our customers, and are in good shape.

As of February 28, 2009, inventories were approximately $1.6 billion or about $51.24 per square foot, a reduction of approximately 4.4% on a square foot basis versus last year.

Consolidated shareholders' equity at February 28, 2009 was approximately $3 billion, which is net of share repurchases, including approximately $3 million repurchased during the fiscal fourth quarter.

At year-end, the balance remaining of the share repurchase program authorized in September 2007 was approximately $919 million.

As a reminder, our next conference call, to review operating results for the fiscal first quarter ending on May 30, 2009, will be on Wednesday, June 24, 2009.

If you have any questions, Ken and Lisa will be in their offices this evening, April 7, to take your calls.

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

Ladies and gentlemen this concludes today's conference call.

Thank you all for listening.

You may now disconnect.