Holey Moley! Bed Bath & Beyond (BBBY) creamed even my high expectations. For their Q4, they earned 86 cents per share. In January, BBBY gave a range of 67 cents to 71 cents a share. Kinda low, no?
For the entire year (this was FY 2010 that just ended in February), BBBY earned $2.30 a share. For FY 2011, the company said it expects earnings growth of 10% to 15%. In other words, forward earnings of $2.53 to $2.64 a share. That’s much better than I was expecting. For Q1, BBBY sees earnings ranging between 44 and 48 cents per share. I have no idea what to expect now.
I had said that I was concerned that BBBY was becoming fully priced. Not anymore. This is still an excellent buy. (The earnings table is updated below, click to enlarge.)
As with the broader economy, BBBY's resurgence is a margin story. They've held the line on costs and no longer have to undercut anyone (RIP: Linens N Things). Here's a look at BBBY's trailing four-quarter operating and net margin.
That upspike is key. Retailing is a margins game. When you increase your margins, you're King of the World, or at least the King of the Mall. Think of it this way: A margin increase of 6% to 8% turns a 10% sales increase into a 47% increase in profits. When the opposite happens, well, that's not good.
Where BBBY is different than the broader economy is that their sales are growing. Nominal GDP growth has been pretty flat but BBBY increased its sales by 16.7% over last year.
Here's the earnings call transcript from Seeking Alpha. Unfortunately, they never take any questions.
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