Why Analysts Are Expecting BBBY’s Net Margins to Fall in 2Q17
For 2Q17, analysts are expecting Bed Bath & Beyond (BBBY) to post gross margin, EBITDA (earnings before interest, tax, depreciation, and amortization) margin, and net margin of 36.7%, 10.3%, and 4.4%, respectively. In 2Q16, the margins stood at 37.4%, 11.8%, and 5.6%, respectively.
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Factors that could lower BBBY’s net margins
Analysts are expecting BBBY’s cost of sales to rise from 62.6% in 2Q16 to $63.1% in 2Q17. The rise in coupon expenses due to redemptions is expected to increase the cost of sales.
In 2Q17, the SG&A (selling, general, & administrative) expenses are expected to rise from 28.0% in 2Q16 to 29.1%. The increase in labor costs, advertising spending, technology-related expenses, and acquisitions are projected to raise BBBY’s SG&A expenses. The rise in SG&A expenses is expected to lower the company’s EBITDA margins by 1.5% to 10.3% in 2Q17.
With the increase in technology-related spending, analysts are expecting the company’s D&A (depreciation and amortization) expenses to rise. Also, the effective tax rate is projected to increase from 36.3% to 37.1%, which could lower BBBY’s net margins.
For the next four quarters, analysts are expecting BBBY to post gross margin, EBITDA margin, and net margin of 36.6%, 10.0%, and 4.3%, respectively. The margins were at 37.3%, 11.2%, and 5.3%, respectively in the corresponding four quarters of the previous year.
Next, we’ll look at analysts’ EPS estimate for 2Q17.