Why BBBY’s Net Margins Declined in 2Q17
During 2Q17, Bed Bath & Beyond (BBBY) posted a gross margin, EBITDA1 margin, and net margin of 36.4%, 8.3%, and 3.1%, respectively. Comparatively, these margins were at 37.4%, 11.8%, and 5.6%, respectively, in 2Q16.
Interested in BBBY? Don't miss the next report.
Receive e-mail alerts for new research on BBBY
Decline in net margins
During 2Q17, BBBY’s gross margins fell 1.0% due to a rise in direct-to-customer shipping expense, lower merchandise margins, and an increase in coupon expense due to higher redemptions. However, some of the declines were offset by the acquisition of PMall, which contributed 0.12% to the company’s growth margins.
The company’s SG&A (selling, general, and administrative) expenses increased from 28% of the total revenues in 2Q16 to 30.6% due rising labor expenses, advertising costs, occupancy expenses, store management restructuring charges, and technology-related expenses.
The PMall acquisition also increased the company’s SG&A expenses by 0.06%. The company’s effective tax rate stood at 37.0% in 2Q17 compared to 36.3% in 2Q16. The growth in these expenses contributed to the 2.4% fall in BBBY’s net margins.
For the next four quarters, analysts are expecting BBBY to post a gross margin, EBITDA margin, and net margin of 36.4%, 8.7%, and 3.4%, respectively. Comparatively, these margins were 37.0%, 10.3%, and 4.8%, respectively, in the corresponding four quarters of the previous year.
Next, we’ll look at BBBY’s 2Q17 EPS.
- earnings before interest, tax, depreciation, and amortization ↩