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Why Bed Bath & Beyond’s Earnings Fell in 3Q17

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3Q17 performance

Bed Bath & Beyond (BBBY) reported adjusted EPS (earnings per share) of $0.44 in 3Q17, which represents a fall of 48.2% from $0.85 in 3Q16. However, it outperformed analysts’ estimate of $0.37.

The fall in BBBY’s net margins offset the positive effects of share repurchases to post a decline in EPS. During the last four quarters, the company has repurchased 10.1 million shares, spending approximately $379.2 million. By the end of 3Q17, it had about $1.5 billion in its share repurchase program. Share repurchases reduce the number of shares outstanding, thus boosting the company’s EPS.

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Peer comparisons

During the same period, Home Depot (HD), Lowe’s (LOW), and Williams-Sonoma (WSM) posted EPS growth of 16.9%, 19.3%, and 8.9%, respectively.

Outlook

After posting its 3Q17 earnings, BBBY management maintained its EPS guidance for 2017 at $3, which represents a fall of 34.5% from $4.58 in 2016.

For the next four quarters, analysts are expecting the company to post EPS of $2.74, which represents a fall of 24.5% from $3.63 in the corresponding four quarters of the previous year.

Dividends

BBBY has announced dividends of $0.15 per share to be paid on April 17, 2018, to shareholders of record as of March 16, 2018. It announced its dividends at a yield of 2.8% and a payout ratio of 20.1%. For 4Q17, analysts are expecting the company to pay dividends of $0.15 to take the total for 2017 to $0.60, which represents a growth of 20% from $0.50 in 2016.

Next, we’ll look at BBBY’s valuation multiple.

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