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Bed Bath & Beyond’s Q2 EPS Failed to Meet Wall Street Forecasts

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Fiscal 2018 second-quarter EPS

Bed Bath & Beyond (BBBY) posted adjusted EPS of $0.36, which were 28.0% lower than analysts’ expectation of $0.50 for the second quarter of fiscal 2018. Also, year-over-year, the company’s EPS declined 53.2% from $0.77 in the second quarter of fiscal 2017.

BBBY’s adjusted EPS fell due to a decline in its net margin, which was partially offset by share repurchases. In the last four quarters, the company has repurchased 6.2 million shares at a cost of ~$131 million. In the second quarter alone, the company repurchased 2.1 million shares at a cost of $41 million. Share repurchases drive the company’s EPS by lowering the number of shares outstanding.

By the end of the fiscal 2018 second quarter, the company had ~$1.4 billion available under its share repurchase program.

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Peer comparisons and outlook

For the same period, Williams-Sonoma (WSM) and RH (RH) posted EPS growth of 26.2% and 215.4%, respectively.

After posting its fiscal second-quarter earnings, BBBY’s management lowered its EPS guidance for fiscal 2018 to the lower end of its earlier guidance of around $2.00.

For the next four quarters, analysts expect BBBY to post EPS of $2.14, which represents a fall of 18.0% from $2.61 in the corresponding four quarters of the previous year. The decline in revenue and lower net margins are expected to lower the company’s EPS in the next four quarters.

Dividends

On September 26, BBBY’s management announced quarterly dividends of $0.16 per quarter to be paid on January 15, 2019, to shareholders recorded as of December 14. As of September 27, the company’s dividend yield stood at 4.31%, with its stock price trading at $14.86. On the same day, the dividend yield of peer Williams-Sonoma’s was 2.63%.

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

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