When the home furnishing retailer Bed Bath & Beyond (BBBY, Financial) disclosed its fourth quarter results and the annual results of the fiscal year 2014, the stock immediately took a toll and fell by 3.5% on April 8 after the market close. This was mainly due to the bleak figures of the fourth quarter that failed to impress investors and analysts worldwide. In fact, the earnings report card was not that lucrative when the numbers were compared to the Street estimates. Let’s dig in further to find out what got shared from the management’s end regarding the fourth quarter results.
The quarter’s major highlights
The sales generated in the final quarter of 2014 were much below the Street expectations which were hooked to $3.37 billion, while the net sales in the fourth quarter stood at $3.34 billion. However, the net sales grew 4.2% year-over-year from $3.2 billion reported in the year-ago similar quarter. Since comparable sales grew by only 3.7% in the quarter, which was much below expectations of 4.5% increase in same-store sales during the quarter, it had a negative impact on the net revenue earned in the quarter.
The management had warned earlier that gross margins could come under pressure due to the several promotional campaigns being undertaken to meet the consumers’ interest in discounts and coupons. In fact, the negative impact of discounts and coupons were felt on the gross margin for the quarter which declined to 39.7% of sales, from 40.5% of sales reported in the corresponding period a year ago.
As gross margins came under pressure and net sales were below expectations, profit for the quarter fell to $321.1 million from $333.3 million, a year-ago. However, diluted earnings per share stood at $1.80 per share for the quarter, a 12.6% improvement from $1.60 a share reported in the same period of the past fiscal year. Fortunately, the earnings per share in the quarter were in line with the Wall Street predictions.
Outlook remains cautious for the coming year
Management has forecast that the comparable sales growth would be between 2% and 3% for the first quarter of the fiscal year 2015 and for the full year. In the first quarter of the fiscal year 2015, the diluted earnings are expected to be in the range of $0.90-$0.95 a share. However, this earnings range projected by the company failed to pacify analysts since their estimate stands at $1.01 a share for the coming quarter.
For the new fiscal year 2015, the company expects earnings per share to be relatively flat or a mid-single-digit percentage increase.
Share repurchases remain an attraction for the investors
The company had repurchased approximately $947 million of its common stock, in the fourth quarter of the fiscal year 2014. As on Feb 28, the company has balance of $884 million that could be repurchased from the total of $2 billion authorized under the share repurchase program. Hence, investors are likely to receive share buyback offers going forward, which is like the cherry on pie.
Final word
Bed Bath & Beyond’s fourth quarter was indeed a mixed one with revenue missing estimates, while the earnings met the Street expectations. Going forward, the management has already taken a cautious stand with respect to the forecast earnings for the upcoming quarter. Let’s stay tuned and keep an eye on how the home furnishing retailer performs in the quarters ahead.
