At the end of February, Bed Bath & Beyond operated 42 million square feet of selling space, up 16% from a year earlier. Its 1,471 locations included more than 1,000 of its namesake stores in all 50 states, as well as Puerto Rico and Canada.
Growth has slowed in recent quarters — no surprise given the series of stresses U.S. consumers have absorbed — but should pick up in coming months.
Standard & Poor's projects a 34% increase in housing starts this year, building on a 28% increase last year. More housing starts should translate into greater demand for such goods as linens and housewares.
The consensus projects sales growth of 7% and per-share-profit growth of 10% in the year ending February 2014. If the economy keeps improving and Bed Bath & Beyond can approach the high end of its same-store-sales guidance (up 2% to 4% for the current fiscal year), the consensus should prove conservative.
In the last fiscal year, Bed Bath & Beyond generated $1.19 billion in operating cash flow and spent more than $1 billion repurchasing its own shares, including $305 million in the February quarter alone.
The company has reduced its share count 6% over the last year and 15% over the last three. At the end of February, the retailer had $2.4 billion left on its repurchase authorization, enough to reduce the share count 16% at current prices.
Despite its consistent profit growth and a price gain of 25% so far this year, Bed Bath & Beyond trades at 15 times trailing earnings, 7% below its five-year median P/E ratio and 19% below the median specialty retailer. The stock is a Long-Term Buy.
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