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Bed, Bath & Beyond 2012 Gains Amid Tighter Competition

For the 53-week fiscal year ended March 2, Bed, Bath & Beyond Inc. posted net earnings of $1.04 billion, or $4.56 per diluted share, versus $989.5 million, or 4.06 per diluted share, in the corresponding 52-week period a year ago. Comparable store sales increased 2.7% year over year.

Net sales for fiscal 2012 reached $10.92 billion, up 14.9% from the year before, the retailer reported.

In the 14-week fiscal fourth quarter, Bed, Bath & Beyond generated net earnings of $373.9 million, or $1.68 per diluted share, versus $351 million, or $1.48 per diluted share, in the 13-week period in the year prior. Comps increased 2.5%.

Net sales for the fiscal fourth quarter were $3.4 billion, up 24.5% from the 13-week 2011 period.

David Gober, a Morgan Stanley analyst, in a research note, pointed out that Bed, Bath & Beyond’s 2.5% comp came in above his estimate of 1.7% and about in-line with the Wall Street consensus.

However, he observed that the “comp was driven by slower traffic, offset by higher ticket amid continuing gross margin declines. These trends are consistent with our view that Bed, Bath & Beyond is facing competitive pressures from both retail and e-commerce competitors and therefore working harder to drive traffic, which is likely to continue.”

Steve Temares, Bed, Bath & Beyond CEO, said in a conference call that recent pressure on gross profit came from an increase in coupon expense, both in terms of redemptions and average amount, an increase in markdowns and shift in sales to lower-margin categories, which follows the Cost Plus acquisition given that company’s greater emphasis on consumables categories. Bed, Bath & Beyond has been evaluating how to bring more consumables into its own namesake stores to drive traffic.

Temares added that the company continues making significant investments in its multi-channel operations including physical plant, to enhance sales, communication, disaster recovery, merchandising, marketing and analytics capabilities. Among then potential benefits will be the ability to tailor marketing offers to particular customer preferences, he noted.

Bed, Bath & Beyond bases fiscal fourth quarter and fiscal year comps on 14 weeks and 53 weeks, respectively, and exclude recently acquired Cost Plus, Inc. and Linen Holdings, the company related. Financial information includes the accounts of Linen Holdings since the date of its acquisition on June 1, 2012, and World Market since the date of its acquisition on June 29, 2012, it maintained.

As of March 2, Bed, Bath & Beyond operated a total of 1,471 stores, including 1,004 namesake units in all 50 of the United States, the District of Columbia, Puerto Rico and Canada, 264 locations under the names of World Market, Cost Plus World Market or World Market Stores, 74 units under the names of Christmas Tree Shops or andThat!, 82 buybuy BABY locations and 47 units under the names of Harmon or Harmon Face Values.  In the fourth quarter, the company said it opened one Bed Bath & Beyond store, and four buybuy BABY units. In addition, Bed, Bath & Beyond is a partner in a joint venture that during the fourth quarter opened its third store in Mexico. The new store in Mexico is the first under the name Bed Bath & Beyond. As it opened the new store, the company rebranded the two existing stores in the joint venture, which had operated as Home & More, under the Bed Bath & Beyond banner.