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Lots Going On, But Bed, Bath & Beyond Q2 Maintains Momentum

Bed Bath & Beyond Inc. reported net earnings of 98 cents per diluted share, or $224.3 million total, in the fiscal second quarter ended August 25 versus 93 cents per diluted share, or $229.4 million total, in the same period a year ago. Comparable store sales in the quarter increased by approximately 3.5% year over year.

Net sales for the fiscal 2012 second quarter were $2.59 billion, an increase of 12.1% from the 2011 period.

Bed, Bath & Beyond’s financial results included the accounts of Linen Holdings since the date of its acquisition on June 1 and Cost Plus, Inc. since the date of its acquisition on June 29. Neither currently figures in comparable store sales calculations. The results also reflect the impact of share buy backs.

Wedbush Morgan analyst Joan Storms observed, in a research note, that earnings per share were at the high end of company guidance and comps were in line. Gross margin was down due to an increase in coupon count and redemption and a merchandise mix that shifted toward lower margin sales, as well as the inclusion of World Market results, which are particularly heavy in short-profit consumable revenues. SG&A gained because of higher payroll, partially due to the relocation of corporate offices, occupancy and advertising expenses as a percentage of net sales, and partially due to the inclusion of World Market’s financial results plus higher professional fees due to acquisitions.

Storms added, “We believe the company should continue to benefit from industry dominance, good visibility for cross-merchandising opportunities, future growth potential for newer concepts, and strong balance sheet and cash flow. Longer term, we remain a believer in Bed, Bath & Beyond and see several distinct performance drivers: well-differentiated assortments at the core Bed, Bath & Beyond and cross-concept merchandising evolving— HBA, food— to drive existing store comps, and marketing and coupons continue to drive traffic.”

As of August 25, Bed, Bath & Beyond operated a total of 1,449 stores, including 1,000 Bed Bath & Beyond stores in all 50 states, the District of Columbia, Puerto Rico and Canada, 258 stores under the names of World Market, Cost Plus World Market, and World Market Stores, 73 Christmas Tree Shops stores, 71 buybuy BABY stores, and 47 stores under the names of Harmon or Harmon Face Values. In the second quarter, the company opened five Bed Bath & Beyond stores, three buybuy BABY stores, one Christmas Tree Shops store and two Harmon Face Values stores. Since the beginning of the third quarter on August 26, the company has opened an additional buybuyBABY store and three World Market stores. Bed, Bath & Beyond also partners on a joint venture that operates two stores in the Mexico City market under the name Home & More.