Bed Bath & Beyond F2Q06 (Qtr End 8/26/06) Earnings Call Transcript

Tags: Bed, Bath & Beyond Inc., Bed, Bath & Beyond Inc.

Earnings Call Excerpt

Bed Bath & Beyond Inc. (BBBY)
F2Q06 Earnings Conference Call
September 20, 2006 5:00 pm ET

Executives

Ronald Curwin - Senior Vice President, Investor Relations
Warren Eisenberg - Co-Chairman
Steven Temares - Chief Executive Officer

Presentation

Operator

Thank you for standing by and welcome to Bed Bath & Beyond’s second quarter fiscal year 2006 results conference call. All participants are in a listen-only mode for the duration of the call. This call is being recorded. A rebroadcast of this conference call is available beginning on Wednesday, September 20, 2006, at 6:30 p.m. Eastern time, through 6:30 p.m. Eastern time on Friday, September 22, 2006. To access the rebroadcast, you may dial 1-888-203-1112, with a passcode ID of 4369195.

Now, at this time, I would like to turn the conference over to Ron Curwin, Senior Vice President of Investor Relations of Bed Bath & Beyond. Mr. Curwin, please go ahead.

Ronald Curwin

Thank you, and good afternoon. Welcome to Bed Bath & Beyond’s second quarter of fiscal 2006 conference call. Within the past hour, we issued a press release covering Bed Bath & Beyond’s results for the three and six month periods ended August 26, 2006.

Also in this press release, we announced that a committee of independent directors has been appointed to carry out a review of the company’s stock option grants and procedures. We expect to report further on the independent stock option review in our Form 10-Q, which the company expects to file on a timely basis by October 5, 2006.

During this call, we will comment on the results of our second quarter and six-month periods, and update our fiscal 2006 guidance, a 53-week year ending on March 3, 2007.

Before proceeding, I will read the following statement, and I quote:

Bed Bath & Beyond’s fiscal second quarter press release and comments made during this call may contain forward-looking statements within the meaning of section 21-E of the Securities and Exchange Act of 1934 as amended. Many of these forward-looking statements can be identified by the use of words such as ?may?, ?will?, ?expect?, ?anticipate?, ?estimate?, ?assume?, ?continue?, ?project?, ?plan?, and similar words and phrases.

The company’s actual results and future financial condition may differ materially from those expressed in any such forward-looking statements, as a result of many factors that may be outside the company’s control.

Please refer to Bed Bath & Beyond SEC filings, including its Form 10-K for the year ended February 25, 2006. The company does not undertake any obligation to update its forward-looking statements.

1. Including 7 Bed Bath & Beyond stores opened since the beginning of our fiscal third quarter, and subject to the possible February to March shift in store openings mentioned by Warren, we anticipate opening approximately 54 new Bed Bath & Beyond stores in our fiscal second half, as well as four Christmas Tree Shops. About 60% of these approximately 54 stores are expected to open during the third quarter, with a remainder in the fourth quarter. In addition, we expect to complete the renovation of a significant number of existing stores, including the introduction of several expanded fine china and Harmon health and beauty care departments. As a result of all of this expansion activity, consolidated total store space at the end of fiscal 2006 is expected, as we said before, to be approximately 27.8 million square feet;
2. Net sales for the fiscal third quarter and fiscal fourth quarter, including the 53rd week, are expected to increase in a low-teens percentage and a high-teens percentage respectively, with consolidated comp sales increases in the range of 3% to 5%. New Bed Bath & Beyond stores are planned to produce net sales of between $160 and $185 per square foot in the first 12 months of operation;
3. Our business plan for the balance of fiscal 2006 anticipates a reduction in operating profit for the fiscal third quarter and for the full year;
4. Principally due to higher interest rates than a year ago, interest income is expected to increase from fiscal 2005;
5. The provision for income taxes will continue to be calculated at approximately 36.6%;
6. Our capital spending plan for fiscal 2006 is presently being estimated at $350 million. Depreciation in fiscal 2006 is expected to be approximately $130 million;
7. As previously mentioned, fiscal 2006 will be a 53-week year. The additional week will be included in the fiscal fourth quarter, making it a 14-week period.

1. Our consolidated balance sheet as of August 26, 2006, remains strong and flexible. Even after completing our $600 million share repurchase program in last year’s final quarter, the combined total of cash, cash equivalents, and investment securities at quarter end was approximately $1.2 billion;
2. Merchandise inventories at August 26, 2006, were on plan of approximately $1.4 billion. Inventories continue to be tailored by store to meet the anticipated demands of our customers, and are in excellent condition going into the fall selling season;
3. Cash outlays for cap-ex in the fiscal first half, including the acquisition of the Union, New Jersey headquarters, new stores, and information technology, amounted to approximately $136 million;
4. Depreciation for the fiscal first half approximated $63 million;
5. Shareholders equity at August 26, 2006, after taking into consideration the fiscal 2005 share repurchase, was approximately $2.5 billion.

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