Bed Bath & Beyond Inc. F4Q05 (Qtr Ending Feb 25, 2006) Earnings Conference Call Transcript (BBBY)

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Earnings Call Excerpt

Bed Bath & Beyond Inc. (BBBY)
Q4 FY2005 Earnings Conference Call
April 5th 2006, 5:00 PM EST

Executives

Ron Curwin - SVP, IR
Len Feinstein, Co-Chairman
Steven Temares - CEO

Presentation

Operator

Thank you for standing by, and welcome to Bed Bath & Beyond's fiscal fourth quarter and fiscal year 2005 results conference call. (Operator Instructions). Now at this time I’d like to turn the conference over to Ron Curwin, Senior Vice President of Bed Bath & Beyond.

Mr. Curwin please go ahead.

Ron Curwin

Thank you and good afternoon. Welcome to Bed Bath & Beyond's fiscal fourth quarter of 2005 conference call. Within the past hour we issued a press release covering our results for the three and 12-month periods ended February 25, 2006.

During this call we will discuss our fourth quarter highlights and update guidance for fiscal 2006, which will be a 53-week year ending March 3, 2007. Before proceeding, I will read the following statement, and I quote: "Bed Bath & Beyond's fiscal fourth quarter press release and comments made during this call may contain forward-looking statements within the meaning of Section 21E of the Securities 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's SEC filings, including its Form 10-K, for the year ended February 26, 2005. The Company does not undertake any obligation to update its forward-looking statements."

Len Feinstein, Co-Chairman of Bed Bath & Beyond, leads off today's call. Steven Temares, Chief Executive Officer, and a Member of the Board of Directors, will follow Len. The earnings guidance and some additional financial commentary will conclude today's call.

I'm now very pleased to introduce Leonard Feinstein. Len.

Leonard Feinstein

Thanks Ron. As many of you have read in our press release issued within the past hour, Bed Bath & Beyond, during fiscal 2005, achieved its 14th consecutive year of record earnings since becoming a public company in 1992. We are particularly pleased with our results, as they were achieved at a time when other retailers operating in our sector continued to experience difficulties.

1. In fiscal 2006, we expect the number of new Bed Bath & Beyond store openings to be approximately 80, including four which have already opened; approximately 10 are expected to open during the fiscal fourth quarter and approximately 15 in the fiscal second quarter. Also included in our fiscal 2006 store opening program will be six Christmas Tree Shops and the continuing development of our Harmon concept. We anticipate that the company's new store openings in fiscal 2006 will occupy approximately 2.5 million square feet of total store space.
2. Bed Bath & Beyond new stores are expected to generate net sales of between $160-185 per square foot in the first 12 months of operation. Consolidated comp sales are expected to increase from 3-5% and net sales, including the 53rd week, are expected to increase between 13% and 14%.
3. Primarily due to the changes for accounting for stock options, and changes in our compensation program, our plan provides for a reduction in operating profit margin for the full year.
4. Based on the current interest rate environment, interest income is expected to be somewhat higher than in fiscal 2005.
5. The rate used to calculate the provision for income taxes for fiscal 2006 is presently being estimated at approximately 36.6%.
6. Average outstanding diluted shares for all of fiscal 2006 is presently being estimated at approximately $288 million.
7. We continue to invest in our company to support future growth, capital expenditures for fiscal 2006, principally for new stores, the refurbishment of existing stores, information technology enhancements and other infrastructure investments and the purchase of our corporate office building is presently being estimated at $300 million. Depreciation in fiscal 2006 is expected to be approximately $125 million.
8. 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 balance sheet and cash flows were strong throughout the year, even after our 2005 share repurchase program of approximately $600 million, cash, cash equivalents and investment securities as of February 25, 2006 approximated $1 billion.
2. Merchandise inventories as of February 25, 2006 were on plan at approximately $1.3 billion. On a per square foot basis, consolidated inventories at year end were about $51 per square foot. We continue to tailor inventories by store to meet our customers demands. As you may be aware, in our decentralized operations, much of the merchandise is replenished by our store associates and we continue to be very pleased with the condition of our inventories.
3. Again, even after the substantial completion of our 2005 share repurchase program, shareholders' equity at February 25, 2006 was approximately $2.3 billion.
4. Capital expenditures, primarily for new stores and information technology, were approximately $240 million for the fiscal year. The purchase of our corporate office building in Union, New Jersey expected to be closed prior to the end of fiscal 2005, actually occurred at the beginning of fiscal 2006. Depreciation was about $111 million at fiscal 2005.
5. Consolidated store space as of February 25, 2006 as Len mentioned, was approximately 25.5 million square feet.

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