BBBY earnings for the first quarter of fiscal year 2018 is generally expected to be at $0.32 per share. The actual number of BBBY diluted earnings per share came out as expected, at $0.32 per share. Cost of sales and operational costs still remain to be the main driver of reduced net income. We note continued share buybacks and investing activities.
The cash provided from normal operation remains strong and provides an opportunity for long-term investments.
We also see a very qualitative description of the outlook for fiscal year 2018 through 2020, which gives a non-committal impression. However, management reported an “on track” for all KPIs of the outlook.
Strong competition from online stores is seen to pose a risk in the presence and in the future.
Share price development
The price has been experiencing continuous sell-off over the past 3 years. The decline is currently off its previous highs by more than 75%. Recent lows show a pullback of more than 78%.
Albeit seeing a slight but continuous growth in sales over these years, including this quarter, cost of goods sold and administrative expenses have disproportionately grown. This resulted in a continuous decline in earnings per share. We note, however, a continuing strong operating cash flows, frequently diminished by share buybacks as well as investing activities. We deem this to be positive.
Using a conservative valuation, we do note an undervaluation at this current price levels. The market seems to be imputing future negative operating cash flows, with a moderate chance of recovery. The question is: when will the market start imputing back the constant trend of an actual positive cash flow?
Current earnings per share outlook for fiscal year 2019 of “maybe” a little more than $2.00 per share lets us suspect an earnings per share ratio of around 10%. This poses a 10 years ROI, assuming the current price of 20$ish level is maintained. The same levels would result in a dividend yield ratio of about 3.2%. That would result in 31 years payback period based on pure dividends.
The price of the shares traded shortly at $18.56 during off-market trading, rebounded, however, shortly thereafter. We remain to observe how the strong online competition will affect further price development. We see this as a strong driver.
Q1 2018 BBBY earnings outlook for 2018 to 2020
Reiteration of the outlook for 2018 to 2020. See below.
2017 BBBY earnings outlook for 2018 to 2020
Full year diluted earnings per share low-to-mid $2.00 range
General growth in comparable sales, expected to start in during the first quarter of fiscal year 2018
Moderating the declines in its operating profit and net earnings per diluted share for the next two fiscal year, 2018 and 2019
growing its net earnings per diluted share by fiscal 2020
About the company
Founded in 1971, Bed Bath & Beyond Inc. and subsidiaries is an omnichannel retailer offering a wide selection of domestics merchandise and home furnishings. The Company’s mission is to be trusted by its customers as the expert for the home and “heart-related” life events. These include certain life events that evoke strong emotional connections such as getting married, moving to a new home, having a baby, going to college and decorating a room, which the Company supports through its wedding and baby registries, new mover and student life programs, and its design consultation services. The Company’s ability to achieve its mission is driven by three broad objectives: first, to present a meaningfully differentiated and complete product assortment for the home, of the right quality product, at the right value; second, to provide services and solutions that enhance the usage and enjoyment of its offerings; and third, to deliver a convenient, engaging, and inspiring shopping experience that is intelligently personalized over time. The Company is undertaking a number of strategic initiatives to support each of these objectives, as well as to drive change across the organization in order to improve operational efficiencies and to create future growth. Through this focused approach, the Company believes it will further strengthen its competitive position to be the customer’s first choice for the home and heart-felt life events.
Conflicting interest disclosure
We do not hold any interest in BBBY. However, we may engage in positions within 72 hours depending on the signals provided by our trading strategies.
None of the above statements are to be construed as financial advice nor should they be used as a basis for making a financial decision. Investing in financial instrument carries great risks and may cause you to lose potentially much much more than what you invested. Historical market performance does not give an indication of future market performance. We advise you to hire a financial expert before making any financial decision of any kind and to ensure that you are aware of all the risks associated with investing in a particular financial product. Participating in electronic markets carry additional risks as well.