Bed Bath & Beyond Drops as Profit Misses on Discounting

Bed Bath & Beyond Inc. (BBBY), the operator of more than 1,000 home-furnishing stores, dropped 4.4 percent in late trading after it reported second-quarter profit that trailed analysts’ estimates.

Net income fell 2.2 percent to $224.3 million from $229.4 million a year earlier, the Union, New Jersey-based company said yesterday in a statement. Profit per share rose to 98 cents from 93 cents a year earlier after the number of shares outstanding declined. Analysts projected $1.02 a share, the average of 25 estimates compiled by Bloomberg.

Bed Bath & Beyond has been resorting to discount coupons to drive traffic, cutting into profit margins, Brian Nagel, an analyst at Oppenheimer & Co. in New York, wrote in a Sept. 18 note. The company’s long-term growth prospects look better as the U.S. housing market picks up, he said.

“For at least the next few quarters we view the potential for outsized sales and earnings at the chain as limited,” Nagel wrote. He rates the shares market perform, the equivalent of a hold.

The shares fell to $65.75 at 7:59 p.m. New York time yesterday in late trading. Bed Bath & Beyond had gained 19 percent through the close of regular trading.

Total revenue rose 12 percent to $2.59 billion. Comparable- store sales rose 3.5 percent in the quarter, trailing the average estimate of 3.8 percent in a Bloomberg survey of six analysts.

Profit Forecast

Bed Bath & Beyond said third-quarter profit may be 99 cents to $1.04 per share. The average of 25 analysts’ estimates compiled by Bloomberg is $1.03 a share.

Chief Executive Officer Steven Temares acquired furniture, food and gifts chain Cost Plus in July for about $495 million, adding 259 stores and a new e-commerce platform, to combat competition from Amazon.com Inc. and Target Corp. (TGT) Bed Bath & Beyond also will be able to integrate Cost Plus’s specialty-food offerings in its stores to boost traffic, Charles Allen, a Bloomberg Industries analyst, said in May.

The acquisition should add to earnings in the current fiscal year, the company said in a May 9 statement.

To contact the reporter on this story: Ari Altstedter in Toronto at aaltstedter@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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