Form 8-K BED BATH & BEYOND INC For: Apr 10
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 10, 2019
BED BATH & BEYOND INC.
(Exact name of registrant as specified in its charter)
New York | 0-20214 | 11-2250488 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
650 Liberty Avenue, Union, New Jersey 07083 | ||
(Address of principal executive offices) (Zip Code) | ||
(908) 688-0888 | ||
(Registrant's telephone number, including area code) | ||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Item 2.02 | Results of Operations and Financial Condition |
On April 10, 2019, Bed Bath & Beyond Inc. (the “Company”) issued a press release announcing the Company’s financial results for its fiscal fourth quarter ended March 2, 2019. A copy of this press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Item 7.01 | Regulation FD Disclosure |
On April 10, 2019, the Company published an Investor Presentation for its fiscal fourth quarter ended March 2, 2019 as noted in the press release described in Item 2.02 above. The Investor Presentation is attached hereto as Exhibit 99.2 and is incorporated herein by reference. Additionally, the Company has posted the Investor Presentation on the investor relations section of its website at www.bedbathandbeyond.com.
The Company’s April 10, 2019 press release further announced that its Board of Directors has declared an increase in the quarterly dividend to $0.17 per share, from $0.16 per share, payable on July 16, 2019 to shareholders of record at the close of business on June 14, 2019.
The information in this Current Report on Form 8-K (including the exhibits attached hereto) is being furnished under Items 2.02 and 7.01 and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of such section or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 | Financial Statements and Exhibits |
(d) Exhibits:
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BED BATH & BEYOND INC. | |||
(Registrant) | |||
Date: April 10, 2019 | By: | /s/ Robyn M. D'Elia | |
Robyn M. D'Elia | |||
Chief Financial Officer and Treasurer | |||
(Principal Financial and Accounting Officer) | |||
Exhibit 99.1
FOR IMMEDIATE RELEASE
BED BATH & BEYOND INC. REPORTS RESULTS
FOR FISCAL 2018 FOURTH QUARTER AND FULL YEAR
Expects Fiscal 2019 and Fiscal 2020 Net Earnings Per Diluted Share Growth;
Board Declares Quarterly Dividend Increase;
Outlines Long-Term Financial Targets;
Provides Update on Comprehensive Transformation Plan;
Provides Update on Board Refreshment and Governance Review
UNION, New Jersey, April 10, 2019 --- Bed Bath & Beyond Inc. (Nasdaq: BBBY) today reported financial results for the fourth quarter of fiscal 2018 ended March 2, 2019. The Company also provided an update on its comprehensive transformation plan, including short-and-long-term financial targets. In addition, the Board of Directors of the Company provided an update on its Board refreshment and governance review.
Fiscal 2018 Fourth Quarter Results
For the fiscal 2018 fourth quarter (13 weeks), the Company reported a net loss of ($1.92) per diluted share (($253.8) million), which included a non-cash goodwill and tradename impairments charge, compared with $1.41 per diluted share ($194.0 million) for the fiscal 2017 fourth quarter (14 weeks). Excluding the non-cash impairments charge, the Company reported adjusted net earnings of $1.20 per diluted share ($158.8 million) for the fiscal 2018 fourth quarter. Net sales for the fiscal 2018 fourth quarter were approximately $3.3 billion, a decrease of approximately 11.0% compared to the prior year period, primarily due to one less week in the quarter compared to fourteen weeks in fiscal 2017 and a shift in the calendar, moving the post-Thanksgiving holiday sales week out of the fourth quarter. Comparable sales in the fiscal 2018 fourth quarter declined approximately 1.4% and included strong sales growth from the Company’s customer-facing digital channels, and sales from stores that declined in the mid-single-digit percentage range.
Fiscal 2018 Full Year Results
For the fiscal 2018 full year (52 weeks), the Company reported a net loss of ($1.02) per diluted share (($137.2) million), which included a non-cash goodwill and tradename impairments charge, compared with $3.04 per diluted share ($424.9 million) for the fiscal 2017 full year (53 weeks). Excluding the non-cash impairments charge, the Company reported adjusted net earnings of $2.05 per diluted share ($275.4 million) for the fiscal 2018 full year. Net sales for the fiscal 2018 full year were approximately $12.0 billion, a decrease of approximately 2.6% compared to the prior year, primarily due to one less week in the year compared to fifty-three weeks in fiscal 2017. Comparable sales in the fiscal 2018 full year declined approximately 1.1% and included strong sales growth from the Company’s customer-facing digital channels, and sales from stores that declined in the mid-single-digit percentage range.
Update on Transformation Plan
The Company’s ongoing efforts to implement and execute on organization-wide foundational initiatives are intended to drive four key objectives:
• | Mid-and-long-term revenue growth from portfolio strategy alignment across product assortment, customer experience and customer engagement, including greater focus on growing destinational categories (bed, bath, kitchen, windows and tabletop) and proprietary and private-label brands; the learnings from Next Generation Lab store experiences to enhance the in-store customer experience; an enhanced online experience; as well as efforts to assure that our customers are getting the right value for the products they want and need most. |
• | Near-term and ongoing gross margin improvements through changes in assortment mix to drive sales to better margin categories; modifications in pricing algorithms; further optimization of coupon strategy; and supply chain improvements. |
• | Near-term and ongoing SG&A improvements from improvements in store labor model; marketing efficiencies; and reductions in occupancy expense relating to ongoing store lease negotiations. |
• | Current and sustainable world-class operational support through investments in human capital, data and analytics and process improvements; repositioning and articulating Bed Bath & Beyond brand in the marketplace across all customer interactions including assortment, store and digital experience and marketing; and enhancements in global sourcing capabilities. |
“During the fourth quarter and throughout fiscal 2018, we have been driving significant foundational change across our business,” said Steven Temares, Chief Executive Officer and Member of the Board of Directors of Bed Bath & Beyond Inc. “The pace of our transformation accelerated during fiscal 2018 and we made measurable progress within each of our four focus areas of our plan. While this is a multiyear effort, our Board and management team are confident that the actions underway to drive our near-term and long-term financial targets will enable Bed Bath & Beyond to succeed and drive shareholder value. In fiscal 2019, we are modeling our operating profit, even including the investments in initiatives, to stabilize, and earnings per share to grow slightly, and for both to accelerate thereafter, as the impact from many of our key initiatives grows and we take advantage of the significant operating leverage of our business.”
Capital Allocation
The Company’s Board of Directors today declared an increase in the quarterly dividend to $0.17 per share from $0.16 per share, payable on July 16, 2019 to shareholders of record at the close of business on June 14, 2019.
During the fiscal 2018 fourth quarter, the Company repurchased approximately $78 million of its common stock, representing approximately 5.2 million shares.
The Company ended fiscal 2018 with approximately $1.0 billion in cash and investments, an increase of approximately 35%, compared with approximately $744 million in cash and investments at the end of fiscal 2017.
Outlook
During the conference call with analysts and investors, the Company plans to provide financial targets for fiscal 2019, 2020 and long term, that directly relate to the various initiatives underway. For further details on these financial targets, please refer to the Fourth Quarter Fiscal 2018 Investor Presentation available on the investor relations website at www.bedbathandbeyond.com.
The Company is now modeling net earnings per diluted share in fiscal 2019 to grow slightly and to be between $2.06 and $2.15, including approximately $0.05 per diluted share in severance and shareholder activity fees, expected to be incurred in the first quarter. Excluding these expenses expected to be incurred in the first quarter, net earnings per diluted share is expected to be between $2.11 and $2.20.
In 2020 and long term, incorporating the cumulative effects of its comprehensive transformation plan; its capital allocation strategy; and operating margin improvement of over 300 basis points, the Company expects to achieve double-digit growth rates in net earnings per diluted share.
Update Regarding Board Refreshment and Governance Review
The Board of Directors of the Company has been undertaking a comprehensive review of its composition, governance structure and compensation practices. In connection with this review, the Board has named Patrick Gaston as Lead Independent Director and has reconstituted its Nominating and Corporate Governance Committee. In addition, the
Board is accelerating its refreshment program, which has already resulted in the addition of three new directors in the past two years.
“Our strategy, business transformation and execution are a critical component of our future success, and we also recognize that the right Board governance structure and incentives are necessary to ensure that we achieve our objectives,” said Patrick Gaston, Lead Independent Director of Bed Bath & Beyond. “The Board is committed to acting in the best interest of our shareholders, is working hard to accelerate the rate of change in the Company’s governance, greatly appreciates investor input received to date, and looks forward to continued constructive engagement with our shareholders on these and related efforts.”
The Company plans to announce additional changes to the Board, governance structure and compensation practices in the near future.
Fiscal 2018 Fourth Quarter Conference Call and Investor Presentation
Bed Bath & Beyond Inc.’s fiscal 2018 fourth quarter conference call may be accessed by dialing 1-888-771-4371, or if international, 1-847-585-4405, using conference ID number 48430411. The replay of the call can be accessed by dialing 1-888-843-7419, using conference ID number 48430411. The call and replay can also be accessed via audio webcast on the investor relations section of our website at www.bedbathandbeyond.com.
The Company has also made available an Investor Presentation on the investor relations section of its website that provides information related to its strategic initiatives, fiscal fourth quarter financial results, and modeling assumptions for fiscal 2019 and 2020 and long term.
About the Company
Bed Bath & Beyond Inc. and subsidiaries (the “Company”) is an omnichannel retailer selling a wide assortment of domestics merchandise and home furnishings which operates under the names Bed Bath & Beyond, Christmas Tree Shops, Christmas Tree Shops andThat! or andThat!, Harmon, Harmon Face Values or Face Values, buybuy BABY and World Market, Cost Plus World Market or Cost Plus. Customers can purchase products either in-store, online, with a mobile device or through a customer contact center. The Company generally has the ability to have customer purchases picked up in-store or shipped direct to the customer from the Company’s distribution facilities, stores or vendors. In addition, the Company operates Of a Kind, an e-commerce website that features specially commissioned, limited edition items from emerging fashion and home designers; One Kings Lane, an authority in home décor and design, offering a unique collection of select home goods, designer and vintage items; PersonalizationMall.com, an industry-leading online retailer of personalized products; and Decorist, an online interior design platform that provides personalized home design services. The Company also operates Linen Holdings, a provider of a variety of textile products, amenities and other goods to institutional customers in the hospitality, cruise line, healthcare and other industries. Additionally, the Company is a partner in a joint venture which operates retail stores in Mexico under the name Bed Bath & Beyond.
The Company operates websites at bedbathandbeyond.com, bedbathandbeyond.ca, worldmarket.com, buybuybaby.com, buybuybaby.ca, christmastreeshops.com, andthat.com, harmondiscount.com, facevalues.com, ofakind.com, onekingslane.com, personalizationmall.com, decorist.com, harborlinen.com, and t-ygroup.com. As of March 2, 2019, the Company had a total of 1,533 stores, including 994 Bed Bath & Beyond stores in all 50 states, the District of Columbia, Puerto Rico and Canada, 277 stores under the names of World Market, Cost Plus World Market or Cost Plus, 124 buybuy BABY stores, 81 stores under the names Christmas Tree Shops, Christmas Tree Shops andThat! or andThat!, 55 stores under the names Harmon, Harmon Face Values or Face Values, and two retail stores under the name One Kings Lane. During the fiscal fourth quarter, the Company opened three stores including two buybuy BABY stores and one World Market store; and closed 21 stores including 11 Bed Bath & Beyond stores, seven World Market stores, two Harmon stores, and one Christmas Tree Shops store. The joint venture, to which the Company is a partner, operates ten stores in Mexico under the name Bed Bath & Beyond.
Non-GAAP Information
This press release contains certain non-GAAP information, such as adjusted net earnings per diluted share, which is intended to provide visibility into the Company’s core operations by excluding the effects of the non-cash goodwill and tradename impairments charge. The Company’s definition and calculation of non-GAAP measures may differ from that of other companies. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported GAAP financial results.
Forward-Looking Statements
This press release may contain forward-looking statements, including, but not limited to, anticipated net earnings per diluted share, and operating margin. Many of these forward-looking statements can be identified by use of words such as may, will, expect, anticipate, approximate, estimate, assume, continue, model, project, plan, goal, 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. Such factors include, without limitation: general economic conditions including the housing market, a challenging overall macroeconomic environment and related changes in the retailing environment; consumer preferences, spending habits and adoption of new technologies; demographics and other macroeconomic factors that may impact the level of spending for the types of merchandise sold by the Company; civil disturbances and terrorist acts; unusual weather patterns and natural disasters; competition from existing and potential competitors across all channels; pricing pressures; liquidity; the ability to achieve anticipated cost savings, and to not exceed anticipated costs, associated with organizational changes and investments; the ability to attract and retain qualified employees in all areas of the organization; the cost of labor, merchandise and other costs and expenses; potential supply chain disruption due to trade restrictions, political instability, labor disturbances, product recalls, financial or operational instability of suppliers or carriers, and other items; the ability to find suitable locations at acceptable occupancy costs and other terms to support the Company’s plans for new stores; the ability to establish and profitably maintain the appropriate mix of digital and physical presence in the markets it serves; the ability to assess and implement technologies in support of the Company’s development of its omnichannel capabilities; uncertainty in financial markets; volatility in the price of the Company’s common stock and its effect, and the effect of other factors, on the Company’s capital allocation strategy; the impact of goodwill and intangible asset impairments; disruptions to the Company’s information technology systems including but not limited to security breaches of systems protecting consumer and employee information or other types of cybercrimes or cybersecurity attacks; reputational risk arising from challenges to the Company’s or a third party product or service supplier’s compliance with various laws, regulations or standards, including those related to labor, health, safety, privacy or the environment; reputational risk arising from third-party merchandise or service vendor performance in direct home delivery or assembly of product for customers; changes to statutory, regulatory and legal requirements, including without limitation proposed changes affecting international trade; changes to, or new, tax laws or interpretation of existing tax laws; new, or developments in existing, litigation, claims or assessments; changes to, or new, accounting standards; foreign currency exchange rate fluctuations; the integration of acquired businesses; and potential continuing uncertainty arising in connection with the announced intention by certain shareholders to seek control of the Company’s Board of Directors. The Company does not undertake any obligation to update its forward-looking statements.
INVESTOR CONTACT:
Janet M. Barth (908) 613-5820
BED BATH & BEYOND INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended | Twelve months ended | ||||||||||||||
March 2, 2019 | March 3, 2018 | March 2, 2019 | March 3, 2018 | ||||||||||||
Net sales | $ | 3,307,881 | $ | 3,716,264 | $ | 12,028,797 | $ | 12,349,301 | |||||||
Cost of sales | 2,161,020 | 2,382,984 | 7,924,817 | 7,906,286 | |||||||||||
Gross profit | 1,146,861 | 1,333,280 | 4,103,980 | 4,443,015 | |||||||||||
Selling, general and administrative expenses | 933,691 | 996,177 | 3,681,210 | 3,681,694 | |||||||||||
Goodwill and tradename impairments | 509,905 | — | 509,905 | — | |||||||||||
Operating (loss) profit | (296,735 | ) | 337,103 | (87,135 | ) | 761,321 | |||||||||
Interest expense, net | 15,440 | 16,294 | 69,474 | 65,661 | |||||||||||
(Loss) earnings before provision for income taxes | (312,175 | ) | 320,809 | (156,609 | ) | 695,660 | |||||||||
(Benefit) provision for income taxes | (58,382 | ) | 126,765 | (19,385 | ) | 270,802 | |||||||||
Net (loss) earnings | $ | (253,793 | ) | $ | 194,044 | $ | (137,224 | ) | $ | 424,858 | |||||
Net (loss) earnings per share - Basic | $ | (1.92 | ) | $ | 1.41 | $ | (1.02 | ) | $ | 3.05 | |||||
Net (loss) earnings per share - Diluted | $ | (1.92 | ) | $ | 1.41 | $ | (1.02 | ) | $ | 3.04 | |||||
Weighted average shares outstanding - Basic | 131,958 | 137,473 | 134,292 | 139,238 | |||||||||||
Weighted average shares outstanding - Diluted | 131,958 | 137,950 | 134,292 | 139,739 | |||||||||||
Dividends declared per share | $ | 0.16 | $ | 0.15 | $ | 0.64 | $ | 0.60 | |||||||
BED BATH & BEYOND INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
(unaudited)
March 2, 2019 | March 3, 2018 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 508,971 | $ | 346,140 | |||
Short term investment securities | 485,799 | 378,039 | |||||
Merchandise inventories | 2,618,922 | 2,730,874 | |||||
Prepaid expenses and other current assets | 344,813 | 516,025 | |||||
Total current assets | 3,958,505 | 3,971,078 | |||||
Long term investment securities | 20,010 | 19,517 | |||||
Property and equipment, net | 1,876,109 | 1,909,289 | |||||
Other assets | 764,450 | 1,140,922 | |||||
$ | 6,619,074 | $ | 7,040,806 | ||||
Liabilities and Shareholders' Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 1,094,078 | $ | 1,197,504 | |||
Accrued expenses and other current liabilities | 672,267 | 633,100 | |||||
Merchandise credit and gift card liabilities | 339,322 | 335,081 | |||||
Current income taxes payable | 20,498 | — | |||||
Total current liabilities | 2,126,165 | 2,165,685 | |||||
Deferred rent and other liabilities | 395,409 | 431,592 | |||||
Income taxes payable | 49,235 | 62,823 | |||||
Long term debt | 1,487,934 | 1,492,078 | |||||
Total liabilities | 4,058,743 | 4,152,178 | |||||
Shareholders' equity: | |||||||
Preferred stock - $0.01 par value; authorized - 1,000 shares; no shares issued or outstanding | — | — | |||||
Common stock - $0.01 par value; authorized - 900,000 shares; issued 342,582 and 341,795 shares, respectively; outstanding 132,233 and 140,498 shares, respectively | 3,426 | 3,418 | |||||
Additional paid-in capital | 2,118,673 | 2,057,975 | |||||
Retained earnings | 11,112,887 | 11,343,503 | |||||
Treasury stock, at cost; 210,349 and 201,297 shares, respectively | (10,616,045 | ) | (10,467,972 | ) | |||
Accumulated other comprehensive loss | (58,610 | ) | (48,296 | ) | |||
Total shareholders' equity | 2,560,331 | 2,888,628 | |||||
$ | 6,619,074 | $ | 7,040,806 | ||||
BED BATH & BEYOND INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands, unaudited)
Twelve months ended | |||||||
March 2, 2019 | March 3, 2018 | ||||||
Cash Flows from Operating Activities: | |||||||
Net (loss) earnings | $ | (137,224 | ) | $ | 424,858 | ||
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities: | |||||||
Depreciation and amortization | 338,825 | 313,107 | |||||
Gain on sale of a building | (29,690 | ) | — | ||||
Goodwill and tradename impairments | 509,905 | — | |||||
Gain on debt extinguishment | (412 | ) | — | ||||
Stock-based compensation | 58,514 | 70,510 | |||||
Deferred income taxes | (104,089 | ) | 175,351 | ||||
Other | (814 | ) | (69 | ) | |||
Decrease (increase) in assets, net of effect of acquisitions: | |||||||
Merchandise inventories | 106,928 | 176,672 | |||||
Trading investment securities | 86,277 | (16,036 | ) | ||||
Other current assets | 220,653 | (258,853 | ) | ||||
Other assets | 218 | (4,754 | ) | ||||
(Decrease) increase in liabilities, net of effect of acquisitions: | |||||||
Accounts payable | (90,657 | ) | 13,210 | ||||
Accrued expenses and other current liabilities | (28,614 | ) | 80,375 | ||||
Merchandise credit and gift card liabilities | 16,016 | 25,510 | |||||
Income taxes payable | 8,360 | (64,941 | ) | ||||
Deferred rent and other liabilities | (35,918 | ) | (75,251 | ) | |||
Net cash provided by operating activities | 918,278 | 859,689 | |||||
Cash Flows from Investing Activities: | |||||||
Purchase of held-to-maturity investment securities | (734,424 | ) | (292,500 | ) | |||
Redemption of held-to-maturity investment securities | 538,925 | — | |||||
Capital expenditures | (325,366 | ) | (375,793 | ) | |||
Proceeds from sale of a building | 11,183 | — | |||||
Payment for acquisition, net of cash acquired | — | (6,119 | ) | ||||
Net cash used in investing activities | (509,682 | ) | (674,412 | ) | |||
Cash Flows from Financing Activities: | |||||||
Payment of dividends | (86,287 | ) | (80,877 | ) | |||
Repurchase of common stock, including fees | (148,073 | ) | (252,433 | ) | |||
Payment of senior notes | (4,224 | ) | — | ||||
Proceeds from exercise of stock options | — | 10,313 | |||||
Payment of other liabilities | — | (434 | ) | ||||
Net cash used in financing activities | (238,584 | ) | (323,431 | ) | |||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (7,181 | ) | (4,035 | ) | |||
Net increase (decrease) in cash, cash equivalents and restricted cash | 162,831 | (142,189 | ) | ||||
Cash, cash equivalents and restricted cash: | |||||||
Beginning of period | 367,140 | 509,329 | |||||
End of period | $ | 529,971 | $ | 367,140 | |||
The Fiscal Year 2017 consolidated statement of cash flows was revised to include restricted cash due to the adoption of Accounting Standards Update 2016-18 Statement of Cash Flows (Topic 230) in Fiscal Year 2018.
Non-GAAP Financial Measures
The following table reconciles non-GAAP financial measures presented in this press release. The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding the performance of the Company’s business. These non-GAAP financial measures should not be considered superior to, but in addition to other financial measures prepared in accordance with GAAP, including the year-to-year results. The Company’s method of determining these non-GAAP financial measures may be different from other companies’ methods and, therefore, may not be comparable to those used by other companies and the Company does not recommend the sole use of this non-GAAP measure to assess its financial and earnings performance.
Non-GAAP Reconciliation
(in thousands, except per share data)
(unaudited)
Three Months Ended | Twelve Months Ended | |||||||
March 2, 2019 | March 2, 2019 | |||||||
Reconciliation of Adjusted Operating Profit | ||||||||
Reported operating loss | $ | (296,735 | ) | $ | (87,135 | ) | ||
Adjustments: | ||||||||
Goodwill and tradename impairments (a) | 509,905 | 509,905 | ||||||
Total adjustments | 509,905 | 509,905 | ||||||
Adjusted operating profit | $ | 213,170 | $ | 422,770 | ||||
Reconciliation of Adjusted Net Income | ||||||||
Reported net loss | $ | (253,793 | ) | $ | (137,224 | ) | ||
Pre-tax Adjustments: | ||||||||
Goodwill and tradename impairments (a) | 509,905 | 509,905 | ||||||
Total pre-tax adjustments | 509,905 | 509,905 | ||||||
Tax benefit of adjustments | (97,286 | ) | (97,286 | ) | ||||
Total adjustments, after tax | 412,619 | 412,619 | ||||||
Adjusted net income | $ | 158,826 | $ | 275,395 | ||||
Reconciliation of Adjusted Earnings per Diluted Share | ||||||||
Reported loss per diluted share | $ | (1.92 | ) | $ | (1.02 | ) | ||
Goodwill and tradename impairments (a) | 3.12 | 3.07 | ||||||
Adjusted earnings per diluted share | $ | 1.20 | $ | 2.05 | ||||
(a) Goodwill and tradename impairments include: (1) goodwill and tradename impairments related to the North American Retail reporting unit; and (2) goodwill and tradename impairments related to the Institutional Sales reporting unit.
Exhibit 99.2 Fiscal 2018 Fourth Quarter Earnings Call April 10, 2019
Forward Looking Statements This presentation may contain forward-looking statements, including, but not limited to, anticipated net earnings per diluted share and operating margin. Many of these forward-looking statements can be identified by use of words such as may, will, expect, anticipate, approximate, estimate, assume, continue, model, project, plan, goal, 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 manyfactors. Such factors include, without limitation: general economic conditions including the housing market, a challenging overall macroeconomic environment and related changes in the retailing environment; consumer preferences, spending habits and adoption of new technologies; demographics and other macroeconomic factors that may impact the level of spending for the types of merchandise sold by the Company; civil disturbances and terrorist acts; unusual weather patterns and natural disasters; competition from existing and potential competitors across all channels; pricing pressures; liquidity; the ability to achieve anticipated cost savings, and to not exceed anticipated costs, associated with organizational changes and investments; the ability to attract and retain qualified employees in all areas of the organization; the cost of labor, merchandise and other costs and expenses; potential supply chain disruption due to trade restrictions, political instability, labor disturbances, product recalls, financial or operational instability of suppliers or carriers, and other items; the ability to find suitable locations at acceptable occupancy costs and other terms to support the Company’s plans for new stores; the ability to establish and profitably maintain the appropriate mix of digital and physical presence in the markets it serves; the ability to assess and implement technologies in support of the Company’s development of its omnichannel capabilities; uncertainty in financial markets; volatility in the price of the Company’s common stock and its effect, and the effect of other factors, on the Company’s capital allocation strategy; the impact of goodwill and intangible asset impairments; disruptions to the Company’s information technology systems including but not limited to security breaches of systems protecting consumer and employee information or other types of cybercrimes or cybersecurity attacks; reputational risk arising from challenges to the Company’s or a third party product or service supplier’s compliance with various laws, regulations or standards, including those related to labor, health, safety, privacy or the environment; reputational risk arising from third-party merchandise or service vendor performance in direct home delivery or assembly of product for customers; changes to statutory, regulatory and legal requirements, including without limitation proposed changes affecting international trade; changes to, or new, tax laws or interpretation of existing tax laws; new, or developments in existing, litigation, claims or assessments; changes to, or new, accounting standards; foreign currency exchange rate fluctuations; the integration of acquired businesses; and potential continuing uncertainty arising in connection with the announced intention by certain shareholders to seek control of the Company’s Board of Directors. The Company does not undertake any obligation to update its forward-looking statements. 1
Our Mission To be the trusted expert for the home and heart-felt life events. 2
Bed Bath & Beyond’s Strategic Advantages Strong brands that are Omni-channel capabilities Deep expertise in whole trusted by customers with a leveraging both physical and home across all important reputation for quality digital assets life stages 1,500+ physical locations across A solution for every room in the all brands… house… …complemented by our digital …through every important life platform stage 3
Bed Bath & Beyond is Responding to the Challenging and Dynamic Retail Environment Dynamic Retail Environment Bed Bath & Beyond’s Response • Dramatic shift to omnichannel – customers • Complete transformation of Bed Bath & demanding a seamless, convenient Beyond’s business over the past 18 months experience between in-store and digital • Structural change of our organization and • Significant competition with high level of infrastructure pricing transparency – both to the customer and the retailer • Investment in IT, analytics, and value optimization to enable data-driven decision • Customer preference for breadth of offering making in both brick & mortar and digital experience • Evolution of our in-store and digital customer experience • High level of interest in destinational categories (e.g. bed, bath, kitchen, • Enhancement of our assortment – including windows and tabletop) and focus on new private label brands experiential retail • Extensive focus on profitability, down to the • Shift from branded items to high-quality item by channel private label products 4
Overview Achieving Our Strategic Focus Driving Our Key Objectives Financial Goals • Product Assortment • Mid-and-Long Term • Fiscal 2018: Strong bias towards Revenue Growth profitability over near-term sales, moderating the declines in operating • Shopping Experience profit and EPS • Near-term and Ongoing Gross Margin Improvements • Services and Solutions • Fiscal 2019: Strong bias towards profitability over near-term sales, • Near-term and Ongoing • Operational Excellence moderating the declines in operating SG&A Improvements profit and EPS *updated for EPS growth in 2019* • Current and Sustainable World-Class Operational • Fiscal 2020: Further grow EPS Support *updated for continued EPS growth* • Long-term Target: Grow operating profit and further grow EPS 5
Key Objectives of Bed Bath & Beyond’s Transformation Bias toward profitability across all decision making Drive Mid-and-Long-Term Drive Near-term and Ongoing Drive Near-term and Ongoing Revenue Growth Gross Margin Improvements SG&A Improvements • Concept Strategy/ • Merchandise Mix • Store Labor Model Brand Vision • Value Optimization • Marketing Efficiency • Proprietary Brands & Private Label • Coupon Strategy • Occupancy/Real Estate Optimization • Next Gen Lab Store • Supply Chain Initiatives Enhancements • Front-End Optimization • Global Sourcing/ 2nd Sourcing Office in Asia • Value Optimization Current and Sustainable World-Class Operational Support • Reconstructed Team/Change How We Work • IT Transformation/ India Development Center • Data & Analytics as a Strategic Asset 6
Initiatives Driving Revenue Growth Key Initiatives Detail Concept Strategy/ . Completed full portfolio review and developed a Brand Vision product strategy Proprietary Brands . Launched first of 6 new private label home furnishings brands & Private Label . Focused on growing preferred brands . Testing new visual merchandising and assortment Next Gen Lab to re-imagine the store experience in 21 lab stores . Early results show outperformance vs. comparable Store Initiatives stores across: sales, transactions, gross margin ($ and %), and inventory reductions . Bed Bath & Beyond and buybuy BABY digital Front-End channels re-platformed; conversion has grown Optimization . New features are now released weekly (previously released monthly, moving towards daily releases) . New pricing team and software now in place Value Optimization . Benefitted from price changes in some baby product categories 7
Initiatives Driving Gross Margin Improvements Key Initiatives Detail . New portfolio strategy implemented Merchandise Mix . Operational team in place to support merchants . Rollout of private label brands . New pricing team and software now in place Value Optimization . Customizing the timing and depth of markdowns at the item and store level . Limit coupon availability Coupon Strategy . Implement coupon exclusions . Adjust value of coupon offers Supply Chain . Initiatives in place to optimize network Enhancements . Optimize eComm outbound fulfillment model . Steps required to realize cost reductions through direct sourcing taken: Global Sourcing – Sourcing team enhanced and restructured – 2nd sourcing office opened in Asia 8
Initiatives Driving SG&A Margin Improvements Key Initiatives Detail . Optimization of store labor model . Realignment of field support structure Store Labor Model . Reduction of labor-intensive tasks . Reduction in store payroll (% of sales – FY18) . Increased efficiency of direct mail events and Marketing digital marketing programs Efficiency . Advertising shift from Q1 to Q4 (FY19) . Increased branding efforts Occupancy/ . Completed comprehensive review of all store leases with assistance of 3rd party Real Estate . Negotiations with landlords are progressing Optimization as planned 9
Initiatives Providing World-Class Operational Support Key Initiatives Detail . Added 20+ new leaders, including industry Reconstructed experts, some in newly constituted roles . Migrated hundreds of associates into new teams Teams/ How we . Utilized world-class external consulting support Work . Created agile teams/cross-functional collaboration to drive faster and more informed decision making Data & Analytics . Growing and embedding analytics capabilities as a Strategic throughout our business to enhance decision- Asset making processes . New technology leadership . Redesigned IT processes to better identify, IT Transformation/ prioritize, resource, collaborate and deliver against India Development ever-evolving technology roadmap Center (IDC) . Established IDC in 2018; plans to expand in 2019 to leverage the skilled talent and the 24-hour workday 10
Bed Bath & Beyond: Business Stabilizing, In-Flight Initiatives Poised to Deliver Impact In Q1 and FY 2019 2019 Q1 2019 Full Year 2019 Key Drivers . Store traffic declines Consolidated . Strong growth in digital channels ~$2.6 bn $11.4 - $11.7 bn Net Sales . Bias toward driving profitability . Further optimizing coupon strategy . Driving sales to better margin categories . Value optimization Gross Margin 34.5% - 34.9% 34.2% - 34.6% . Optimizing coupon strategy . Supply chain enhancements . Improvements in store labor model Including: 33.1% - 33.4% Including: 30.6% - 31.0% . Lease re-negotiations SG&A* Excluding: 32.8% - 33.1% Excluding: 30.5% - 30.9% . Advertising efficiency . Increases in technology costs Including: $30 - $45 mm Including: $400 - $440 mm Operating (Margin: 1.3% - 1.6%) (Margin: 3.4% - 3.8%) Income* Excluding: $39 - $54 mm Excluding: $409 - $449 mm (Margin: 1.6% - 1.9%) (Margin: 3.5% - 3.9%) Including: $0.02 - $0.07 Including: $2.06 - $2.15 Diluted EPS** Excluding: $0.07 - $0.12 Excluding: $2.11 - $2.20 Capital . Investment in warehouses for eCommerce - $350 - $375 mm Expenditures distribution and personalized product Capital Dividend: $0.68 per share - Return Repurchase: ~$225 mm *Including and excluding $9 million in severance and shareholder activity fees expected to be incurred in 2019 Q1 ** Including and excluding $0.05 in severance and shareholder activity fees expected to be incurred in 2019 Q1 11
Bed Bath & Beyond: Re-Positioning for Sustainable Growth in FY 2020 and Long Term 2020 Long-Term Target Key Drivers . Revenue driving initiatives begin to impact 2020: – Enhancing assortment incl. proprietary brands and private label Consolidated – Scaling learnings from Next Gen Stores Net Sales $11.4 - $11.7 bn Low single-digit growth – Expanding personalization and branding – Continuing to leverage value optimization, FEO platform – Growing baby business, decorating services . Driving sales to better margin categories ~36% margin . Direct sourcing Gross Margin 34.5% – 35.0% (~200 bps improvement from 2018) . Coupon and pricing/ value optimization . Supply chain enhancements . Store labor model changes . Optimizing store footprints to meet market need SG&A (incl 30% – 31% 29% – 30% depreciation) (~100 bps improvement from 2018) . Occupancy cost reduction . Advertising efficiency Operating $430 - $475 mm ~6% margin Income (Margin: 3.7% - 4.1%) (~300 bps+ improvement from 2018) Capital ~$350 mm ~$350 mm Expenditures Capital Dividend: $0.68 per share Ongoing commitment to capital Return Repurchase: ~$400 mm return Diluted EPS of $2.60 - $2.70 in 2020. Progress toward long-term margin target and share repurchase will generate a double digit EPS CAGR over the next few years 12
Bed Bath & Beyond’s Capital Allocation Framework Bed Bath & Beyond has a disciplined capital allocation framework that balances: (1) organic investment and financial stability to ensure long-term success; and (2) return of excess capital to our shareholders through dividends and share repurchases • Invest in our business to ensure we continue to be the expert in whole home for all life events, Organic providing a strong value proposition and experience for our customers Investment • Invest in value-creating transformative initiatives to adapt to the dynamic retail environment and enhance growth and margins • Maintain modest leverage: 0.8x net debt* / EBITDA as of Feb-2019 Strong • Retain strong cash position Balance Sheet • As of Feb-2019, approximately $1 billion of cash and investments and $0.6 billion of net debt* Dividends • Consistent cash return through attractive quarterly dividend • Annualized dividend per share of $0.68 • Return excess cash flow to shareholders Share and supplement EPS growth with share Repurchase repurchase • Expect ~$225 million in FY19 and ~$400 million in FY20 *Net of both cash and investments 13
Appendix 14
Q4 2018 Summary • Net loss per diluted share of ($1.92), including a non‐cash goodwill and tradename impairments charge • Adjusted net earnings per diluted share of $1.20, excluding the impairments charge • Operating profit margin deleverage less than prior year period, excluding the impairments charge • Comp sales declined ~1.4%, including strong sales growth from customer‐facing digital channels • Net sales decreased ~11%, primarily due to having one less week in the quarter, a calendar shift of post‐Thanksgiving week out of the fourth quarter and actions taken during the quarter in support of our bias towards driving profitability over near‐term sales growth • Retail inventories at year end (March 2, 2019) reduced by nearly 5% as a result of our ongoing inventory optimization strategies 15
Q4 2018 P&L Summary* (amounts in millions, except comp %, and per share data) Adjusted* Three Months Ended March 2, 2019 % of Sales March 3, 2018 % of Sales Change Comp Sales % (a) (1.4) (0.6) Net Sales $3,308 100.0 $3,716 100.0 Gross Profit 1,147 34.7 1,333 35.9 (1.2) (b) SG&A Expenses 934 28.2 996 26.8 (1.4) (c) Operating Profit 213 6.4 337 9.1 (2.6) Net Earnings 159 4.8 194 5.2 (0.4) EPS ‐ Diluted $1.20 $1.41 WAS ‐ Diluted 132 138 (a) Comp sales are determined using the same calendar weeks as fiscal 2018; therefore the Q4 comp sales % compares the periods of December 2, 2018 ‐ March 2, 2019 to December 3, 2017 ‐ March 3, 2018. (b) Due to a decrease in merchandise margin and an increase in coupon expense. (c) Due to increases in technology related expenses, including related depreciation, and occupancy expenses, and costs related to litigation settlement. These increases were partially offset by a decrease in payroll and payroll‐ related items and advertising expenses, which includes a benefit of the shift of advertising expenses out of the fourth quarter and into the third quarter, because of the impact of the new Revenue Recognition standard. *Excluding the non‐cash goodwill and tradename impairments charge. Please refer to the non‐GAAP reconciliation on the following page. 16
Non-GAAP Reconciliation (amounts in thousands, except per share data) (unaudited) Three Months Ended March 2, 2019 Reconciliation of Adjusted Operating Profit Reported operating loss $ (296,735) Adjustments: Goodwill and tradename impairments (a) 509,905 Total adjustments 509,905 Adjusted operating profit $ 213,170 Reconciliation of Adjusted Net Income Reported net loss $ (253,793) Pre‐tax Adjustments: Goodwill and tradename impairments (a) 509,905 Total pre‐tax adjustments 509,905 Tax benefit of adjustments (97,286) Total adjustments, after tax 412,619 Adjusted net income $ 158,826 Reconciliation of Adjusted Earnings per Diluted Share Reported loss per diluted share $ (1.92) Goodwill and tradename impairments (a) 3.12 Adjusted earnings per diluted share $ 1.20 This table reconciles non‐GAAP financial measures presented in this press release. The Company believes that these non‐GAAP financial measures provide meaningful supplemental information regarding the performance of the Company’s business. These non‐GAAP financial measures should not be considered superior to, but in addition to other financial measures prepared in accordance with GAAP, including the year‐to‐year results. The Company’s method of determining these non‐GAAP financial measures may be different from other companies’ methods and, therefore, may not be comparable to those used by other companies and the Company does not recommend the sole use of this non‐GAAP measure to asses its financial and earnings performance. (a) Goodwill and tradename impairments include: (1) goodwill and tradename impairments related to the North American Retail reporting unit; and (2) goodwill and tradename impairments related to the Institutional Sales reporting unit. 17