Bed, Bath and Bullish: The Consumer Carries the Rally

Bed, Bath and Beyond Inc. (BBBY)’s 41,000 employees issued a booyah to Jim Cramer following his site’s September 10th article titled, “Bed, Bath and Bearish.” On September 22nd, BBBY proved top-line growth, another sign to the bears the consumer is alive, the recovery is unfolding and upside signs are evident. Here’s the breakdown on BBBY’s Q2 earnings report:

Earnings: Q2 profits of $.70 vs. $.63 consensus and $.52 in Q2 last year. Profits rose 35% Year-over-Year and BBBY beat earnings for the fourth straight quarter.

Revenue: Increased 12% Year-over-Year at $2.14 Billion vs. $2.10 Billion consensus, easily surpassing expectations. Last year, Bed, Bath & Beyond Inc. generated sales of $1.91 Billion in the same quarter, so this year’s quarter is a drastic improvement and another sign of the economy’s improvement.

Gene Castagna, Chief Financial Officer of Bed, Bath & Beyond, shared what Wall Street loves to hear, the BBBY’s future projections, “One, including the 15 stores opened so far this year, we expect the total number of new stores openings across all of our concepts to be in the mid-to-high 40s range.  Two, we expect to continue our program of expanding, renovating, remodeling and/or relocating a number of our stores in fiscal 2010. Three, if you recall, last year’s comp store sales improved from a decrease of approximately 1.1% in the first half to an increase of approximately 9.5% in the second half. A mid single-digit percentage comp store sales increase for all of fiscal 2010. Four, net sales to increase by a mid single-digit percentage in the third and fourth quarters of fiscal 2010 and by a high single-digit percentage for all of fiscal 2010. Five, for all of fiscal 2010, we would expect to leverage our operating profit. Six, interest income is expected to be relatively flat in the back half of 2010 versus the same period in fiscal 2009. Seven, the third quarter and full year tax provisions are estimated in the high-30s percent range with variability as taxable events occur. Eight, capital expenditures for fiscal 2010, principally for new stores, existing store refurbishment, information technology enhancements and other projects, continue to be planned at approximately $225 million. Nine, depreciation for fiscal 2010 is estimated to be approximately $180 million. Ten, we expect to generate positive operating cash flow in fiscal 2010 and continue to fund operations entirely from internally-generated sources. Eleven, we expect to continue our share repurchase program and evaluate the amount of repurchases based upon business and economic conditions.”

Comment: Shares of Bed, Bath & Beyond (BBBY) are trading up 3.6% following the company’s earnings release on September 22nd, trading at $43.60 per share, compared to yesterday’s closing price of $42.05 per share.

Based on the chart above, Bed, Bath & Beyond (BBBY), shares of BBBY have technically tested the 200-day moving average from the top as support and are now trading above both the 200-day and 50-day moving averages. The stock price is now back in the May-June price zone as the company continues to expand, grow and deliver solid results.

Bed, Bath & Beyond is expecting net earnings per diluted share in the fiscal third quarter to be in the range of approximately $0.61 to $0.65. For all of fiscal 2010, BBBY is expecting net earnings per diluted share to increase by approximately 20%, up from the previous model of approximately 15%.