...NDU MAIN CAMPUS, ZOUK Graduate Division MRK 606 Project title: Case 1: BED BATH & BEYOND'S PLAN FOR GROWTH Submitted to: Dr. Elie Dibeh Prepared By Abdo Al Chammass Due date: 26-3-2012 1. Explain how Bed Bath and Beyond practices the retailing concept. Four principles form the retailing concept, and they are: 1. Customer orientation 2. Coordinated effort 3. Value driven 4. Goal orientation The first concept means communicate with the shoppers and view their desires and work at best to fulfill this desire, and that’s what the sales clerk at BB&B did when the shopper asked her where she could find a set of dishes listed on a bridal registry, the latter was the desire of the shopper. When the clerk immediately dropped what she was doing and located the dishes for the customer she fulfill the customer desire. The second concept talk about having a consistent strategy and integrates plan to maximize efficiency, and from BB&B point of view this could be translated by the high profitability resulted from consistent strategy to increase the gross profits margin and at the same time to decrease selling, general, and administrative expenses as percent of sales. Moreover plans integrations such as an excellent atmosphere, wide assortments, and a deep variety within most merchandise also lead to an increase in BB&B's gross profits margin. The third concept which is the value driven, as we know, value leads to customer satisfaction;...
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...item to store some wine and liquor that can easily be accessible without walking up and down the stairs. Therefore over the weekend I entered in the retail store Bed Bath & Beyond (BB&B) in search for a wine bar. BB&B is a chain of domestic merchandise retail stores across the US, Puerto Rico, Canada and even New Zealand. They primarily sell goods for the bedroom and bathroom but have expanded to the kitchen, dining room and seasonal items as well. Since its main competitor Linens ‘n Things liquidated, BB&B has few remaining retail competitors that include Wal-Mart, Target and of the smaller variety, Pier 1 Imports. Companies like Crate & Barrel and Williams Sonoma are also considered competitors but are more specialized and upscale than the merchandise sold at BB&B. After leaving the store with the wine bar that I was looking for and some observation of the store and its surrounds, I was able to reflect on what I noticed from an environments perspective. The first thing that is noticeable is how the store predominantly places its seasonal items, in this case Thanksgiving, right at the front entrance. Another very noticeable and convenient thing is how the products in the store are laid out. The products and sections flow very nicely from kitchen to dining, bedroom sets to bedding, and bath and bathroom accessories. It makes traveling the store and locating items fairly easy. Lastly, what is very noticeable about the environment is friendliness and accommodating...
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...Valued at 1 April, 2007 Matthew Lewis: matthew.lewis@ttu.edu Tyler Page: tyler.page@ttu.edu Alex Segreti: alexander.l.segreti@ttu.edu Andrea Spencer: andrea.spencer@ttu.edu Stephen Wiggins: stephen.wiggins@ttu.edu Table of Contents Executive Summary Business & Industry Analysis. Five Forces Model Rivalry Among Existing Firms Threat of New Entrants Threat of Substitute Products Bargaining Power of Buyers Bargaining Power of Suppliers Competitive Advantage Analysis Key Success Factors Accounting Analysis Key Accounting Policies Accounting Flexibility Accounting Strategy Quality of Disclosure Revenue Manipulation Diagnostics Expense Manipulation Diagnostics Potential “Red Flags” Undo Accounting Distortions Ratio Analysis Forecast Financials Liquidity Analysis Profitability Analysis Capital Structure Analysis Extended Ratio Analysis SGR and IGR Analysis Forecasting Valuation Analysis Cost of Equity Cost of Debt WACC Method of Comparables Intrinsic Valuation Models Altman Z-Score Analyst Recommendation Appendix Works Cited 1 3 7 8 9 10 11 12 13 14 14 16 16 18 20 21 23 26 29 30 31 31 37 44 46 47 47 61 61 66 67 68 72 78 79 80 84 2 Executive Summary Investment Recommendation: Overvalued, Sell BBBY – NASDAQ $40.40 52 week range $30.92 - $43.32 Revenue (2006) $5,809,562,000 Market Capitalization $11.75 Billion Shares Outstanding 283,380,000 3-month Avg. Daily Trading Volume 2,332,640 ...
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...Bed Bath Short Gases ASE 1: BED BATH & BEYOND,S PLAN FOH cRowrHc-t Bed Bath & Beyond (BB&8, www.bedbathandbeyond.com), the power retailer of domestics and home furnishings, has annual sales of $7 billion and a net income of $562 million. The firm's profitability can be explained by its increasing gross profit margins at the same time it decreases selling, general, and administrative (SG&A) expenses as a percent of sales. BB&B is able to increase its gross profit margins due to its excellent atmosphere, wide assortments, and a deep variety within most merchandise lines. Its control over SG&A expenses is partly due to the outsourcing of its dishibution centers to a third party. BB&B has opened hundreds of stores over the last few years, ranging in size from 30,000 to 80,000 square feet. Because it uses a flexible real-estate strategy, BB&B is able to stood by the shopper as she decided whether to purchase the set and even had the dishes brought to a nearby checkout so that the shopper could continue buying at the store. The sales clerk then met the shopper at the checkout to facilitate the transaction. In 2008, BB&B was tied for second place in an annual study of the top "20 Most Competitive Retailers" in the United States. The study, conducted by Capgemini (www.capgemini. com) and W Ratings Corporation (wwwwratings.com), measured the ability of retailErs to beat consumer expectations and deliver superior profitability. Each firm's rankings were based on ib profits...
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...II Bed Bath & Beyond Inc. Nasdaq: BBBY Dow Jones Indus: 16,321.71 S&P 500: 1,859.45 Russell 2000: 1,183.03 Index Component: S&P 500 Initially Probed: Volume XXXVIII, Issue VII & VIII @ $69.77 Last Probed: Volume XXXIX, Issue XI & XII @ $76.52 Trigger: No Type of Situation: Business Value Price: Shares Outstanding (MM): Fully Diluted (MM): Average Daily Volume (MM): $ 67.82 209.7 212.3 (1.2%) 2.6 Market Cap (MM): Enterprise Value (MM): Percentage Closely Held: $ 14.2 $ 13.4 Insiders ~4% 52-Week High/Low: 5-Year High/Low: $ 80.82/56.37 $ 80.82/19.52 Trailing Twelve Months Price/Earnings: Price/Stated Book Value: 13.8x 3.4x Net Cash & Investments (MM): Upside to Estimate of Intrinsic Value: $ 781 Dividend: Yield: $ NA NA Net Revenue Per Share: LTM: 2012: 2011: 2010: $ $ $ $ Earnings Per Share: 2012: 2011: 2010: Overview Bed Bath & Beyond Inc. (“BBBY” or “the Company”) is a major operator within the retail sector. BBBY operates roughly 1,500 stores and employs approximately 57,000 people throughout North America, and the firm generates annual revenue of over $10 billion. The stores are primarily located in the U.S., and consist of the following brands: Bed Bath & Beyond, Christmas Tree Shops, Harmon, buybuy BABY, and Cost Plus World Market. BBBY’s product line includes a wide range of domestic merchandise and home furnishings. Examples of BBBY’s product assortment include bed linens...
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...nationwide chain of 575 retail stores selling domestics merchandise (bed linens, bath items, and kitchen textiles) and home furnishings (kitchen and tabletop items, small appliances, and basic house wares). In 2003 Bed Bath and Beyond reported annual revenues (gross profit) of approximately $1.8 billion, net income of $339 million and net sales of $4.5 billion, representing 22% growth in revenue and 32% growth in income as compared to the previous year. In addition to the 575 Bed Bath and Beyond stores, BBBY also owns 30 Harmon Stores, a discount health, and beauty aid retailer, and 24 Christmas Tree Shops, a retailer of home décor, giftware, and seasonal merchandise. Results of operations for both the Harmon Stores and the Christmas Tree Shops are included in the companies consolidated results of operations and have been since the date of acquisition. Bed Bath and Beyond is currently the largest superstore domestics retailer, although their market share is only 4%. Competitors like Target, Wal-Mart and JC Penney offer a wider variety of merchandise such as apparel and electronics. Since 2002 growth has been a result of acquiring the Christmas Tree Shops and the Harmon Stores. In addition BBBY believes that their product offerings, customer service and advertising program have contributed to the company's financial success. Business risk in the case of BBBY is low if you only consider that the products they sell are produced by name brand companies, so any products needing...
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...On July 23, 2010 at approximately 2040 hours, I (Vincent Mendez) Security Officer was sent to asst. with Officer Andrew Kent to Shemoni Jewelry regarding a shoplifting in progress. We were advised from dispatch to help an employee from Shemoni Jewelry who witnesses one of the three males steal diamond earrings. The employee also advised one of the three suspects to stop and come back into the store. At that time the three males laughed at the employee and began speed walking away from Shemoni Jewelry. The employee then followed the three Hispanic males into Bed Bath and Beyond. I arrived at approximately 2045 hours after Officer Andrew Kent and Officer Robert Lopez were already talking to the three males. I then saw one of the three suspects (Alvarez) physically push Officer Kent and then attempt to walk towards the exterior exit out of Bed Bath and Beyond toward the parking lot. At this time officer Kent told Alvarez, don’t push me and that he needed to go back to Shemoni Jewelry or we have to call Ontario Police Department. Alvarez again physically pushed Officer Andrew Kent. I felt he needed to be handcuff because of his violent act and I did not want Alvarez to go further with his behavior and try to harm anyone else. At this time I grabbed Alvarez and took him to the ground to handcuff him. Officer Kent and I placed Alvarez into custody. Shemoni Jewelry employee witnessed Alvarez push Officer Andrew Kent several times. I heard Officer Andrew Kent sternly say to Alvarez...
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...Short Gases ASE 1: BED BATH & BEYOND,S PLAN FOH cRowrHc-t Bed Bath & Beyond (BB&8, www.bedbathandbeyond.com), the power retailer of domestics and home furnishings, has annual sales of $7 billion and a net income of $562 million. The firm's profitability can be explained by its increasing gross profit margins at the same time it decreases selling, general, and administrative (SG&A) expenses as a percent of sales. BB&B is able to increase its gross profit margins due to its excellent atmosphere, wide assortments, and a deep variety within most merchandise lines. Its control over SG&A expenses is partly due to the outsourcing of its dishibution centers to a third party. BB&B has opened hundreds of stores over the last few years, ranging in size from 30,000 to 80,000 square feet. Because it uses a flexible real-estate strategy, BB&B is able to stood by the shopper as she decided whether to purchase the set and even had the dishes brought to a nearby checkout so that the shopper could continue buying at the store. The sales clerk then met the shopper at the checkout to facilitate the transaction. In 2008, BB&B was tied for second place in an annual study of the top "20 Most Competitive Retailers" in the United States. The study, conducted by Capgemini (www.capgemini. com) and W Ratings Corporation (wwwwratings.com), measured the ability of retailErs to beat consumer expectations and deliver superior profitability. Each firm's rankings were based on ib profits over the prior...
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...Let’s Take this Private: Linens’n Things versus Bed Bath & Beyond 1. Assume that you are Robert DiNicola, CEO of Linen’n things, what specific competitive strategy and implementation plan would you take to turn around LNT？ * improve supply chain, lower their cost * Improve online store, online shopping * Differentiation strategy * Globalization. They can seek international partner to expand their business * Learning the successful experiences from Bed Bath & Beyond 2. Will DiNicola’s effort to turn around LNT be aided or hindered by changing economic and industry conditions (show your macro environment and industry analysis？ Be aided * Industry consolidation. Business environment becomes less favorable. It’s good for LNT to turn around based on the big scope and the existed structure. * Integrate internet. It’s good for LNT to build the online store * Globalization of the fashion. It’s good for LNT because of their differentiated products. Be hindered: * Slow increasing rate with intensely competition. The maturity of the U.S. market. * Industry consolidation makes the large companies stronger, but LNT fall behind some big companies like BBBY. So it’s hard to catch up. * Financial crisis. * Government policies affect the industry performance. e.g. interest rate adjustment. High interest rate, low purchase. 3. How had Bed Bath & Beyond come to surpass Linens’n Thins over time despite its similar...
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...BACKGROUND HISTORY Bed bath and beyond Inc, incorporated on October 5,1971, is a retailer which operates under the names Bed bath and bb I. COMPANY BACKGROUND HISTORY Bed bath and beyond Inc, incorporated on October 5,1971, is a retailer which operates under the names Bed bath and bb I. COMPANY BACKGROUND HISTORY Bed bath and beyond Inc, incorporated on October 5,1971, is a retailer which operates under the names Bed bath and bb I. COMPANY BACKGROUND HISTORY Bed bath and beyond Inc, incorporated on October 5,1971, is a retailer which operates under the names Bed bath and bb I. COMPANY BACKGROUND HISTORY Bed bath and beyond Inc, incorporated on October 5,1971, is a retailer which operates under the names Bed bath and bb I. COMPANY BACKGROUND HISTORY Bed bath and beyond Inc, incorporated on October 5,1971, is a retailer which operates under the names Bed bath and bb I. COMPANY BACKGROUND HISTORY Bed bath and beyond Inc, incorporated on October 5,1971, is a retailer which operates under the names Bed bath and bb I. COMPANY BACKGROUND HISTORY Bed bath and beyond Inc, incorporated on October 5,1971, is a retailer which operates under the names Bed bath and bb I. COMPANY BACKGROUND HISTORY Bed bath and beyond Inc, incorporated on October 5,1971, is a retailer which operates under the names Bed bath and bb I. COMPANY BACKGROUND HISTORY Bed bath and beyond Inc, incorporated on October 5,1971, is a retailer which operates under the names Bed bath and bb I. COMPANY...
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...Bed Bath & Beyond was started in 1971 by founders Warren Eisenberg and Leonard Feinstein, who originally called it Bed 'n Bath and opened the first store in New Jersey. As per the name, it initially only sold items for the bedroom and bathroom. By 1985, it had expanded to 17 locations. Two years after that, the name was changed to Bed Bath & Beyond to reflect its full range of "domestic merchandise and home furnishing," as the company puts it. By 1991, it hit $134 million in sales, going public on the NASDAQ stock exchange one year later. The company’s portfolio grew in other ways when the new millennium hit. It bought health and beauty retailer Harmon’s in 2002, and the nothing-but-tchotchkes Christmas Tree Shops the year after. In 2007, it acquired Buy Buy Baby, and in 2012, both Linen Holdings, LLC and Cost Plus World Market. Currently operating six different businesses, Bed Bath & Beyond, Inc. now owns a total of 1,512 stores, according to its most recent earnings call; Bed Bath is its largest subsidiary with 1,020, or 67%, of its total stores. Bed Bath’s merchandising concept—a massive space offering a plethora of products—is known in the retail world as "big box." It’s the opposite approach of carefully curated home stores like Williams-Sonoma and Crate & Barrel, but was widely popular when Bed Bath first hit the market. Toys "R" Us was the first retailer to adopt this "category killer strategy," explains retail analyst Warren Shoulberg. In the pre-e-commerce...
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...Linen N Things Linens ’n Things Center, Inc. is a wholly owned subsidiary of Linens ’n Things, Inc. The Company and Linens ’n Things, Inc. are wholly owned subsidiaries of Linens Holding co. The Company is a specialty retailer of home textiles, housewares and home accessories in North America operating 589 stores in 47 United States and seven Canadian provinces as of December 29, 2007. The Company is a destination retailer, offering one of the selections of brand-name, as well as private label home furnishings merchandise in the industry. The Company’s average store size of approximately 33,000 gross square feet enables it to offer a more comprehensive product and brand selection than department stores and other retailers that sell home furnishings. The Company’s primary target guest is female between the ages of 25 and 55 who is fashion and brand conscious, has better income and focuses on the home as a reflection of her individuality. On the surface, LNT and BBBY companies were pursuing a similar business-level strategy of cost leadership, but key strategic decisions led them down quite different evolutionary paths. Both companies focused on providing consumers with high-quality houseware goods in a no-frills, value-priced environment, but LNT's decision to build centralized warehouses - seemingly consistent with a cost leadership strategy - ended up bringing it into direct competition with Target and Walmart. In contrast, BBBY allowed for greater decentralization in decision...
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...Advance Corporate Finance - Bed Bath and Beyond Case Questions: You are BBBY’s CEO, Steven Temares. It is April 2004 and you are about to decide what to do with the company’s excess cash: - Keep it? - Pay it out and issue debt? You structure your analysis by answering the following questions: 1. What is wrong with building up cash? Provide (at least two) reasons in favor and against keeping cash in the firm. Against: By paying out excess cash and issuing debt, BBBY could improve return to equity holders and raise earnings per share (by a share repurchase). Leverage can increase a firm’s expected earnings per share. An argument is that by doing so, leverage should also increase the firm’s stock price. Because BBBY has no debt, they pay no interest, and because in perfect capital markets there are no taxes, BBBY’s earnings would equal its EBIT. If BBBY has new debt, they will have interest payments each year, so their earnings will decrease (EBIT – interest). If BBBY uses the debt to repurchase shares, the number of outstanding shares will also fall. Because of this, the earnings per share can increase with leverage. This increase might appear to make shareholders better off and could potentially lead to an increase in the stock price. Besides this, BBBY faces the risk that the firm is not attracting investors. Investors want to maximize their returns and when the firm has a lot of cash, the investors may not be sure of the ability of BBBY to maximize...
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...Bed Bath & Beyond “The Capital Structure Decision” Advanced Corporate Finance Everaars, Tim 6160492 Groenenberg, Erik 6178944 Kruitwagen, Max 6359744 Veldkamp, Max 6270581 1. What is wrong with building up cash? Provide (at least two) reasons in favor and against keeping cash in the firm. You need a cash reserve for bad economic times. If business is not going very well, you’re making losses, you need some reserves to absorb these losses. If you haven’t built up any cash you won’t be able to absorb these losses and in the worst case you can go bankrupt. When one of your customers or a company you delivered to can’t pay their bill there is a possibility you get short on cash. To be able to still purchase equipment and pay your own bills you need a cash reserve to absorb this loss without going bankrupt. When you have cash you can invest when an opportunity comes by. This can be a favourable thing or a bad thing. When decision making is hasted or a decision is made to invest in a bad investment it is not favourable. You pay tax twice over the cash you build up. The first time you pay tax is when you report it as income. The second time is when it is on your bank account because you pay tax every year over your company’s value. Shareholders also don’t like excess cash because the cash can be used to invest and make a profit, or can be used to repurchase shares, both leading to...
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...The business risk of BBBY can be categorized as medium to low. On the low side that is due to the fact that BBBY is a common goods company and the risk of default in the common goods industry is relatively low. But BBBY also has a lot of competitors with a higher market share and some of them even offer a higher ROE, like Best Buy (23.4%) and William Sonoma’s just a little above BBBY’s (19.5%), compared to BBBY ROE of 20.1%. The main competitors are chains of superstores such as Target and Best Buy. While BBBY has no debt on its balance sheets due to the conservatism of its management team, it invested a lot of its money in short-term securities and lately these investments weren’t profitable enough due to the low interest earned. Therefore, it is clear that the company needs a new strategy as to the future of their excess funds. As mentioned above, we believe that the company does have a lot of excess cash that needs to be organized in a better way to provide its owners with a higher return. The company could pay out the excess cash as one time dividend or it could implement stock repurchasing. As for the first alternative, it is highly inefficient because if the company offers higher ROE than the current market does, it should keep the money in the company. Companies always do what is best for their shareholders. Therefore, it leaves us with only one option – to repurchase some of the shares back from the public to increase the price of the stock that will remain outstanding...
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