Bed, Bath and Beyond 2008 Annual Report Download - page 5

BED BATH & BEYOND 2008 ANNUAL REPORT
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Bed Bath & Beyond Inc. and subsidiaries (the “Company”) is a chain of retail stores, operating under the names Bed Bath &
Beyond (“BBB”), Christmas Tree Shops (“CTS”), Harmon and Harmon Face Values (“Harmon”) and buybuy BABY. The Company
sells a wide assortment of merchandise principally including domestics merchandise and home furnishings as well as food,
giftware, health and beauty care items and infant and toddler merchandise. The Company’s objective is to be a customer’s first
choice for products and services in the categories offered, in the markets in which the Company operates.
The Company’s strategy is to achieve this objective through excellent customer service, an extensive breadth and depth of
assortment, everyday low prices, introduction of new merchandising offerings and development of its infrastructure.
Operating in the highly competitive retail industry, the Company, along with other retail companies, is influenced by a number
of factors including, but not limited to, general economic conditions including the housing market, fuel costs, and the overall
macroeconomic environment, unusual weather patterns, consumer preferences and spending habits, competition from existing
and potential competitors, and the ability to find suitable locations at acceptable occupancy costs to support the Company’s
expansion program.
The difficult conditions affecting the overall macroeconomic environment continued to impact the retail sector in general and
the Company. The Company believes factors such as the increase in the unemployment rate and issues specific to the housing
industry, including a decline in home values in conjunction with a downward trend in home sales, have negatively impacted
consumer confidence and the level of discretionary spending by consumers, resulting in an adverse impact on the Company’s net
sales, net earnings and operating cash flows. The Company cannot predict whether, when or the manner in which these economic
conditions will change.
Recently, a number of businesses in the retail industry, including a significant competitor of the Company, have announced their
liquidations. The Company’sresults have been impacted and may continue to be impacted by these liquidations, including those
within its sector of retailing. The Company believes this continued industryconsolidation will provide an opportunity to gain
market share and to improve its competitive position over the long term; however, the Company cannot, with any level of
certainty, estimate the impact these liquidations will have on its future results of operations.
In light of the risks posed by the current macroeconomic environment, the Company continues to work to systematically review
all expenditures with the goal of prudently managing its business. At the same time, the Company remains committed to making
the required investments in its infrastructureto help position the Company for continued success. The Company continues to
scrutinize and prioritize its capital needs while continuing to make investments, principally for new stores, existing store improve-
ments, and other projects whose impact is considered as important to its future.
The following represents an overview of the Company’s financial performance for the periods indicated:
•Net sales in fiscal 2008 (fifty-two weeks) increased approximately 2.3% to $7.208 billion; net sales in fiscal 2007 (fifty-two
weeks) increased approximately 6.5% to $7.049 billion over net sales of $6.617 billion in fiscal 2006 (fifty-three weeks).
•Comparable storesales for fiscal 2008 decreased by approximately 2.4% as compared with an increase of approximately
1.0% and 4.9% in fiscal 2007 and 2006, respectively. Comparable store sales percentages are calculated based on an
equivalent number of weeks for each annual period.
Astore is considered a comparable store when it has been open for twelve full months following its grand opening period
(typically four to six weeks). Stores relocated or expanded areexcluded from comparable store sales if the change in square
footage would cause meaningful disparity in sales over the prior period. In the case of a storeto be closed, such store’ssales
are not considered comparable once the store closing process has commenced. Since the first quarter of fiscal 2008, buybuy
BABY has been included in the Company’scomparable storesales calculation.
•Gross profit for fiscal 2008 was $2.873 billion or 39.9% of net sales compared with $2.925 billion or 41.5% of net sales for
fiscal 2007 and $2.835 billion or 42.8% of net sales for fiscal 2006.
•Selling, general and administrative expenses (“SG&A”) for fiscal 2008 were $2.199 billion or 30.5% of net sales compared
with $2.087 billion or 29.6% of net sales for fiscal 2007 and $1.946 billion or 29.4% of net sales for fiscal 2006.
•The effective tax rate was 37.8%, 35.0% and 36.3% for fiscal years 2008, 2007 and 2006, respectively. The changes in the
effective tax rate between fiscal 2008, fiscal 2007 and fiscal 2006 are due to the recognition of certain discrete tax items in
each respective fiscal year.