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Bed, Bath & Beyond Buybacks Authorizes Another $2 Billion In Stock Repuchases

Tyler Durden's picture




 

It was only two weeks ago when Bed Bath and Beyond reported earnings that missed across the top and bottom line. And while the company has little control over contracting revenues, one reason it may have missed on the EPS (at $0.93 vs $0.95) was the "contraction" in buybacks. A contraction, incidentally, which we use loosely, because it followed a February quarter repurchase amount that blew out all historical buybacks out of the water at over half a billion as shown in the chart below.

The bigger problem is that with just $861 million left under its existing buyback authorization, this most popular pathway for New Normal "growth" would have been promptly shut for the company at the current pace of buying up its own stock as soon as two more quarters.

So what does Bed Bath and Beyond Buybacks do? Why it promptly authorized just the thing the central-planning doctor ordered: an authorization to buy even more shares back, some $2 billion worth to be precise.

From the just released press release:

Bed Bath & Beyond Inc. announced today that its Board of Directors has authorized a new $2.0 billion share repurchase program. The Company expects that the new share repurchase program will commence after the completion of its existing share repurchase program, which, as of May 31, 2014 had approximately $861 million remaining. The Company is currently planning that the new share repurchase program will be completed during fiscal 2016. Since 2004 through the fiscal first quarter of 2014, the Company has returned approximately $6.6 billion to its shareholders through share repurchases.

 

"Our Board authorized this new share repurchase program based upon its continued confidence in our Company's long-term growth potential, financial outlook and cash flow generation. We also believe this is an opportune time, and method, to return value to our shareholders. In addition to providing value to our shareholders through share repurchase programs, our strong operations should allow us to continue to invest in our infrastructure and maintain our ability to take advantage of opportunities as they may arise," said Steven Temares, Chief Executive Officer and Member of the Board of Directors.

 

The repurchases may be effected in the open market, through accelerated repurchase and other negotiated transactions, including through plans designed to comply with Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended. It is contemplated that funding for the new program would be from operating cash flow as well as various financing alternatives.

Well, the stock is about $20 off its all time highs of $80.82 set in late 2014, so yes: apparently the board, in its infinite valuation wisdom, is right in pushing for more repurchases. As for BBBY's stock repurchase history of $6.6 billion in the past decade, putting that number in context, over the same period, BBBY reported Net Income of $7.1 billion. In other words, some 93% of BBBY's Net Earnings ended up as stock buybacks. Just in case anyone is curious why revenue growth is slowing not only for the company but the entire S&P500...

 

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Mon, 07/07/2014 - 09:09 | 4931266 Bryan
Bryan's picture

What better way to look profitable than to reduce your stockholders' equity?

Mon, 07/07/2014 - 10:14 | 4931410 max2205
max2205's picture

They are geniuses. ..bullish since BAC downgraded

Mon, 07/07/2014 - 11:48 | 4931694 Thomas
Thomas's picture

This share buyback program is not as crazy as it looks. They have a trailing p/e of 12 (if you believe it), and they have no (as in zero) debt. I could imagine going long this company if they take a serious beating in what I believe is a coming carnage.

Mon, 07/07/2014 - 09:09 | 4931270 SoilMyselfRotten
SoilMyselfRotten's picture

Wash, rinse, repeat

Mon, 07/07/2014 - 09:42 | 4931332 rubiconsolutions
rubiconsolutions's picture

For BBBY that's just money down the drain....

 

Mon, 07/07/2014 - 09:15 | 4931271 NoDebt
NoDebt's picture

From the WSJ, future article, October 2014:  FASB announces that share repurchases can now be categorized as CapEx.

From the article:  "Well, that's pretty much what they're doing anyway, so all we did was give them an accounting method to recognize that."

Problem: solved.

Mon, 07/07/2014 - 09:10 | 4931272 buzzsaw99
buzzsaw99's picture

BBBY = better than most. I wouldn't be surprised if it is taken private.

Mon, 07/07/2014 - 09:15 | 4931282 Jason T
Jason T's picture

in essance, everytime you by something from BBBY, a good chunk of that money spent is heading to wall street furnding these buybacks.  

Mon, 07/07/2014 - 11:56 | 4931710 QQQBall
QQQBall's picture

Dude, get over the evil Wall Street is responsible for everything meme. The money goes to the company who is choosing to buy back stocks with their funds.

Mon, 07/07/2014 - 09:19 | 4931287 Seasmoke
Seasmoke's picture

Lies, Fraud & Beyond. 

Mon, 07/07/2014 - 09:18 | 4931288 firstdivision
firstdivision's picture

Borrow money, buy stocks, profit.

Mon, 07/07/2014 - 09:23 | 4931293 oklaboy
oklaboy's picture

guess nobody thought ot give the 2B to the stockholders as dvidend? guess that is too difficult.

Mon, 07/07/2014 - 12:09 | 4931755 QQQBall
QQQBall's picture

Dividends are taxed; buybacks are not

Mon, 07/07/2014 - 09:23 | 4931295 JustObserving
JustObserving's picture

Everything is a fraud now in the land of the free as Paul Craig Roberts succinctly puts it today:


The corruption in present-day America is total. Psychologists and anthropologists serve war and torture. Economists serve globalism and US financial hegemony. Physicists and chemists serve the war industries. Physicists and computer geeks serve NSA. The media serves the government and the corporations. The political parties serve the six powerful private interest groups that rule the country.

No one serves truth and liberty.

I predict that within ten years truth and liberty will be forbidden words uttered only by “domestic extremists” who are a threat that must be exterminated without due process of law.

America has left us. We now have the tyranny of the Orwellian state that rules, not by the ballot box and Constitution, but by force and propaganda.

http://www.paulcraigroberts.org/2014/07/07/virtual-economys-phantom-job-...

Mon, 07/07/2014 - 09:43 | 4931334 Ghordius
Ghordius's picture

how can you serve truth and liberty if you have no control over your vocabulary? the very words and concepts you need for the fight for truth (and liberty) have to be clear, concise and well-defined. and the word "globalist"... has none of those qualities

Mon, 07/07/2014 - 09:55 | 4931357 lordylord
lordylord's picture

"how can you serve truth and liberty if you have no control over your vocabulary?"

Try to focus your small mind on the message.  Not the syntax, grammar, and vocabulary.  Everyone from a child to the illiterate to the well-educated can understand the message of liberty. 

Mon, 07/07/2014 - 11:57 | 4931715 Ghordius
Ghordius's picture

I don't mind the message. In fact, I like the message. but that word... I defy you to define it. It's not really more than a generic "them"

Mon, 07/07/2014 - 09:48 | 4931348 lordylord
lordylord's picture

"America has left us. We now have the tyranny of the Orwellian state that rules, not by the ballot box and Constitution, but by force and propaganda."

This is obvious for about 1% of us.  The 99% are happy to have their heads up their asses.

Mon, 07/07/2014 - 09:25 | 4931298 yogibear
yogibear's picture

It's the Federal Reserve's fiat Ponzi game. Nothing really productive, it's all about maxing financialization.

Print money, blow bubbles and transfer wealth. Reverse Robin Hood. Steal from the 99% to give to the 1%.

Mon, 07/07/2014 - 09:24 | 4931299 Mitch Comestein
Mitch Comestein's picture

The cash flows of this co are huge.  I guess they are the exception in retail.  They have to do something with the money.

Mon, 07/07/2014 - 09:25 | 4931300 Its_the_economy...
Its_the_economy_stupid's picture

bad day coming when that debt has to be refi-ed at who knows what rate. Ah, but no worries banking that executive bonus today.

Mon, 07/07/2014 - 09:25 | 4931301 tedstr
tedstr's picture

Man thats one fugly chart.  Massive double top.  I was in a BBBY store last fall first time.  I have never seen a store so well stocked.  What does that say

 

Mon, 07/07/2014 - 09:28 | 4931307 orangegeek
orangegeek's picture

$2B is about 33.5M shares at $60

 

BBBY has 202M shares (declining for a few years) outstanding while the price continues to fall - google finance.

 

More buybacks this late in the cycle isn't going to help much - it just may hold the stock in a range for a while.

Mon, 07/07/2014 - 09:33 | 4931318 ejmoosa
ejmoosa's picture

In the old days, companies would buy back shares when they were undervalued.  They would issue shares at market tops.  

In between they would eactually work to grow and expand their businesses....

 

I miss the good old days.

 

Mon, 07/07/2014 - 09:46 | 4931346 Ghordius
Ghordius's picture

yet companies buying back shares is a sign that they don't see other, better opportunities, including growing and expanding - FED effects or not, humungus off-shore cash mountains or not, wrong executive compensation plans or not

Mon, 07/07/2014 - 10:31 | 4931442 ejmoosa
ejmoosa's picture

What better opportunities do you see other than borrowing near 0%, buying back shares, driving up EPS, and raking in big bonuses?

It's much easier than speaking out against the endless rules and regulations that are destroying the American economic engine.  Businesses fear speaking out against this anti business environment,  for they just might be targetted for a little extra scrutiny from the IRS, the EPA and other heavy handed government agencies.

Mon, 07/07/2014 - 09:38 | 4931328 RaceToTheBottom
RaceToTheBottom's picture

Check the executive comp plan.

That explains everything.

Mon, 07/07/2014 - 09:50 | 4931345 BobTheSlob
BobTheSlob's picture

BBandB is the poster child for what is wrong with American Retail. I was walking through one this weekend with the wife and my impression:
1) Prime expensive real estate location
2) Mounds and mounds of junk inventory that nobody wants

Stock buybacks are the least of their worries. We went in to buy a few barstools. And the choices:
1) 29 inch stool built for Chinese midget bars
2) flimsy cast metal stool that looked like a forgery of a real stool one might find in Ethan Allen
3) Half wood "rotating" stool that failed to rotate when you sat on it.
4) Contemporary fake "silver" finished (paint?) stool that looked like a milking stool for very large cows.

NO SALE...we walked out.

Mon, 07/07/2014 - 10:01 | 4931377 lordylord
lordylord's picture

" I was walking through one this weekend with the wife"

OUCH!  Sorry to hear that.  Zero, a moment of silence for this man.  My suggestion if you are looking for a bar stool: if you have the space and the tools (or a friend with the tools), crack open a beer and make your own. 

Mon, 07/07/2014 - 12:14 | 4931768 U4 eee aaa
U4 eee aaa's picture

Better yet:

If you are looking for a bar stool it is best to head down to the local pub. You can rent them by the glass there

Mon, 07/07/2014 - 10:01 | 4931382 Yes We Can. But...
Yes We Can. But Lets Not.'s picture

I wander into BB&B occasionally, pretty much never buy anything, am continually amazed at the big, big margins they get.

Mon, 07/07/2014 - 12:35 | 4931857 QQQBall
QQQBall's picture

+1 I used to walk through when the local store was open. Too expensive more my taste.

Mon, 07/07/2014 - 11:02 | 4931537 Bemused Observer
Bemused Observer's picture

I saw barstools this weekend at yard sales. Nice ones too, with leather seats and backs. Set of 4, she was asking 40 dollars. She'd have taken 30.

I looked at them because they were so nice I wish I HAD a home bar, or someplace to use them.

Just wondering what BBB was asking for their crappy ones...

Mon, 07/07/2014 - 09:51 | 4931360 Frostfan1
Frostfan1's picture

I don't get all the whining and moaning here.  They don't have that many places left to expand.  They're already everywhere. They don't need any more big boxes and they don't spend on R&D.  Whether by dividend or stock, it's time for money to benefit the shareholders.  I know someone who works there as a manager.  Lots of hours but they're not leaving anytime soon for somewhere else.  This was the better retailer, recall.  Linens and Things was the second class competitor now out of business.

Mon, 07/07/2014 - 10:54 | 4931510 I Write Code
I Write Code's picture

Share buybacks, previously to 2008, had a horrible record, almost always a sign that management was lost and confused and corrupt.

Now in a ZIRP environment this is not necessarily the case, it can look like a riskless investment.  As ZH has pointed out everyone is doing it, to the point where I wonder if they have been *ordered* to do it by the Fed.

However for BBBY I'll make an exception, the company seems a throwback to that lost and confused category, I guess it's kind of a retail Disneyland for classic homemaker wives, but seriously do we have that many classic homemaker wives anymore, who can probably buy all the hard goods 30% off from Amazon and the soft goods 40% off from Target?

Mon, 07/07/2014 - 10:59 | 4931528 starman
starman's picture

Recovery!

Mon, 07/07/2014 - 11:53 | 4931707 QQQBall
QQQBall's picture

Yields are low so this is a decent use of funds IMO sssuming th share price is not over-valued. They are not borrowing to fund the buybacks. Once the share count drops and the stock gets hit - with rates low this would be a LBO candidate?

Mon, 07/07/2014 - 11:59 | 4931726 Fix It Again Timmy
Fix It Again Timmy's picture

Bed, Bath and Beyond INSANITY.....

Mon, 07/07/2014 - 12:01 | 4931730 Chuck Knoblauch
Chuck Knoblauch's picture

The magic of fake EPS growth.

Manipulate the denominator.

 

Mon, 07/07/2014 - 12:17 | 4931778 U4 eee aaa
U4 eee aaa's picture

They must have a ton of executive stock options at X strike price

Mon, 07/07/2014 - 12:17 | 4931780 Agent P
Agent P's picture

BBBY stock....20% discount coupon not required. 

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