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...