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Non-Tech : Bed, Bath, and Beyond (BBBY)
BBBY 15.46+2.4%Jan 14 4:00 PM EST

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To: Frederick Langford who wrote (67)7/25/2003 9:38:28 AM
From: Neil H  Read Replies (1) of 77
A 3 page article from the

Bed, Bath & Beyond Adolescence

By Troy Wolverton
Staff Reporter
07/18/2003 08:15 AM EDT
Click here for more stories by Troy Wolverton

Has Bed Bath & Beyond's (BBBY:Nasdaq - news - commentary - research - analysis) decade-long run of 25% annual earnings growth finally caught up with it?

That's what investors are trying to figure out -- and they're increasingly answering yes. Shares in the household goods retailer have sold off in recent weeks amid concerns the company has run out of places where it makes sense to launch new stores.

Every retail company hits an "inflection point," where its growth starts to slow and investors start focusing more on how its existing stores are performing than on how many stores it's opening, said Gary Farber, a partner with hedge fund Nightingale & Farber. Bed Bath & Beyond is starting to hit that point, he said.

"It's the law of large numbers. The growth is going to slow," said Farber. "You can make a valuation story, but that's not a great reason not to own it unless there's something else there."

This kind of concern is something new for Bed Bath & Beyond, which has been something of an investors' darling. The company has been one of the few fast-growing retailers, posting per-share earnings gains of greater than 25% in each of the past 10 years. The stock, meanwhile, is up more than 200% over the last five years.

But recent events have led to questions from investors and analysts. Although the company's annual earnings growth jumped from 25% in fiscal 2002 to 35% in fiscal 2003, its growth in square footage and store openings slowed. The company ended its fiscal year in March operating 490 stores comprising 17.2 million square feet of space, up 23.7% and 17.2%, respectively, from the previous year.

Those were healthy numbers, to be sure. But the company's square footage grew at its slowest pace in 11 years. And Bed Bath & Beyond's store count increased at the slowest percentage rate since 1994, when the company ended its fiscal year with just 45 stores.
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