Bed Bath and Beyond Financial Ratios
FinTech Consulting
Bed Bath and Beyond
Growth & sustainability evaluation
Denise Hamilton, Joel Raha , Naveen Mamidyala, Puneet Pagi , Rory Murphy,
Table of Contents
Executive Summary 3
Market & Competition 3
Bed, Bath & Beyond Strategies 4
Business Strategy 4
Operating Strategy 4
Expansion Strategy 5
Are these strategies working? 6
Comparison with competition 6
Year-On-Year (YoY) same-store sales 6
Sales per Square Foot 6
Sliding ROE (Explanation using Dupont Analysis) 6
Performance ratios: How has BBBY fared over time? 8
Conclusions 9
Appendix 11
Performance Ratios since 1990 11
Executive Summary
Founded in 1971, Bed Bath & Beyond (BBBY) was a small chain of stores; they sold bed linens and bath accessories in New York and New Jersey. After 14 years of sluggish performance, the company saw an opportunity for gaining competitive advantage by moving away from small specialty-store format to a superstore format. The superstore format allowed BBBY to do what other home retailers at the time could not do: offer a depth and breadth of domestic merchandise and home furnishings at everyday low prices. The success of the superstore format allowed BBBY to issue its IPO in June 1992. Since then, BBBY has continued to grow by opening new stores, expanding existing stores and adding additional square feet of retail space. Their growth had a positive impact on sales & net profit & their stock price has sky rocketed & increased by over 350%. However a troubling reality is that over the past 4 years BBBY’s sustainable growth rate has been declining. BBBY is at an inflection point where the sustainable growth rate is not aligned with the growth strategy. It is our recommendation that BBBY improves their sustainable growth rate by increasing leverage in the near term while continuing to improve their asset turn ratio in the mid and long term.
Market & Competition
The home furnishing industry can be roughly categorized into two segments: $15 billion for home textiles &
Bed Bath and Beyond
Growth & sustainability evaluation
Denise Hamilton, Joel Raha , Naveen Mamidyala, Puneet Pagi , Rory Murphy,
Table of Contents
Executive Summary 3
Market & Competition 3
Bed, Bath & Beyond Strategies 4
Business Strategy 4
Operating Strategy 4
Expansion Strategy 5
Are these strategies working? 6
Comparison with competition 6
Year-On-Year (YoY) same-store sales 6
Sales per Square Foot 6
Sliding ROE (Explanation using Dupont Analysis) 6
Performance ratios: How has BBBY fared over time? 8
Conclusions 9
Appendix 11
Performance Ratios since 1990 11
Executive Summary
Founded in 1971, Bed Bath & Beyond (BBBY) was a small chain of stores; they sold bed linens and bath accessories in New York and New Jersey. After 14 years of sluggish performance, the company saw an opportunity for gaining competitive advantage by moving away from small specialty-store format to a superstore format. The superstore format allowed BBBY to do what other home retailers at the time could not do: offer a depth and breadth of domestic merchandise and home furnishings at everyday low prices. The success of the superstore format allowed BBBY to issue its IPO in June 1992. Since then, BBBY has continued to grow by opening new stores, expanding existing stores and adding additional square feet of retail space. Their growth had a positive impact on sales & net profit & their stock price has sky rocketed & increased by over 350%. However a troubling reality is that over the past 4 years BBBY’s sustainable growth rate has been declining. BBBY is at an inflection point where the sustainable growth rate is not aligned with the growth strategy. It is our recommendation that BBBY improves their sustainable growth rate by increasing leverage in the near term while continuing to improve their asset turn ratio in the mid and long term.
Market & Competition
The home furnishing industry can be roughly categorized into two segments: $15 billion for home textiles &