Analysis Of Warren Eisenberg And Leonard Feinstein Founded Bed Bath & Beyond ( Bbby )

Climbing from $146.9 million in 2007 to $528.8 million in 2013, the net cash provided by operating activities has almost tripled and reached a CAGR of 23.79%.

Company does not have big amount of debt to pay. In 1994 its outstanding debt is only 36.4% of its total assets which is a healthy rate. Its current assets are higher 2.4 times than its current liability. Also company has no outstanding interest to pay. Price earning ratio of 42.80 is highest among the competitors. (Pls. see exhibit 2, 3&4) for details. So we can safely conclude that BBBY has great potential to sustain.

The main source of cash is A/R. In 1991 the company also gathered $23M issuing stock.

The company's Babbage's Etc. subsidiary (renamed GameStop, Inc.) acquired video game retailer Funco for $161.5 million in 2000. In 2001 Barnes & Noble joined barnesandnoble.com in acquiring a majority stake in magazine subscription seller enews.com.

Bixton Company’s new chief financial officer is evaluating Biston’s capital structure. She is concerned that the firm might be underleveraged, even though the firm has larger-than-average research and development and foreign tax credits when compared to other firms in its industry. Her staff prepared the industry comparison shown here.

By paying out excess cash and issuing debt, BBBY could improve return to equity holders and raise earnings per share (by a share repurchase).

* Taking on debt gives the company the ability to use cash for projects and short term investments.

The purpose of this paper is to discuss Case #6 in the student text regarding The Grand General Store.

BBBY has too much cash even though it has used the cash for store growth and small acquisition. They should be focusing on using their cash to increase shareholder value.

1971 to over 800 stores located in 46 states and Puerto Rico. This industry is

Bed, Bath and Beyond (BBBY) currently has $400 million more in cash than they need for ongoing growth and operations requirements. While the company is financially sound analysts and investors worry about the company’s capital structure decisions. Investors do not want to see that much cash on the books and worry that the current capital structure is not the most effective for the future. They prefer that BBBY change their capital structure by paying out excess cash and issuing debt. This could allow BBBY to improve their return on equity and raise earnings per share. Given the low interest rates available it seems like the perfect time for BBBY to add debt to its capital structure. Until now they

An analysis of a repurchase of stock for $400 million cash, and recapitalization to 80% debt-to-total capital by borrowing $1.27 million reveals that BBBYs return on equity will be 113%, return on assets 61% and an after tax cost of debt of 28%. ROE is > ROA and ROA > after tax cost of debt. With the 80% debt-to-total capital structure ROE exceeds the other two capital structure scenarios of no debt and 40% debt-to-total capital. While all of this looks great there are other considerations. The household and personal products industries debt to total asset ratio is 34.69% while BBBY debt to total asset ratio is at 44% ($1,270,000/$2,865,023). Increasing to this capital structure would also reduce shareholders earnings per share.

By 1979 the company had seen rapid expansion and had a total of 26 stores. Further expansion ensued through a combination of mergers and acquisitions. In 1980 B&Q bought

5). Some of these superstores were 80,000 square feet and carried more than 300,000 different products stocked from floor to the ceiling. By 1991, they started opening new stores in more states, and two stores already in operation increased in size to match the trending superstore format. Sales and earnings for the founders increased unexpectedly and they invested the revenue right back into the organization. As the number of stores increased, Eisenberg and Feinstein were also strategically placing Bed Bath and Beyond stores in locations contrary to the norm in metropolitan areas.

The statement of cash flows outlines some of the changes to the capital structure. The company added $164.5 million in a consolidated loan facility, and it paid out $138.1 million in dividends. There were no share buybacks during the year. The company states in the annual report (p.4) that it intends to maintain a conservative gearing ratio. The company in this section attributes its increased borrowings to projects and opportunities on which it has embarked. These investments lie within the integrated retail, franchise and property system. One of the