• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Operating strategy: Current Strategies and Future Implications o The functional layout of the Bed Bath & Beyond stores allows for convenient navigation through the 11 specialty stores within each superstore. The racetrack layout showcas

Extracts from this document...

Introduction

Executive Summary Strategic Analysis: * Business strategy: Bed Bath & Beyond's boutique superstore strategy of offering an extensive product line and superior customer service translates into a customer-friendly shopping experience at a store with a variety of quality products at reasonable prices. o This is an effective strategy because customers can get everything in one place, while private label merchandise allows them to get a discount instead of having to pay a premium for the convenience. o Also, although the size of the BBBY stores could easily create an impersonal environment, the company is making a conscious effort to design their stores and policies around the needs of the customer. o Currently, BBBY has built a higher margin business and they need to be careful that in their future growth they do not sacrifice these margins to price wars. * Operating strategy: Current Strategies and Future Implications o The functional layout of the Bed Bath & Beyond stores allows for convenient navigation through the 11 "specialty stores" within each superstore. The "racetrack" layout showcases the merchandise and makes locating a particular product easier. o Local responsiveness is one of BBBY's strengths. This strength comes in part from the policy of allowing local managers to determine the appropriate product mix to best fit the local market tastes. ...read more.

Middle

o BBBY ROE is 33.18% and the closest competitor, JC Penney has an ROE of 18.75% * "Off Balance Sheet" Financing Impact o (See attached spreadsheet for adjusted income statement and balance sheet after capital lease liabilities and interest payments) * Growth Strategy: o Yes, BBBY's growth strategy is sustainable, at least for the foreseeable future o BBBY has a net working capital of $54 million, enough to cover the expenditures to open new stores, at $3 million per store o Credit facility of $20 million gives BBBY an additional way (through debt) to finance expansion/growth * Statement of Cash Flows Assessment: o Increasing Net Earnings from 1992 to 1994 o In 1992 and 1994 CFO does not cover CapEx, however this is not necessarily negative, because it is an investment in the future growth of the company. o There is a net increase in cash in 1992 and 1993 but a net decrease in cash in 1994 * Sources and Uses of Cash: o Sources: Accounts payable, Proceeds from IPO, and Proceeds from revolving credit facility; in 1994 Accrued expenses is also a major source o Uses: Merchandise inventories, Deferred income taxes, Repayment of revolving credit facility; in 1994 Income taxes payable and Prepaid expenses are also major uses Company Forecast: * Drivers of future earnings include: o Same-store sales growth o ...read more.

Conclusion

As you can see below, even though sales is growing at a 30% + clip it is still managing to outpace BBBY's COS and sustaining their healthy Gross Profit Margin of 40%. In the graph above we can see that BBBY's sales per sq. ft. remains stead y in the face of massive square footage increases. In addition to that same store sales grew at an amazing 10.6% this year. BBBY has announced plans to grow their stores by 30% a year for the next three years. With $35 million currently in Retained Earnings and a credit line of $20 million available to them, they have adequate capital to carry out these plans. Given that BBBY's store growth has a 97% correlation to growth in the Net Earnings we are confident that these store openings will have a positive effect on BBBY's financials. There is one issue to watch however. As is the case with most retail growth stories there is the possibility that keeping up this incredible pace could affect BBBY's margins. Keep an eye out to make sure that BBBY isn't growing sales by increasing advertising expenses, adding middle management, or engaging in price wars with competitors. We feel secure in saying that the BBBY model is less suseptable to pitfalls such as these given their model and past history of mainting costs while growing. - 4 - ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our University Degree Finance section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related University Degree Finance essays

  1. Valuation Report for SingTel. SingTel was incorporated in 1992 and it was listed ...

    c. Executive Resource and Compensation Committee (ERCC) The main responsibilities of the ERCC are to approve the Group's policies on executive remuneration, and to administer and review any long term incentive schemes of SingTel. d. Corporate Governance and Nominations Committee The main functions of the Corporate Governance and Nominations Committee are outlined in the commentaries on 'Board

  2. The Balanced Scorecard - Managing Business Strategy.

    by Robert Kaplan, an accounting professor at Harvard University, and David Norton, a consultant from the Boston area. In 1992 they first introduced the Balanced Scorecard concept as a result of growing concern regarding traditional performance measures and advanced to measure organization performance from not only financial perspective but also customer, internal and organizational perspectives.

  1. Lourdesville Nursing Home

    Fire drills are carried out on a regular basis and smoke detectors, fire doors and emergency exits are throughout the Nursing Home. Smoking is allowed in restricted and areas under supervision only. 4.5 Personnel The personnel staff will be composed of 28 people as described as follows: 5 Nurses These

  2. With the gradual growth of world trade, the opening and expansion of markets, and ...

    an action viewed upon by the general population or its government as being counterproductive to the overall benefit of society. Naturally, this term might take on a varying meaning in varying geographical, legal or cultural settings. However, we ask the reader to have in mind in which contexts the term is used.

  1. Executive Summary

    Merrill Lynch - The Early Years 1914-1929 Historical Overview In the early 20th century productivity shocks and emerging markets worldwide created unparalleled growth of the US economy. Amidst this great prosperity, the American public embarked on a fascination with the ever-booming stock market.

  2. Cournot and Bertrand competitors are behaving identically when the number of Cournot competitors increases" ...

    So each firm treats price of the rival as given, and then aggressively sets price, just under rival's price (pi-?-MC), to steal market share from the rival. As it can be seen because duopolistics' products are perfect substitutes whichever firm sets the lowest price it gets all the demand.

  1. Google IPO.

    The bidder is expected to: * Read the prospectus and all the risk factors described in the prospectus. * Understand the risk factors inherent in the auction process for the IPO, and, in particular, the possibility that the stock price may decline significantly below the IPO price.

  2. "The Causes of Contagion, in Crisis Times, and Policy Implications For Market Regulation."

    countries, curtail their lending, or refuse to roll over short-term loans to borrowers in those countries. This proposition gains some credence from the fact that during the East Asian crisis in 1997, exchange rates depreciated substantially even in economies such as Singapore and Taiwan, China, which did not naturally appear

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work