Bed Bath & Beyond Inc. (NASDAQ:BBBY)

Net Operating Profit After Taxes (NOPAT)

The company experienced a significant decline in NOPAT from US$935,216 thousand in 2017 to a negative value of US$-522,990 thousand in 2020, indicating deteriorating operating performance during this period. There was a slight recovery in 2021 with a positive NOPAT of US$98,133 thousand, followed by another decline to US$-301,295 thousand in 2022. Overall, the trend shows substantial volatility and sustained losses after 2017.

Cost of Capital

The cost of capital showed variability over the years, starting at a high of 13.85% in 2017, dropping to a low of 7.56% in 2020, and then increasing again to 12.17% in 2021 before slightly decreasing to 9.34% in 2022. This fluctuation could reflect changes in market conditions, risk perceptions, or capital structure adjustments.

Invested Capital

Invested capital consistently decreased over the review period, dropping from US$6,680,896 thousand in 2017 to US$3,288,320 thousand in 2022. This represents a nearly 50% reduction, indicating significant divestments, asset sales, or operational downsizing, which may be associated with efforts to restructure or streamline the business.

Economic Profit

Economic profit was positive but modest in 2017 and 2018, with values of US$9,914 thousand and US$96,411 thousand respectively. Starting from 2019, economic profit turned deeply negative and deteriorated further, reaching US$-908,064 thousand in 2020. Despite some improvement in 2021, it remained negative at US$-420,326 thousand and worsened again to US$-608,310 thousand in 2022. This persistent negative economic profit suggests that the company’s returns did not cover its cost of capital, resulting in value destruction over multiple years.

Net Earnings (Loss)

The net earnings demonstrate a declining trend over the observed periods. The company reported positive earnings in 2017 and 2018, with figures of approximately $685 million and $425 million respectively. However, from 2019 onwards, the net earnings turned negative, with losses deepening each year. The largest loss was recorded in 2020 at around $614 million, followed by losses of approximately $151 million in 2021 and $560 million in 2022. This pattern indicates a significant deterioration in profitability beginning in 2019.

Net Operating Profit After Taxes (NOPAT)

The NOPAT values show a similar trajectory to net earnings. Positive and relatively strong NOPAT were recorded in 2017 and 2018, amounting to approximately $935 million and $735 million respectively. In 2019, NOPAT dropped sharply to a negative value of about $83 million, continuing the downward trend into 2020 with a significant loss of roughly $523 million. An improvement was noted in 2021 when NOPAT turned positive again at approximately $98 million, but this was not sustained, as 2022 saw a return to negative territory with a loss nearing $301 million. These fluctuations highlight instability in operational profitability and challenges in maintaining post-tax operating profits.

The analysis of the financial data reveals several notable trends in the provision for income taxes and cash operating taxes over the examined periods.

Provision (benefit) for income taxes

The provision for income taxes demonstrates significant fluctuations and a downward trend from 2017 through 2021, followed by an upward reversal in 2022. Initially, there was a substantial provision of $380,547 thousand in 2017, which decreased to $270,802 thousand in 2018. In the subsequent years, this provision shifted into negative territory, reflecting income tax benefits rather than expenses, with -$19,385 thousand in 2019, further deepening to -$185,989 thousand in 2021. However, in 2022, there was a sudden reversal with the provision increasing to a positive figure of $86,967 thousand. This shift indicates considerable volatility in the company's tax-related expenses and potential fluctuations in profitability or tax strategies.

Cash operating taxes

Cash operating taxes exhibit a pronounced downward trajectory with considerable variability. Beginning at $355,672 thousand in 2017, cash taxes paid plummeted to $161,195 thousand in 2018 and further declined to $126,720 thousand in 2019. The downward movement continues sharply in 2020 and 2021, reaching negative values of -$294,013 thousand and -$3,389 thousand, respectively. The negative values during these recent years suggest significant tax refunds or reductions, possibly related to tax credits, loss carrybacks, or adjustments in cash tax payments. The sharp decline and negative amounts indicate irregular tax cash flows, which could reflect tax planning measures or operational challenges affecting taxable income.

Overall, both income tax provisions and cash operating taxes indicate a period of decreasing tax expenses followed by irregularities and eventual volatility in recent years. These patterns might be linked to changes in profitability, tax laws, or strategic financial management, warranting further detailed investigation into underlying causes and potential impacts on the company's financial position.

Total reported debt & leases

The total reported debt and leases exhibit a general downward trend over the analyzed period. Beginning at approximately $4.2 billion in early 2017, the figure decreases gradually to about $3.8 billion by early 2019. There is a slight uptick in early 2020 to around $3.9 billion, followed by a more pronounced decline to just over $3 billion by early 2021, after which it stabilizes near $3.07 billion in early 2022. This trend indicates a significant reduction in the company's indebtedness and lease obligations over the six-year span.

Shareholders’ equity

Shareholders’ equity shows a marked downward trajectory throughout the period. Starting at approximately $2.7 billion in early 2017, it experiences moderate fluctuations but declines substantially after 2019. The equity falls sharply from about $2.56 billion in 2019 to roughly $1.76 billion in early 2020, followed by a further decline to approximately $1.28 billion in early 2021. By early 2022, equity dwindles considerably to about $174 million. This significant erosion suggests ongoing losses or other factors negatively impacting retained earnings and overall net asset value.

Invested capital

Invested capital declines steadily over the analyzed period, beginning at roughly $6.7 billion in early 2017 and decreasing consistently year-over-year. By early 2020, invested capital stands near $5.1 billion, continuing to diminish to approximately $4.3 billion in early 2021, and further down to nearly $3.3 billion in early 2022. This consistent reduction reflects a contraction in the company’s total capital employed, which aligns with decreases in both shareholders’ equity and debt levels.

Economic Profit

Economic profit demonstrated a significant fluctuation over the analyzed period. In the initial two years, the metric showed a positive trend, rising from 9,914 thousand US$ in 2017 to a peak of 96,411 thousand US$ in 2018. However, starting from 2019, economic profit turned negative, with a sharp decline to -664,688 thousand US$ and further depreciations continuing into 2020, 2021, and 2022, reaching -908,064, -420,326, and -608,310 thousand US$ respectively. This indicates a shift from generating value above the cost of capital to persistent value destruction from 2019 onward.

Invested Capital

Invested capital displayed a consistent downward trend throughout the period. The value decreased steadily from 6,680,896 thousand US$ in 2017 to 3,288,320 thousand US$ in 2022. This continuous reduction suggests asset divestitures, capital asset impairments, or strategic downsizing, aligning with the decrease in economic profit and potentially reflecting a restructuring or retrenchment strategy.

Economic Spread Ratio

The economic spread ratio mirrored the trends observed in economic profit, reflecting profitability relative to invested capital. Initially positive at 0.15% in 2017 and increasing to 1.47% in 2018, it sharply declined from 2019 onwards to negative levels. Specifically, the ratio plunged to -11.48% in 2019 and worsened to -17.82% by 2020. Although there was a slight recovery in 2021 to -9.86%, the ratio deteriorated again in 2022 to -18.5%. These negative percentages confirm the erosion of returns below the cost of capital during the latter part of the period analyzed.

Overall Analysis

The combined data indicates a company undergoing significant challenges starting in 2019, with profitability collapsing and economic value being destroyed. The sharp decline in both economic profit and economic spread ratio, alongside a steady contraction in invested capital, suggests a period of financial distress or strategic repositioning. The partial rebound in economic spread in 2021 was not sustained, indicating persistent operational or market difficulties. The trends collectively signal the need for strategic assessment and operational improvements to restore value generation.

Economic Profit

The economic profit demonstrated a significant fluctuation over the analyzed periods. Starting with a positive value of 9,914 thousand USD in 2017, it surged to a peak of 96,411 thousand USD in 2018. However, from 2019 onward, the economic profit turned negative and exhibited a declining trend, reaching -664,688 thousand USD in 2019, further deteriorating to -908,064 thousand USD in 2020. Although there was a moderate recovery in 2021 when the loss narrowed to -420,326 thousand USD, the figure worsened again in 2022, settling at -608,310 thousand USD. This pattern indicates an initial period of profitability followed by sustained and substantial economic losses.

Net Sales

Net sales revealed a downward trajectory throughout the reporting periods. The sales peaked at 12,349,301 thousand USD in 2018, close to the initial level of 12,215,757 thousand USD in 2017. Beginning in 2019, net sales started to decline steadily each year, falling to 12,028,797 thousand USD in 2019, then sharply dropping to 11,158,580 thousand USD in 2020. This decline accelerated in subsequent years, with sales diminishing to 9,233,028 thousand USD in 2021, and further decreasing to 7,867,778 thousand USD in 2022. The trend indicates a consistent loss of revenue over time, which may reflect deteriorating market conditions or competitive challenges.

Economic Profit Margin

The economic profit margin closely mirrored the trend of economic profit, displaying a promising margin of 0.08% in 2017 and a marked improvement to 0.78% in 2018. From 2019 onwards, the margin turned negative, showing a value of -5.53% in 2019 and worsening further to -8.14% in 2020. Although there was some improvement in 2021 with a margin of -4.55%, the margin declined again in 2022 to -7.73%. This negative margin over the later years indicates the company was operating at a loss relative to invested capital, which is consistent with the negative economic profit figures for the same periods.