Bed Bath & Beyond Inc. (NASDAQ:BBBY)

Net Operating Profit After Taxes (NOPAT)

The company's NOPAT exhibited significant volatility over the analyzed periods. Initially, there was a strong positive performance in 2017 and 2018, with values of approximately 935 million and 735 million respectively. However, from 2019 onward, NOPAT turned negative, reflecting operational challenges, with the largest loss seen in 2020 at around -523 million. A modest recovery was observed in 2021, reaching a positive figure of about 98 million, but this was followed by another decline in 2022, falling back to -301 million. This pattern indicates instability in profitability and possible issues affecting operational efficiency or market conditions.

Cost of Capital

The cost of capital fluctuated during the period. It started relatively high in 2017 at 14.04%, then decreased to a low of 7.62% in 2020. Subsequently, it rose again, reaching 12.33% in 2021 before slightly dropping to 9.44% in 2022. These changes suggest variable market or company-specific risk perceptions, and shifts in financing conditions which likely affected the investment outlook and required return.

Invested Capital

Invested capital displayed a consistent downward trend throughout the timeline, decreasing from about 6.68 billion in 2017 to approximately 3.29 billion in 2022. This steady reduction may reflect asset sales, divestitures, or a strategic downsizing of operations. The decline in invested capital, alongside fluctuating profitability, could imply an effort to streamline the business or to adapt to challenging financial circumstances.

Economic Profit

Economic profit mirrored the patterns seen in NOPAT but remained negative for most of the periods except for a positive result of 88 million in 2018. The company experienced large negative economic profits from 2019 onwards, with the worst performance occurring in 2020 (-911 million). Although there was some improvement in 2021, the figure again worsened in 2022, indicating that the company consistently failed to generate returns exceeding its cost of capital in recent years. This sustained negative economic profit highlights continued value destruction and financial stress.

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

The economic profit exhibits significant volatility over the periods analyzed. Initially, in early 2017, the company recorded a slight negative economic profit of approximately -2.7 million US dollars. By 2018, there was a notable positive turnaround to about 88.3 million US dollars. However, from 2019 onward, economic profit sharply declined into substantial negative territory, reaching -671.7 million in 2019, further decreasing to -911.3 million in 2020, followed by somewhat less negative values in 2021 and 2022, but still remaining considerably below zero. This indicates persistent economic losses after 2018, with the peak loss occurring in 2020.

Invested Capital

Invested capital demonstrates a consistent downward trend over the six-year timeframe. Starting at approximately 6.68 billion US dollars in early 2017, the invested capital decreases steadily each year, reaching about 3.29 billion US dollars by 2022. This decline suggests substantial divestments or asset reductions, which may relate to strategic repositioning, capital restructuring, or operational contractions.

Economic Spread Ratio

The economic spread ratio mirrors the pattern observed in economic profits with notable fluctuations. Initially slightly negative at -0.04% in 2017, it improved to a positive 1.35% in 2018. From 2019, the ratio rapidly deteriorated, indicating negative returns on capital far below cost of capital, with a sharp decrease to -11.6%, further dropping to -17.89% in 2020. Although minor improvements occurred in 2021 (at -10.03%), the ratio declined again to -18.6% in 2022. The persistent negative spread ratio after 2018 underscores ongoing challenges in generating returns above capital costs.

Overall Insights

The data suggest that after a brief recovery in 2018, the company faced escalating economic losses and deteriorating return metrics over succeeding years. The continuous reduction in invested capital could reflect efforts to mitigate losses or adjust the business scale. Nevertheless, the sustained negative economic spread ratios indicate that investment returns have been consistently underperforming relative to capital costs, highlighting operational and financial difficulties during this period.

Net Sales

There is a clear downward trend in net sales over the analyzed period. Starting at approximately 12.2 billion US dollars in early 2017, sales slightly increased to around 12.3 billion in early 2018 but then steadily declined each year, reaching about 7.9 billion by early 2022. This reflects a substantial decrease in revenue capacity by approximately 35.9% from the peak in 2018 to 2022.

Economic Profit

The economic profit exhibits significant volatility and overall negative performance throughout the periods. Initially, there was a small loss of approximately 2.7 million US dollars in early 2017, followed by a notable positive turnaround to around 88.3 million US dollars profit in early 2018. However, this positive result was short-lived, as subsequent years saw a sharp deterioration in economic profit, registering increasing losses that peaked at over 911 million US dollars in early 2020. Though the losses decreased somewhat after that peak, they remained substantial, with losses of around 611.7 million US dollars in early 2022.

Economic Profit Margin

The economic profit margin mirrors the trends observed in economic profit relative to net sales. The margin improved from a negative 0.02% in 2017 to a positive 0.71% in 2018, indicating a brief period of profitability. Subsequently, it dropped dramatically to negative 5.58% in 2019 and further declined to a low of negative 8.17% in 2020. Although there was some improvement in the margin to -4.63% in 2021, it worsened again to -7.77% by early 2022, signalling ongoing challenges in generating value beyond costs and capital expenses.

Overall Insights

The data indicates that the company faced increasing financial difficulties starting from 2019, with sharp declines in both revenue and economic profitability. Despite a brief positive period in 2018, the economic profit and margins worsened substantially and remained negative. The persistent negative economic profit margins suggest that the company's operational and capital costs have exceeded the returns generated, impacting overall financial sustainability. The declining net sales further compound these challenges, highlighting the need for strategic measures to stabilize revenue and improve operational efficiency.