Bed Bath & Beyond Inc. (NASDAQ:BBBY)

The financial data reveals several notable trends regarding the company's profitability, cost of capital, invested capital, and economic profit over the examined periods.

Net Operating Profit After Taxes (NOPAT)

The NOPAT initially showed a robust value of approximately $935 million in early 2017 but experienced a downward trend through 2018 and into 2019, turning negative by 2019 at around -$83 million. This negative trend worsened in 2020, with a further decline to nearly -$523 million. A slight recovery appears in 2021, with NOPAT moving back into positive territory at about $98 million; however, the company reverted to negative performance in 2022, ending the period at approximately -$301 million. Overall, these fluctuations suggest significant volatility and challenges in sustaining operating profitability.

Cost of Capital

The cost of capital fluctuated over the years, starting at 14.09% in 2017, then dropping to 9.9% in 2018. A modest increase to around 10.2% occurred in 2019, followed by a decline to 7.64% in 2020. There was an increase back up to 12.37% in 2021, before a reduction to 9.47% in 2022. These variations indicate changes in the perceived risk and capital market conditions affecting the company, with a peak cost in 2017 and 2021 and lower costs in the middle years, particularly in 2020.

Invested Capital

The amount of invested capital shows a clear and steady decline throughout the period, starting from about $6.68 billion in 2017 and decreasing consistently each year to reach approximately $3.29 billion by 2022. This sustained reduction may suggest the company is either divesting assets, optimizing its capital structure, or experiencing shrinkage in operational scale.

Economic Profit

The economic profit follows a pattern consistent with the trends in NOPAT and invested capital but remains predominantly negative over time. Though it showed a positive figure in 2018 at around $86 million, it was negative before and after that year, with significant losses reported in 2019 (-$673 million), 2020 (-$912 million), 2021 (-$429 million), and 2022 (-$613 million). This consistent negative economic profit suggests that the company struggled to generate returns exceeding its cost of capital during most years, indicating potential value destruction.

In summary, the company experienced declining operating profits with considerable volatility, a generally decreasing invested capital base, fluctuating cost of capital, and persistent negative economic profits except for a brief improvement in 2018. These patterns highlight ongoing challenges in achieving sustainable profitability and value creation over the analyzed period.

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.

The analysis of the financial metrics over the observed periods reveals significant volatility and a downward trajectory in key performance indicators.

Economic Profit

Economic profit showed considerable fluctuations, starting with a negative figure in early 2017, indicating a loss of 6,028 thousand US dollars. It improved sharply by early 2018, achieving a positive economic profit of 86,131 thousand US dollars. However, from 2019 onwards, the economic profit declined markedly, producing substantial losses each year through to 2022, with the lowest point recorded in 2020 at -912,112 thousand US dollars. Despite a slight improvement in 2021, the economic profit deteriorated again in 2022.

Invested Capital

Invested capital exhibited a consistent declining trend across the analyzed periods, decreasing from 6,680,896 thousand US dollars in 2017 to 3,288,320 thousand US dollars in 2022. This reduction suggests a strategic contraction or asset divestiture over the years, reflecting a continuous scaling down of resources invested in the business.

Economic Spread Ratio

The economic spread ratio, which reflects the difference between return on invested capital and cost of capital, showed an initial improvement from -0.09% in 2017 to a positive 1.31% in 2018. Subsequently, it sharply declined each year, reaching a negative spread of -18.63% by 2022. This trend indicates a progressively diminishing return relative to the cost of capital, highlighting growing inefficiencies or challenges in generating value over the capital invested.

Overall, the company's financial performance depicts a brief period of positive economic profit and spread followed by several years of deteriorating profitability and efficiency, accompanied by a continuous reduction in invested capital. This suggests increasing operational and financial challenges during the recent years under review.

Net Sales

Net sales demonstrated a declining trend over the reported periods. Starting at approximately 12.2 billion US dollars, there was a slight increase in the second period followed by a consistent decrease. By the last period, net sales had dropped to approximately 7.9 billion US dollars, indicating a significant contraction in revenue over the six-year span.

Economic Profit

Economic profit exhibited considerable volatility throughout the periods. It shifted from a negative position initially to a positive peak in the early years, then sharply declined into negative territory again, reaching substantial losses in subsequent years. The fluctuations and persistent negative values in the later periods indicate ongoing challenges in generating profit beyond the cost of capital.

Economic Profit Margin

The economic profit margin mirrored the pattern of economic profit, showing a considerable decrease over time. It briefly rose to a positive margin early on but subsequently deteriorated and remained negative, reaching near negative eight percent in the most recent data. This declining margin reflects decreasing efficiency in generating economic value from net sales.

Overall Trends and Insights

The company experienced a steady decline in sales alongside worsening economic profitability after an initial period of positive economic profit. The negative economic profit margins in the later years underscore difficulties in maintaining profitability relative to the cost of capital. The trend suggests operational or market challenges affecting sustainable financial performance and value creation during the observed timeframe.