Market Gift From Bed Bath and Beyond

As Posted to the Wall Street Journal

Home-furnishings retailer Bed Bath & Beyond reports fiscal second-quarter earnings on Wednesday, and Wall Street is hoping for another upside surprise as evidence that some sellers of home goods can stop hiding under the covers.

Executives at the Union, N.J.-based Bed Bath said in June that analyst estimates for earnings of 42 cents a share for the quarter ended Aug. 29 appeared "reasonable, despite uncertainty of the overall macroeconomic environment." Analysts now expect the company to post 46 cents a share, which would be even with its results a year ago.

Since Bed Bath's main competitor, Linens 'N Things, bit the dust in January, investors have gotten used to the company beating its own estimates, as well as those from Wall Street. Last quarter, it posted earnings of 34 cents a share, above its guidance of 23 cents a share and ahead of analysts' consensus of 25 cents a share.

Bed Bath achieved that result the new-fashioned way -- impressive expense control. It lowered its advertising and staffing costs, despite net new store openings, and saw revenue growth of almost 3%.

As for sales at stores open at least a year, with consumers worried about job losses and home-foreclosure rates still high, no one is expecting Bed Bath to notch a big uptick. The company said it expects same-store sales to continue to decline in the low single digits.

Anything better could be good news. Last week, Pier 1 Imports saw its stock rise more than 9% when it posted a smaller profit loss than was predicted due, in part, to fewer markdowns.

But market watchers looking for signs of broad consumer demand shouldn't make too much of any successes at Bed Bath, given continued housing headwinds.

Its strength has been in gaining market share in the downturn. That has helped send its shares up 55% this year, nearly three times higher than the broader market.

Last quarter, as total sales rose at Bed Bath, they dropped 13% for the home-furnishings sector. If Bed Bath can continue to show that it is grabbing market share, investors may remain impressed.