Earnings Preview: Bed Bath & Beyond

Bed Bath & Beyond Inc. reports earnings for its fiscal first quarter on Wednesday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Home furnishing retailers have been hit hard in recent quarters by the slumping housing market, tightening credit and a decline in consumer discretionary spending.

One victim of the downturn is Bed Bath & Beyond's major rival, Linens 'n Things, which filed to reorganize under Chapter 11 bankruptcy protection last month. The company is closing 120 underperforming stores, almost a quarter of them in California.

Last month, Bed Bath & Beyond said it formed a joint venture with Mexican home products retailer Home & More SA de CV. The company paid $4 million for a 50 percent stake in a new company operating two stores in Mexico City under the name "Home & More."

BY THE NUMBERS: Analysts polled by Thomson Financial expect a profit of 27 cents per share on revenue of $1.62 billion. The company has projected earnings of 26 cents to 30 cents per share.

ANALYST TAKE: Goldman Sachs analyst Matthew J. Fassler noted that recent sales and earnings shortfalls by Williams Sonoma Inc. and Pier 1 Imports Inc. point to the likelihood of same-store sales pressure at Bed, Bath & Beyond.

Fassler, who maintained the stock's "Neutral" rating, expects a 2 percent first-quarter same-store sales decline and earnings of 26 cents per share.

SunTrust Robinson Humphrey analyst David Magee also expects the company to report earnings per share of 26 cents, the low end of Bed, Bath & Beyond's guidance range.

Magee said he expects near-term pressure on the company from Linens' going-out-of-business sales, which is probably driving some traffic into rival stores.

WHAT'S AHEAD: Analysts will continue to watch Linens' bankruptcy progress carefully. After the initial going-out-of-business sales, both Magee and Fassler expect Linens' store closings to benefit Bed, Bath & Beyond by reducing competition.

Magee said he expects Bed, Bath & Beyond to be well positioned when the economic environment begins to improve.

STOCK PERFORMANCE: Shares gained about 10 percent during the fiscal first-quarter, which started on March 2. The stock has since fallen about 12 percent to close at $28.09 on Monday.