Investors sent Bed Bath & Beyond (NASDAQ:BBBY) shares on a roller coaster ride in 2019 due to pessimism around a sharp sales decline coupled with rising confidence in management's turnaround plan. The stock had been down as much as 30% at one point in the year but rallied to a yearly gain of over 50% in the final weeks of 2019.

That rally raises the stakes for the retailer when it announces its quarterly earnings on Jan. 8. Let's look at a few metrics that might determine whether Bed Bath & Beyond's rally continues into 2020.

A woman standing on an escalator in a mall.

Image source: Getty Images.

Fixing those growth trends

The chain's previous earnings report contained plenty of bad news on the growth front. The company said in early October that sales fell 7% in the quarter, with traffic falling both in stores and in its online selling channel. Those results translate into continued market share losses across its home goods selling categories.

Management is aiming to stabilize sales over the next few quarters, with declines ideally moderating over the holiday shopping period. Investors will know whether that plan is on track by watching the chain's traffic trends and following its outlook updates. As it stands today, Bed Bath & Beyond is predicting that full-year sales will land at about $11.4 billion thanks to slightly improving growth trends over the second half of the fiscal year. That prediction could change this week, though, depending on how customers responded to its latest merchandising plan. The company is reporting on its fiscal third quarter, which does not include the full holiday shopping season.

Financial wins

Bed Bath & Beyond's finances have been a bright spot in recent quarters. Sure, the company took a large inventory writedown charge ($194 million) heading into the holiday season. Yet its gross profit margin inched higher in the fiscal second quarter as the retailer scaled back on promotions and cut many of its low-margin products. Those successes have raised expectations for potentially healthy earnings results for the year even as the company behind the consumer stock deals with major pressures such as tariff charges and a declining sales base.

If Bed Bath & Beyond can navigate through these issues and defend its operating profit margin, it could win some solid momentum for the last few months of its fiscal year.

Management comments

Comments from CEO Mark Tritton on the rebound strategy will likely play a big role in how investors respond to this week's earnings report. The former Target executive has taken an aggressive approach since taking over in November, one that has resulted in the departure of six senior members of the management team.

The good news is that the moves have convinced investors that Bed Bath & Beyond is taking a completely new direction, with everything from real estate moves to major brand divestments on the table. The big question now is whether the company can make progress while stabilizing the business.

The stock price rally to date reflects the hope that Tritton and his new executive team will turn things around. Now comes the hard part, when investors will demand evidence that Bed Bath & Beyond is executing on its aggressively optimistic goals.