Bed Bath & Beyond, Inc. Earnings: Will Growth Be Back?

On Wednesday, Bed Bath & Beyond (BBBY +0.00%) will release its quarterly report, and investors are nervous about just how bad the home-furnishings retailer's numbers could be. After a huge plunge back in January, Bed Bath & Beyond's stock has had trouble even as The Container Store (TCS +0.00%) and other competitors have managed to hold their own. With relatively low expectations for this quarter's results, shareholders want to know whether Bed Bath & Beyond can climb back and get onto positive footing again.

Bed Bath & Beyond performed extremely well in 2013, as the rebound in the housing market helped to drive sales for it and its peers throughout the industry. Yet as the economic recovery pushes into a sixth year, Bed Bath & Beyond faces concerns about whether the housing rebound can keep pushing revenue higher. Moreover, competition from The Container Store as well as rival home-furnishings specialists threatens to eat into Bed Bath & Beyond's dominance of the niche. Let's take an early look at what's been happening with Bed Bath & Beyond over the past quarter and what we're likely to see in its report.

Source: Wikimedia Commons, courtesy Coolcaesar.

Stats on Bed Bath & Beyond

Source: Yahoo! Finance.

Will Bed Bath & Beyond earnings bounce back?
Analysts have slashed their views on Bed Bath & Beyond earnings in recent months, reducing February-quarter estimates by 10% and cutting more than 6% from their fiscal 2015 projections. The stock has plunged as a result, falling 16% since early January.

Bed Bath & Beyond already gave investors a hint of what was to come when it announced its fiscal third-quarter results in January. The company saw same-store sales rise by only 1.3%, as greater competition ate into its organic growth and its gross margins fell. Overall, revenue rose 6%, and although earnings per share rose by nearly 9%, that gain was smaller than investors had expected. Even worse, Bed Bath & Beyond cut its guidance for the full fiscal year, suggesting that the key holiday quarter had gone worse than planned in comparison to The Container Store and other healthier competitors. Bed Bath & Beyond confirmed that sentiment in March, when it warned that adverse weather had reduced earnings by $0.06 to $0.07 per share and hurt comps by 2 to 2.5 percentage points. The company said that same-store sales likely rose about 1.7%, and its new range for earnings guidance fell below the previous range.

One key issue for Bed Bath & Beyond involves potential saturation of its consumer markets. The company owns not only its Bed Bath & Beyond stores but also several other chains, and combined, Bed Bath & Beyond hasn't aggressively increased the amount of store space across all of its concepts. Recent acquisitions have done a good job of keeping revenue and earnings up, but it's unclear whether further expansion will do Bed Bath & Beyond any good.

Meanwhile, Bed Bath & Beyond has had to fight the rise of online shopping, as its own e-commerce channel has fallen behind those of many of its peers. It's too easy for shoppers to look at physical items at Bed Bath & Beyond stores and then take advantage of discounted prices elsewhere, and that has forced Bed Bath & Beyond to offer margin-crushing coupons. The Container Store reported substantial e-commerce growth during the first half of last year, yet as recently as 2012, Bed Bath & Beyond got just 3% of total sales from online, and the retailer needs to boost that share in order to make a meaningful difference in the e-commerce world.

In the Bed Bath & Beyond earnings report, watch to see whether the retailer can fight off The Container Store and other competitors within the home-furnishings niche. If economic growth does slow down, then it'll be more important than ever for Bed Bath & Beyond to do all it can to keep its share of its industry intact.

Click here to add Bed Bath & Beyond to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.