Source: Bed Bath & Beyond.

Shares of Bed Bath & Beyond (NASDAQ:BBBY) were falling by 4.7% at one point on Thursday after the close, as investors reacted with pessimism to the company's earnings report for the quarter ended on Nov. 29. Let's take a look at the latest announcement from Bed Bath & Beyond and highlight the main takeaways for investors.

The context
The retail industry is going through a challenging period. Companies across different product categories are being hurt by an intensely promotional retail environment due to relentless competition from both online and brick-and-mortar operators.

Bed Bath & Beyond had reported both better-than-expected sales and earnings for the previous quarter, the second quarter of fiscal 2014 for the company. This positive earnings report sparked optimism among investors, and the stock rose by almost 20% in the last quarter.

This is important to keep in mind when trying to understand market reaction to Thursday's report. While sales were moderately below expectations, earnings were in line with Wall Street forecasts, so the company's performance was not that dismal after all.

However, optimism has been on the rise, and Bed Bath & Beyond stock was trading near historical highs as the news hit the wires. When expectations are that high, any disappointment can produce a big sell-off and a material increase in volatility, especially in the short term.

The numbers
Net sales for the third quarter of fiscal 2014 were $2.94 billion, an increase of approximately 2.7% versus $2.86 billion reported in the third quarter of fiscal 2013. Comparable sales during the quarter increased by an uninspiring 1.7%.

Sales were below expectations. Wall Street analysts were, on average, expecting $2.97 billion in revenues. In addition, comparable sales decelerated materially versus a 4.3% increase in the second quarter of fiscal 2014.

Gross profit margin came in at 38.4% of sales, a small decline versus 39.1% of revenues in the same quarter of the previous year. Considering how aggressively promotional the retail environment remains, a small decline in gross margins should come as no big surprise. Besides, gross margin actually improved sequentially, from 37.9% in the second quarter of fiscal 2014.

Selling, general, and administrative expenses grew faster than revenue, increasing almost 4% year over year, and generating additional pressure on profit margins. Operating margin declined one percentage point, to 12% of sales.

Bed Bath & Beyond achieved a significant reduction in shares outstanding via buybacks. The average weighted diluted share count declined more than 13% year over year. This was a big positive factor for earnings per share.

The company earned $1.23 per share during the period, including approximately $0.04 of net benefits for non-recurring items.

The adjusted earnings per share figure is in line with Wall Street analysts' forecasts, and it represents a 6.3% increase versus the same quarter in the prior year.

The future
Management said in its press release that the $1.1 billion accelerated share repurchase program, which commenced in July 2014, was completed in December 2014. As of the end of the quarter, the remaining balance of the $2 billion share repurchase program is approximately $1.8 billion.

This is an important factor to consider, because buybacks have been a big positive for Bed Bath & Beyond during the last quarters. Investors may want to keep an eye on the company's plans regarding share repurchases in the coming quarters in order to evaluate how capital distributions will impact earnings per share.

Bed Bath & Beyond is expecting earnings per share during the full fiscal 2014 year to be in the range of $5.05 to 5.09. This is in line with previous guidance, and also a strong forecast versus the $5.04 per share estimated on average by Wall Street analysts for the year.

Weaker-than-expected sales were the main disappointment in the report. However, margins held on acceptably well, and share buybacks are a big positive when it comes to earnings per share. The latest earnings report from Bed Bath & Beyond was quite uninspiring, but there's no reason for investors to panic.