Source: Bed Bath & Beyond.

Bed Bath & Beyond (BBBY) stock was falling by 3.5% on Wednesday after the market close, as investors reacted with pessimism to the company's earnings report for the quarter ended on Feb. 28. Let's look at the latest financial figures from Bed Bath & Beyond and the main takeaway for investors.

Weaker-than-expected sales
Net sales during the fourth quarter of fiscal 2014 were approximately $3.34 billion, a 4.2% increase versus $3.2 billion in the same period during the prior year. The number came in below forecasts, as Wall Street was on average expecting $3.37 billion in sales for the quarter.

Comparable sales during the quarter grew 3.7%, also below expectations of a 4.5% increase in comparable store sales. The figure includes a 0.2% unfavorable impact from the change in the Canadian currency exchange rate during the period.

Net sales for the full fiscal year 2014 were $11.88 billion, an approximately 3.3% increase from net sales of $11.5 billion in fiscal 2013. Comparable sales during fiscal 2014 grew 2.4%, in line with the growth in comparable sales during fiscal 2013.

Margins remain under pressure
Gross profit margin declined to 39.7% of sales, versus 40.5% of revenues in the year-ago quarter. The retail environment has been aggressively promotional lately, and management has warned about the negative impact from discounts and coupons on margins, so this should come as no big surprise.

Selling, general, and administrative expenses increased 3% year over year. Since costs increased at a slower rate than revenues, SG&A expenses declined as a percentage of sales, from 24% in the fourth quarter of fiscal 2013 to 23.8% in the fourth quarter of 2014.

However, this wasn't enough to buffer the decline in gross margin, so operating results increased less than 1% during the quarter. As a percentage of revenue, operating margin fell to 15.9% from 16.4% in the same period during fiscal 2013.

On a full-year basis, operating earnings declined 3.7% in fiscal 2014 versus fiscal 2013, driven mostly by falling margins. As a percentage of sales, operating margin during the year was 13.1%, versus 14% in the previous year.

The power of share buybacks
Bed Bath & Beyond is allocating tons of capital to share buybacks, and doing so is having a big positive impact on earnings per share. During the fourth quarter of fiscal 2014, the company repurchased approximately $947 million of its common stock, representing approximately 11.8 million shares. On a year-over-year basis, the weighted diluted share count was reduced by 14.4%, providing a considerable boost to earnings per share.

As of Feb. 28, the remaining balance of the Bed Bath & Beyond's $2 billion share repurchase program is $884 million, so investors may want to keep a close eye on the company's announcements regarding buybacks in the coming quarters.

All told, the company reported $1.80 in diluted earnings per share during the quarter, a 12.6% increase versus $1.60 the same period last fiscal year. The number was in line with Wall Street analysts' expectations.

For the full year, earnings per share came in at $5.07, a 5.8% increase versus the year before, and marginally above Wall Street forecasts of $5.05 in earnings per share for the year.

Moving forward
Management is expecting a modest increase in comparable sales of between 2% and 3% for both the first quarter of fiscal 2015 and the full year. Net earnings per diluted share are expected to be in the range of $0.90 to $0.95 during the coming quarter, below analysts' forecasts of $1.01 for the period. For the full fiscal 2015, the company expects earnings per share to be between relatively flat and a mid-single-digit percentage increase.

The press release said management is modeling "an increase in investments in compensation and benefits in 2015 beyond those historically planned," which seems to be indicating that Bed Bath & Beyond will be increasing wages in the coming year.

Other big retailers such as Wal-Mart (WMT 0.48%) and TJX (TJX 0.22%) have recently announced wage increases, and so has fast food-giant McDonald's (MCD -0.05%). This seems to be a broad economic trend in the context of growing labor demand and declining unemployment, as opposed to a company-specific factor.

The takeaway
Sales growth was not very inspiring, and profit margins remain under heavy pressure, so most of the earnings growth was driven by share buybacks during the quarter. It's nice to see the company putting its capital to work for the benefit of shareholders, but it would be much nicer to see accelerating sales growth and improving profit margins.