Tickers in this Article: BBBY, PIR, WSM, WFM
Home and kitchen furnishings retailer Bed Bath and Beyond (Nasdaq:BBBY) reported fiscal 2011 second quarter EPS of 93 cents, an increase of 33% over the year EPS figure of 70 cents. Quarterly net sales increased by a respectable 8.3% to $2.3 billion, while comparable store sales, the more meaningful measure, was up 5.6%. Analysts were expecting EPS of 84 cents in the quarter against sales of $2.3 billion.

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What Recession?
Results from Bed Bath and Beyond are not what you would expect in an environment where the economy is on the verge of a double-dip recession. Same-store sales growth indicates that consumers continue to visit and make purchases. BBBY is an excellent retailer run by a solid management team. Gross profit of $951 million during the quarter represents a 41% margin on sales of $2.3 billion. That compares with gross profit of $875 million, or the same 41% of sales in the year-ago quarter. Considering the rise in input costs year-over-year, management executed well during the quarter. Diluted shares outstanding declined to about 246 million during the quarter, down from about 260 million as the company repurchased nearly $287 million worth of common stock. (For related reading, see 5 Signs We're Already In A Double-Dip Recession.)

Strong Finish
In typical BBBY fashion, management made no statements in the earnings release save for an outlook that suggests a strong finish to fiscal 2011. The company now forecasts net diluted EPS to be approximately 82-87 cents for the fiscal third quarter of 2011, and expects it to increase by approximately 22-25% for all of fiscal 2011. That's the type of growth any business would love to have when the overall economy is expected to grow less than 2% in 2011. Should the company accelerate stock buybacks, per share results could be even stronger than expected. Bed Bath and Beyond's solid quarter and outlook could mean similar results for other specialty retailers like Williams-Sonoma (NYSE:WSM), Whole Foods (Nasdaq:WFM) and Pier 1 Imports (NYSE:PIR).

The Bottom Line
Retailing is a tough business but one that provides good insight into consumer behavior. BBBY is a best of breed retailer, so I wouldn't expect its results to translate across the industry. Still, in this tough environment where consumer confidence is slipping, BBBY results are a hopeful sign. (For related reading, see The 4 R's Of Investing In Retail.)

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