Tickers in this Article: BBBY, WSM, PIR, M, WMT
Roughly a decade ago, specialty retailer Bed Bath & Beyond (Nasdaq:BBBY) could be counted on for posting steady annual sales and profit gains of more than 20%. Maturity at the main store concept means sales will likely return to these levels, but profit growth has seen an impressive revival due to several key factors.

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First Quarter Recap
Sales advanced 9.7% to $2.1 billion on the opening of new stores and very healthy comparable store sale growth of 7%. During the quarter, Bed Bath opened a net two new namesake stores, two "buybuy BABY" locations, and closed a "Harmon" location. Management detailed that its "fundamental business strategy remains unchanged [and is] to offer a broad assortment of merchandise at everyday low prices with superior customer service."

As is its quarterly custom, management didn't provide specific details on merchandise trends but rather an overview of general strategies that help it consistently execute at each individual store.

Net income jumped 31.3% to $180.6 million as management was able to control both selling and operating costs. For example, on the second category it was able hold SG&A expense growth to 3.5%. Share buybacks further boosted reported profit growth as earnings jumped 38.5% to $0.72 per diluted share. This came in well ahead of analyst projections.

For the full year, Bed Bath increased its earnings growth expectations and now projects an increase between 15% and 20%. Currently, analysts project earnings of $3.56 per share and sales growth of 7.5% for total annual sales of $9.4 billion.

As of quarter end, Bed Bath operated 1,142 stores, including 984 namesake stores. Management still sees the potential for 1,300 additional Bed Bath stores across the United States. However, the other concepts are still in their infancy and this leaves plenty of room for top-line growth over the long haul.

The company also has a goal to steal market share from traditional retailers including Macy's (NYSE:M) and purer play home furnishing retailers including Williams Sonoma (NYSE:WSM) and Pier 1 Imports (NYSE:PIR). Wal-Mart (NYSE:WMT) is also a key rival but has recently decided to return focus to more basic necessities, as opposed to more fashionable and higher priced home goods.

The Bottom Line
Wal-Mart's shift in focus, the demise of archrival Linens 'N Things and a slowly improving economy are all combining to boost Bed Bath's fortunes. Company-specific matters also play a big part as management has a reputation as one of the more savvy operators in retail. The stocks' forward P/E of nearly 16 still looks rich, but is looking more and more reasonable given the impressive sales and profit growth the company has been posting as of late. (For more, see The 4 R's Of Investing In Retail.)

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