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Tickers in this Article: BBBY, JWN, M, TGT, WMT
Despite the sluggish economic recovery, the retail sector has prospered in recent weeks, notes Susan J. Aluise of InvestorPlace.com.

As consumers have hurried to snap up 1,000-thread count cotton sheets and upscale espresso machines at bargain prices, one of the clear winners in the rally has been home-products giant Bed Bath & Beyond (BBBY).

Sales at the 1,100-store chain rose nearly 10% in the first quarter. Same-store sales, which track a retailer’s sales performance against its head-to head-competitors, rose by 7%.

Its stores also are getting larger: Industry observers estimate the square footage of the retail stores is increasing by 3% to 4% per year.

And as college students and their parents gear up to furnish all those dorm rooms and off-campus apartments, the lines for household necessities are expected to grow longer and more profitable.

Clearly, the retailer has prospered from the real-world demise of its big-box competitor Linens & Things in 2008 (L&T closed its physical stores and now only operates a Web site).

The company’s product line is similar to that of upscale department stores like Macy’s (M) and Nordstrom (JWN), although discounters like Wal-Mart (WMT) and Target (TGT) increasingly are giving the chain a run for the shopper’s money.

That strengthening competitive position also is showing up where it counts: in the company’s quarterly earnings report. In June, BBBY reported first-quarter net sales of more than $2.1 billion, up 9.7% from the same quarter last year. The increase in first-quarter net earnings was more dramatic—$180.6 million (72 cents per share)—an increase of 38% over the same quarter in 2010.

Those numbers show BBBY clearly doing something right. And here’s a few other numbers worth noting: Bed Bath & Beyond set a new 52-week high of $60.55 earlier this month. At Tuesday’s close of $57.84, the stock is trading almost two-thirds above its 52-week low of $35.55 in August 2010.

BBBY’s fundamentals are solid: The company has a market capitalization of $14.58 billion and a price-to-earnings growth ratio of 1.12, indicating the stock is fairly valued. The company is in an enviable debt position: $1.83 billion in cash with zero debt.

While Bed Bath & Beyond’s market position and fundamentals are strong, the retail industry faces headwinds because of the sluggish economy.

Recent research from ShopperTrak, a counter and analyzer of retail foot traffic, predicts national retail sales will grow by 3.8% this back-to-school season, while foot traffic actually will drop by 2.9%. Back-to-school sales and retail traffic historically have served as a key predictor of the kind of winter holiday shopping season retailers will have.

But unless something catastrophic happens to shake consumer confidence to the core (like the US government’s failure to raise the debt ceiling), BBBY should continue to be a shiny jewel in retail investors’ portfolios.

Read more from InvestorPlace.com here…

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