Bed Bath & Beyond Forecasts Reduced Profits

Home products retail major Bed Bath & Beyond Inc., the biggest home furnishings retailer in the United States, has forecast profit margins that fall below estimates by Wall Street analysts. In a statement, the company said this was the first time in 15 years it had registered a drop in quarterly earnings, and that was what prompted the reduced profit forecast.

A slowdown in consumer spending saw the company register a 3 percent drop in net income for the third quarter, resulting in a 6.4 percent slump in company stock values. The reduced profit forecast said the company would earn a maximum of $2.11 a share for the year ending March 1. This figure is far below the $2.19 a share that Wall Street analysts forecast in a Bloomberg survey.

A number of factors, including gasoline prices and the worst slump in the housing sector in the past 27 years meant consumers went easy on the purchase of home furnishings like curtains, dinnerware, and other such related items.

With rival company Linens ‘N Things Inc. offering 20 percent and more worth of holiday discounts and also free shipping, Bed Bath & Beyond sought to tone down on price cuts. In a statement, the company, based out of Union, New Jersey, said it had suffered a drop in prices to $138.2 million, at 52 cents a share, for the three months through December 1, 2007.

The company said this included a tax benefit of $8 million. On the whole sales figures for the quarter climbed upwards, ending at $1.79 billion. Just a year back, the company had declared a profit of $142.4 million, at 50 cents a share.

The impact of the reduced forecast could be seen immediately, with shares of Bed Bath & Beyond falling by $1.75, ending at $25.65 as of 6:25 p.m. New York time in after-market trading in the US. The stock value had dropped earlier by 96 cents in composite trading on the Nasdaq Stock Market, ending at $27.40 as of 4:00 p.m.

There has been a slump in gross margin as well, from 43.5 percent 41.7 percent. The company’s shares have registered an overall drop of 23 percent in 2007, which makes it the biggest slump since the company went public in 1992.