Can Bed Bath & Beyond Take On Amazon?

Retailer Bed Bath & Beyond (NASDAQ:BBBY) declared earnings for its first quarter ended May 26 that beat analysts’ estimates, yet shares slipped over 11 percent during extended trading after the retailer disclosed a weak profit outlook for its current quarter.

Investing Insights: Bed Bath & Beyond Earnings: Revenue Misses, Slowing Growth a Concern.

For the first quarter, Bed Bath earned $206.8 million (89 cents a share) compared to $180.6 million (72 cents a share) last year. The result was better than what analysts estimated at 84 cents a share. Sales were higher by 5.2 percent to $2.22 billion while analysts expected $2.25 billion.

For the second quarter, Bed Bath expects earnings of about 97 cents to $1.03 per share, much lower than the Street expectations of $1.08 per share.

Outlook for the quarter has been clouded due to the company’s investments on revamping its e-commerce business, which include a new distribution center, new data center and new website. Some of the related expenses have occurred earlier than expected, though the company estimates that most of these expenses, about 9 cents a share, will kick in during the second half of the year. The second quarter earnings could also be affected by a few cents a share if Bed Bath’s acquisition of rival Cost Plus Inc (NASDAQ:CPWM) completes by the second quarter.

The company’s business is witnessing intense competition from Amazon Inc (NASDAQ:AMZN), which launched its own home furnishings website in February, and is offering a slew of incentives to consumers to shop online. In addition the company is also affected by an increasing tendency on the part of shoppers to buy products which carry lower profit margins.

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