Bed Bath & Beyond's Second Quarter Guidance Results in Share Drop

On Wednesday, Bed Bath & Beyond BBBY saw shares tumble in after-market trading following mediocre first-quarter earnings and astonishingly dismal guidance for its upcoming quarter. While the popular retailer still reported monetary gains in the conference call, the prospects for the future has investors in a selling frenzy. Bed Bath & Beyond, famous for high thread count sheets, bathroom décor and wedding registries, said revenues were up in its most recent quarter with a $1.1 million gain from $2.11 billion last year. Unfortunately, the increase was still considered a miss as the Street had guided the company to $2.24 billion in its first quarter of 2012. Same store sales were down from the year prior, as an increase of 3 percent was barely comparable to 2011's increase of 7%. While this earnings call proved to be economically unsuccessful on some levels, it was the guidance that really irked fans of the well-known brand. Management stated that the company would be expecting EPS between $0.97 and $1.03 for the second quarter, a considerable drop from Street estimates of $1.08. So what could be the reasoning behind such a large earnings drop? For starters, Bed Bath & Beyond has announced agreements over the past two months that will eventually result in the acquisition of Cost Plus' CPWM outstanding shares and a merger with Linen Holdings, LLC. According to Yahoo!, the pending transaction between Bed Bath & Beyond and Cost Plus will likely be to blame for the decrease in guidance if it is completed in the second quarter as anticipated. Bed Bath & Beyond's low expectations, whether due to acquisitions or not, could potentially foreshadow the future of comparable stores such as Williams-Sonoma WSM. "We expect today's [Bed Bath & Beyond] announcement could have implications on Williams Sonoma based on its overlap in the kitchen category. We are concerned the slowing of comps and the commentary on the promotional environment could be a read through to WSM. Management noted that increases in both redemptions and the amount of coupons weighed on GPMs," Citi said in a research report this morning. As core sales trends continue to look weak for Bed Bath & Beyond, there is no telling when the household décor and product retailer will rebound from considerable losses in the future. However, analysts at Jefferies are viewing yesterday and today's substantial dip in share price as range-bound in the wake of first quarter disappointment, with the company set to travel to the upper $70's over the next year. Bed Bath & Beyond is currently down approximately 10% in pre-market trading at $66.30, while Williams-Sonoma is down almost 1% this morning at $34.88.