Can Bed Bath & Beyond Bounce Back?

Is it too late to rechristen Bed Bath & Beyond (BBBY) as Bed Bath & Begone?

Investors probably feel that way. Many retailers and home improvement specialists are trading near all-time highs, but not the housewares superstore chain.

The retailer was trading close to its 52-week low even before Wednesday's disappointing quarterly report when earnings grew by less than 2 percent to $232.8 million, despite seeing net sales climb 15 percent to top $2.7 billion. Oh, and don't get too excited about the top-line growth. It's largely the handiwork of a pair of acquisitions that closed in June. Bed Bath & Beyond same-store sales only inched 1.7 percent higher during the quarter.

Things may not seem so bad, but they're about to get worse.

Deck the Halls and Hit the Deck

Like most retailers, Bed Bath & Beyond lives for the holidays. It doesn't have the same kind of seasonality as traditional stores -- since folks need new shower curtain rods and K-Cup coffee pods year-round -- but its strongest quarter by far is the Christmas-stoked fiscal fourth quarter.

Well, the news isn't all that encouraging on that front.

Bed Bath & Beyond sees a profit of $1.60 a share to $1.67 a share during the quarter. Wall Street was forecasting net income of $1.75 a share.

This is actually even worse than it looks.

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Bed Bath & Beyond has been aggressively buying back stock. It's a smart strategy in general, but it's a ploy that some companies use to mask bottom-line weakness. Repurchasing shares lowers the share count that profits are divided by to arrive at earnings per share. For example, Bed Bath & Beyond's net income grew by less than 2 percent this past quarter, but rose by more than 8 percent on a per-share basis.

There's certainly nothing wrong with buying back shares, especially if it's done at low prices. However, it's something to keep in mind in assessing a company's true performance. In Bed Bath & Beyond's case, acquisitions are inflating the top line and buybacks are puffing up the per-share profitability.

Home Is Where the Improvement Is

It's surprising to see Bed Bath & Beyond just meandering about.

When it comes to house wares, apparently the soft goods that Bed Bath & Beyond is selling aren't as hot as the heartier home improvement products that Home Depot (HD) is ringing up.

Now that the housing market is showing signs of stability, homeowners and prospective homebuyers aren't having a problem going for big-ticket improvement projects. Home Depot and Lowe's (LOW) are trading near their 52-week highs.

Hey, there's an idea. Bed Bath & Beyond's next acquisition may want to be in the home improvement arena. Things are just too hard right now for soft goods.

Motley Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Bed Bath & Beyond, The Home Depot, and Lowe's companies.