Home business proves resilient

Bed Bath & Beyond reported a widely anticipate decline in profitability last week that was surprising from the standpoint that a strong case existed for the company’s financial performance to be much worse, given its exposure to the housing market and the discretionary nature of its product mix.

Instead, Bed Bath & Beyond said same-store sales for its fourth quarter ended Feb. 28 declined 4.3%, while total sales dropped less than 1% and earnings per share declined to 55 cents from 66 cents the previous year. The smaller than expected decline in profitability caused the company’s shares to surge, and Bed Bath & Beyond is now trading within a few dollars of its 52-week high of $34.73, whereas most retailers are trading much closer to their 52-week lows.

The demise of arch rival Linen’s ‘N Things helped from that standpoint that it removed capacity from the market, but strength in home also came from an unlikely source last month. Wal-Mart singled out the home and DIY categories as strong sales performers during March, as the company reported a 0.6% same-store sales increase at its U.S. stores. By itself, that figure isn’t impressive, but it is worth noting the company said its home and DIY categories achieved a mid-single digit increase during March. The strength in home is more impressive considering overall sales suffered as Easter shifted into April and made comparison again prior year results challenging. Easter fell on April 11 this year compared to March 23 last year.

“People are choosing to spend money in key discretionary categories across the stores, and this is translating to improvement is several areas of our business, including home,” said Wal-Mart vice chairman Eduardo Castro-Wright.

While Bed Bath & Beyond’s results were not as bad as expected, and Walmart claimed outright strength in its rejuvenated business, the other key development last month involved Target. Alas, all is not entirely well on the home front as Target indicated continue weakness in its home business, but as was the case with Bed Bath & Beyond, reported a same-store sales decline that was not as bad as expected.