Why Bed Bath & Beyond, Inc. Stock Dropped Today

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What happened

Shares of Bed Bath & Beyond Inc. (NASDAQ: BBBY) were down 12.2% as of 11 a.m. EST Thursday after the home goods retailer announced stronger-than-expected quarterly results, but followed with cautious forward-looking commentary.

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More specifically on the former, Bed Bath & Beyond's fiscal third-quarter 2017 revenue was roughly flat compared to the same year-ago period, at $3.0 billion -- slightly above investors' expectations -- including a modest 0.3% decline in comparable-store sales. On the bottom line, that translated to net earnings of $61.3 million, or $0.44 per diluted share, above consensus estimates for $0.37 per share and down from $0.85 in last year's fiscal third quarter.

So what

During the subsequent conference call, CFO Sue Lattmann credited Bed Bath & Beyond's stronger sales performance to "opportunistic marketing spend and increased promotional offerings" that the company had planned going into the quarter. However, she also noted that as the holiday season approached, the increased promotional environment potentially pulled some sales forward from the fiscal fourth quarter.

"This justified in the short term a more aggressive approach to satisfy customers," Lattmann added, "which has continued to be necessary as we approach Christmas."

Now what

Bed Bath & Beyond expects full fiscal-year revenue to be flat to slightly positive (including a benefit from an extra week in the year), assuming a comparable-sales decline in the low-single-digit percent range. And despite its earnings beat this quarter, Bed Bath & Beyond reiterated its expectation for full fiscal-year earnings to be roughly $3.00 per share.

To be sure, it's somewhat concerning that Bed Bath & Beyond's outperformance this quarter was the result of sales pulled forward from the busy holiday quarter. But keep in mind that the stock had climbed more than 20% in the month leading up to this report, partly on speculation in early December that the retail chain could benefit greatly from the passage of a new congressional tax bill.

So while it's painful for any long-term investor to see a stock drop, in this case it seems Bed Bath & Beyond is merely giving back a portion of those gains on today's relative disappointment.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.