DOW JONES NEWSWIRES

Bed Bath & Beyond Inc.'s (NASDAQ-NMS:BBBY) (BBBY) fiscal first-quarter net income dropped 27% on lower margins, but shares jumped in after-hours trading as the results beat Wall Street's expectations.

"We continue to take a long-term approach to our business and work to continue to distance ourselves from our competitors by striving to be our customers' first choice for the products we offer domestically, interactively and over the long-term, internationally," said Chief Executive Steve Temares.

For the quarter ended May 31, the housewares retailer reported net income of $ 76.8 million, or 30 cents a share, down from $104.6 million, or 38 cents a share, a year earlier. In April, Bed Bath & Beyond (NASDAQ-NMS:BBBY) predicted earnings of 26 cents to 30 cents.

Revenue rose 6.1% to $1.65 billion.

Analysts expected earnings of 27 cents a share on revenue of $1.62 billion, according to a poll by Thomson Reuters.

Bed Bath & Beyond's (NASDAQ-NMS:BBBY) shares were at $30.86, up about 7.8%, in after-hours trading from the Wednesday close of $28.57.

Same-store sales rose 0.8%, rebounding from the company's first-ever decline in the fourth quarter.

Gross margin fell to 39.7% from 41.5%. Bed Bath & Beyond (NASDAQ-NMS:BBBY) has been offering more discounts as it faces more competition from discount and department stores, such as Wal-Mart Stores Inc. (NYSE:WMT) (WMT), Target Corp. (NYSE:TGT) (TGT) and Kohl's Corp. (NYSE:KSS) (KSS).

Bed Bath & Beyond (NASDAQ-NMS:BBBY) is expected to benefit in the long term from the bankruptcy filing last month by its main rival, Linens 'n Things Inc., which is closing 120 stores. But the company may lose out to Linens stores conducting liquidation sales in the short term. Bath & Beyond stores competed directly with more than half of the privately held Linens' 589 stores before the filing, according to UBS Investment Research.

Bed Bath & Beyond (NASDAQ-NMS:BBBY) represents 5% of the $141 billion home furnishings retail business, while Linens had about 2%, according to JPMorgan.

The company has been trying to expand its international operations, opening its first store in Canada and last month investing $4 million in a joint venture with Mexican home-product retailer Home & More SA de CV.

-By Kathy Shwiff, Dow Jones Newswires; 201-938-5975; Kathy.Shwiff@dowjones.com

    (END) Dow Jones Newswires   06-25-08 1652   Copyright (c) 2008 Dow Jones & Company, Inc.