Retail Stocks' Pre-Market Sale: Bed Bath & Beyond Setting Up for Shorts

The weaker than expected results from Bed Bath and Beyond (BBBY) after the close Wednesday ignited the selling with additional enthusiasm to the downside being generated by poor same store sales results from other leading retailers in yesterday morning's pre-market:

J.C. Penney (JCP) March Comp Store Sales Decrease 12.3% - Off 1% in Light Pre-Market Trade.

Kohl's (KSS) March Comp Store Sales Decreased 15.5%, Guides Q1 EPS Below Street - Stock Down 3%.

Target's (TGT) March Comp Store Sales Decreased 4.4% - Stock Off 2% in First Light-Volume Pre-Market Matches.

American Eagle's (AEO) March Same Store Sales Decrease 12%, Cuts Earnings Outlook - Down 4% in Pre-Bell.

Bed Bath & Beyond declined 5.6% (at 27.80) in Wednesday's after-hours session after missing Q4 revenue expectations and setting its forward earnings guidance below the Street consensus.

BBBY reported Q4 EPS of $0.66 vs a with-items $0.72 per share a year earlier and just beating the Thomson FC mean for $0.65.

Sales were approximately $1.933 billion, a decrease of approximately 3.1% from the year-ago period. The Street looked for $1.96 billion. Comparable store sales decreased by approximately 0.4% compared with an increase of approximately 5.2% a year earlier.

Assuming no significant change in the macroeconomic environment, the company estimates that its fiscal 2008 EPS will decline from a low double digit percentage to mid -teens percentage from the $2.10 per diluted share reported for fiscal 2007. This estimate is based, in part, upon the assumption that the comparable store sales for all of fiscal 2008 will be relatively flat to slightly negative. The Street is at $2.14.

For the fiscal first quarter, the company estimates earnings to be approximately $0.26 to $0.30 per share. The Street is at $0.36.

BBBY popped to a brief early after-hours high of 29.72 before sellers converged on the issue and punched it down through the 28.70 level to its session low of 27.66. It firmed off this bottom, rising from 27.72 to a mid-session high of 28.49. BBBY spent much of its second-half of Wednesday night’s action dropping back from 28.40 to 27.87.

BBBY is maintaining a widening pattern between the sessions, demonstrating a historically significant pattern of extended earnings event related losses from the after-hours to the following regular session close. On the short side, a decent ceiling developed Wednesday night around 28.40, perhaps an area to nibble at a downside play back to 28.20 or 28.

Disclosure: no positions