Bed Bath & Beyond posts surprise rise in profit

By Nicole Maestri

SAN FRANCISCO (Reuters) - Bed Bath & Beyond Inc (BBBY.O) posted an unexpected rise in quarterly profit by cutting costs to offset slumping demand for home furnishings, and the retailer's shares rose more than 6 percent.

"The beat really was on the expense line although they had good operating performance across the board," said Bernstein analyst Colin McGranahan, who has an "outperform" rating on the stock.

"They have absolutely tightened the labor model up. I think they're reducing advertising costs, which had gone way up."

Net income for the fiscal first quarter ended May 30 rose to $87.17 million, or 34 cents per share, from $76.78 million, or 30 cents per share, a year earlier, Bed Bath & Beyond said on Wednesday .

Analysts, on average, were expecting earnings of 25 cents per share, according to Reuters Estimates, which would have meant a decline in profit compared with a year earlier.

Sales rose 2.8 percent to $1.69 billion as it opened more stores, but sales at stores open at least a year, a key retail measure known as same-store sales, fell 1.6 percent.

Selling, general and administrative expenses declined to $524.5 million in the quarter from $537.18 million a year earlier.

The company also said it expected its second-quarter earnings per share to rise to 42 cents, with fiscal 2009 earnings per share expected to be $1.59.