Making Money on Bed Bath & Beyond in a Wal-Mart World

NEW YORK ( TheStreet) -- If you're a Bed Bath & Beyond ( BBBY) investor, Wednesday's earnings release must have felt like squeezing the only shampoo bottle only to find nothing left while hurrying to prepare for a big job interview.

Bed Bath & Beyond's stock plummeted more than 15% Thursday even as the company said earnings per share rose 24% to 89 cents per share. It was at least the fourth quarter in a row that Bed Bath & Beyond beat estimates. Unfortunately, expected earnings moving forward captured Wall Street's attention. Analysts' downward revisions for the next earnings report outnumber higher revisions 3 to 1. The stock price fell through strong support at the 200-day moving average of $63.50.

Bed Bath & Beyond's CEO Steven H. Temares blames the economy for softness, but sales were not bad. Net sales climbed 5.1% to $2.2 billion, and same-store sales advanced 3%, slowing from a pace of 7% a year earlier.

Insiders sold over 1.5 million shares, or about 5% of their holdings, in the past six months. Some will say there are many reasons why insiders sell (stock options, etc.), but the bottom line is the motivation to sell or buy is nearly the same. You don't sell a stock you think is moving higher in price regardless of the source.

The soft economy is allowing Wal-Mart ( WMT), Macy's ( M) and Target ( TGT) to execute well; however, they are not alone. Pier 1 Imports ( PIR) and Amazon ( AMZN) are both up with conviction from a year ago.

Amazon's big move into the home-furnishings space has many Bed Bath & Beyond investors scratching their heads wondering if margins will get squeezed.

Considering Amazon is comfortable operating on razor-thin margins, the concern is well-founded. Bed Bath & Beyond will likely have to maintain aggressive technology expenses to keep up with Amazon. Even if Amazon trips and falls, it is so large it will have an impact. (Read my Amazon: No Such Thing as Free Shipping article.)

Based on my experience with gap downs following reductions in guidance similar to Bed Bath & Beyond's, investors may not see the short-term low until today or, more likely, Monday.

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