Bed Bath & Beyond (NASDAQ: BBBY), a chain that competes with Wal-Mart (NYSE: WMT) and Target (NYSE: TGT), issued Q2 numbers on Wednesday after the conclusion of the regular trading session. Net sales increased over 3%, and earnings per diluted share expanded by 13% to 52 cents. The retailer beat expectations by four pennies, according to the earnings preview.

This is a good showing for the retailer. As we all know, the economy continues to show signs of improvement. At least, that's what the pundits and the headlines have been telling us. An earnings report like this from a retailer does offer some evidence that the worst is behind us.

Leading domestics retailer Bed Bath & Beyond Inc. (NASDAQ: BBBY) closed more than 9% higher today after the one-two punch of a well-received earnings report and a brokerage upgrade. The company announced first-quarter results of 34 cents per share, a whopping nine cents better than analysts were expecting. Revenue edged 2.8% higher year over year. The one gray lining was same-store sales numbers, which drifted 1.6% lower during the reporting period.

Reacting to this after-the-close earnings report, Cowen & Co. upgraded the shares this morning to "neutral" from "underperform." The brokerage noted that BBBY has been able to cut advertising expenses now that its chief competitor, LInens n' Things, has filed for bankruptcy. Cowen also notes that BBBY has reduced its payroll expenses.

As investors start to believe that the worst of the current recession is already behind us, they are turning their attention to oil, and today have pushed the precious crude over the psychological $50 mark.

Oil is moving higher today with the overall markets, as Wall Street has been seeing hints that things are starting to turn around. Part of the reason for the optimism has come in the form of strong earnings this week from Ruby Tuesday (NYSE: RT) and Bed Bath & Beyond (NASDAQ: BBBY). If restaurants and retailers are seeing things start to rebound, its a good sign for the overall economy, and a sign that people are out there driving their cars around, which helps boost oil prices.

Bed Bath & Beyond (NASDAQ: BBBY) reported earnings for the fourth quarter on Tuesday after the market closed its doors. In the after-hours session, the retailer's stock rallied mightily, rising over $3.50, or better than 14%. Let me tell you, that was impressive. As was the beat on the bottom line.

As I wrote in my preview piece, the market was looking for 44 cents per share. Bed Bath & Beyond did its job and delivered 55 cents per share. Net sales decreased by less than 1%. Granted, no one likes to see the top line contract even a little, but considering how bad retail has been, I actually find this to be a small victory. Unfortunately, the same-store sales weren't good. They dropped over 4%. Also, operating profit and cash from operations saw a decline.

Bed Bath & Beyond (NASDAQ: BBBY), whose colleagues include Wal-Mart (NYSE: WMT) and Target (NYSE: TGT), will be reporting earnings for the fourth quarter on Tuesday, April 7. Now, the market isn't expecting any earnings growth. In fact, according to this source, the decline could be as severe as 33% if the retailer matches expectations and delivers $0.44 per share.

The good news, though, is that Bed Bath & Beyond actually has a decent history in terms of beating Wall Street expectations. If that holds, then investors might be pleasantly surprised when Q4 numbers are issued. When I wrote about the retailer's last earnings release, I was pretty bearish. And I was very wrong. I questioned why the stock should be purchased. Well, the stock has been doing well as of late, and is up on the year-to-date frame as of this writing. A commenter named Rich set me straight and rightfully proposed that the liquidation of a competitor might have temporarily dampened things; once the competitor was gone, he said, Bed Bath & Beyond might prosper.

Home-products retailer Williams-Sonoma (NYSE: WSM), which runs such retail brands as Pottery Barn and West Elm in addition to its namesake chain, issued Q4 numbers on Tuesday. Well, they weren't spectacular. Surprised? No, I'm sure you weren't. I mean, when you sell stuff for homes, you've got to expect that you're going to see some weakness. And there's plenty of it here.

Revenues decreased almost 27% during the quarter, and earnings per share on an adjusted basis dropped over 70% to 31 cents. That beat estimates of 16 cents per share, according to Reuters' analysts, but forgive me if I don't jump up and down over that performance. And what about same-store sales? They were mighty bad. On an overall basis, they went down by over 22%.

Bed Bath & Beyond (NASDAQ: BBBY) reported earnings for the third fiscal quarter on Wednesday after the bell, and I have to admit, I'm puzzled that, at the time of this writing, the stock is seeing a bid. It currently is trading up almost 3% on decent volume.

Here's why I'm puzzled. According to Melly Alazraki's summary, earnings per share declined 36% to $0.34 per share. That was a penny below what analysts were looking for. Okay, maybe the buying is due to the fact that the company only missed by a penny? After all, I myself was expecting much worse, and maybe the market was, too. But then I go to the press release and see that top-line sales were flat and same-store sells fell by 5.6%. Those comps are just terrible. And the cash-flow statement was nothing to write home about, either. You'd have to be pretty damn optimistic to buy Bed Bath & Beyond with the market indexes in the red and with all the miserable economic data that's out there haunting the halls of Wall Street, Main Street, and every other Street you can think of. Plus, with not-so-great news out from Wal-Mart (NYSE: WMT), I really have to wonder why anyone is stepping up today to purchase BBBY. (Michael Fowlkes does offer a different perspective in his earnings preview, so you may want to check that out.)

Maybe everyone else is right while I am wrong. Who knows. But the stock doesn't pay a dividend, the dire predictions on Christmas sales are coming true, and the Santa rally may officially be over. I don't know, I'd tend to be more bearish on this retailer's earnings data than bullish. It's possible some shorts are cashing out on the news, I suppose. One thing's for certain: I won't be getting into bed with this stock (and, yes, that was an awful pun).

Disclosure: I don't own any stock mentioned, but positions can change without notice.

Investors are going to keep a close eye on Bed Bath and Beyond (NASDAQ: BBBY) Wednesday afternoon when the company reports its fiscal third quarter numbers.

Going into tomorrow's earnings announcement, analysts are expecting the company to post third quarter earnings of 33 cents per share. During its third quarter last year the company matched analyst estimates for 52 cents per share, so hitting its 33 cent estimate this year would mean a drop of 36% year over year.

Last month, the company pre-announced its quarterly numbers and stated that it expected earnings would fall somewhere between 31 and 35 cents a share. This estimate was down from the company's previous guidance of 41 to 47 cents per share.

Of course, one of the main reasons for the company's lower guidance was overall weakness in the economy, but it also faced increased competition from the liquidation sale at its main rival, Linens 'n Things. As Linens 'n Things was preparing to close its doors, its inventory was put on massive discount, and Bed Bath and Beyond was hurt by consumers flocking to buy the highly discounted prices over at Linens 'n Things. I, personally, did a lot of holiday shopping at Linens 'n Things, as did many people that I know.

Bed, Bath, & Beyond (NASDAQ: BBBY) shares are trading higher today after the company posted a first-quarter profit of $76.8 million, or 30 cents per share, beating analysts' estimates of 27 cents per share. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on BBBY.

After hitting a one-year high of $37.61 last June, the stock hit a one-year low of $24.49 in January. BBBY opened this morning at $29.98. So far today the stock has hit a low of $29.72 and a high of $30.54. As of 12:05, BBBY is trading at $30.28, up $1.70 (6.0%). The chart for BBBY looks bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $25 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in just seven weeks as long as BBBY is above $25 at August expiration. Bed, Bath & Beyond would have to fall by more than 17% before we would start to lose money. Learn more about this type of trade here.

Bed Bath & Beyond (NASDAQ: BBBY) reported Q1 earnings on Wednesday, and Trey Thoelcke highlighted the numbers in this earnings-recap piece. Shares rose substantially in the after-hours trading session yesterday, jumping over 8%, and as I reviewed various earnings reports last night, I found myself drawn to the retailer's stock performance. I haven't been a huge fan of Bed Bath & Beyond as of late, so I figured I should take a look at the earnings release to see if there's anything here that would change my opinion.

Unfortunately, there isn't. Sales may have grown 6%, and expectations may have been beaten by $0.03, but net income still dropped over 20% to $0.30 per diluted share. Cash flow from operations declined 44% to $65.8 million. And same-store sales were very anemic, rising only 0.8%.

I choose, in this case, to focus on those figures. I also consider the fact that Bed Bath & Beyond does not pay a dividend, and that we are in an awful economic environment, both from a consumer and stock-market standpoint. This is not the stock I'd want to face the recession with, and I don't necessarily find it to be a big value right now. When it comes to retail, I am more likely to look at Wal-Mart (NYSE: WMT) and Target (NYSE: TGT). I'd even consider a Home Depot (NYSE: HD) or a Lowe's (NYSE: LOW). All of these stocks pay dividends and have better brand equities and more attractive prospects. Bed Bath & Beyond certainly didn't deliver an earnings bomb, but I'm still not inclined to put money here.

Disclosure: I don't own any company mentioned; positions can change at any time.

MOST NOTEWORTHY: The U.S. Retail Hardlines Sector, the BioFuels Sector, Interpublic Group and Omnicom Group were today's noteworthy initiations:

• Lehman initiated the Retail Hardlines Sector with a Neutral. The firm initiated coverage of Home Depot (NYSE: HD) and Lowe's (NYSE: LOW) with Overweight ratings and Best Buy (NYSE: BBY), Bed Bath & Beyond (NASDAQ: BBBY) and Williams Sonoma (NYSE: WSM) with Equal Weight ratings.
  
• Oppenheimer initiated Aventine Renewable (NYSE: AVR), Pacific Ethanol (NASDAQ: PEIX) and VeraSun Energy (NYSE: VSE) with Perform ratings. The firm is cautious on the industry due to higher feedstock costs.
  
• UBS initiated Interpublic Group (NYSE: IPG) and Omnicom Group (NYSE:OMC) with Buy ratings and an $11 target and $62 target, respectively. The firm views valuation as attractive.

OTHER INITIATIONS:

• Morgan Stanley assumed coverage of International Flavors (NYSE: IFF) with an Overweight rating.
  
• Wachovia initiated CGI Group (NYSE: GIB) with a Market Perform rating.
  
• Leap Wireless (LEAP) was initiated at RBC Capital with a Sector Perform rating and $55 target.

Monday, April 7

• PDUFA date for Bristol-Myers Squibb Co. (NYSE: BMY)'s supplemental Biologics License Application for Orencia for the treatment of Juvenile Rheumatoid Arthritis.
• Alcoa Inc. (NYSE: AA) to report Q1 earnings; conference call at 5pm.

Tuesday, April 8

• Chattem Inc. (NASDAQ: CHTT) to report Q1 earnings; conference call at 9:00am.
• FOMC to release minutes of the March 18th meeting at 2:00pm.
• Embraer-Empr Bras Aeronautica (ADR) (NYSE: ERJ) conference call to announce new midsize & midlight executive jet concepts at 6:00pm.

MOST NOTEWORTHY: Bed Bath & Beyond, DSW Inc and Oplink Comm were today's noteworthy downgrades:

• JP Morgan downgraded Bed Bath & Beyond (NASDAQ: BBBY) to Underweight from Neutral citing recent sales commentary from competitors and the difficult macro environment.
  
• Oppenheimer cut DSW Inc (NYSE: DSW) to Perform from Outperform following the company's Q1 miss and lower than expected guidance, as they see little visibility in the coming quarters.
  
• Piper downgraded shares of Oplink Communications (NASDAQ: OPLK) to Sell from Neutral following the company's negative earnings preannouncement and lowered their target to $9.00 from $14.

OTHER DOWNGRADES:

• Tiffany (NYSE: TIF) was downgraded to Sell from Neutral at Merrill.
  
• Goldman cut National Semiconductor Corp (NYSE: NSM) to Sell from Neutral.
  
• Wellpoint (NYSE: WLP) was downgraded to Equal Weight from Overweight at Lehman.

Investors didn't have a whole lot of confidence in Bed Bath & Beyond Inc. (NASDAQ: BBBY) ahead of tonight's earnings report - the stock hit a new 52-week low during the trading day. Under the unforgiving glare of the earnings spotlight tonight, the domestics retailer said third-quarter profit fell to $138.2 million from $142.4 million in the year-ago period. Earnings on a per-share basis edged up to 52 cents from 50 cents, matching analysts' expectations.

Net sales for the quarter were 10.8% higher at $1.795 billion, and comparable store sales in the reporting period edged up 0.8%. In the year-ago third-quarter period, same-store sales grew by 4.6%. According to Thomson, analysts were expecting revenue of $1.765 billion.

For the fourth-quarter, BBBY officials expect same-store sales to be virtually flat, leading to per-share earnings between 64 and 67 cents per share. This is well south of analysts' mean estimate of 77 cents per share, according to Reuters.

The poor fourth-quarter guidance is not sitting well with investors, who have sent BBBY reeling nearly 9% lower in after-hours trading. This move will bring the stock deeper into new-annual-low territory. In fact, a move of this magnitude come tomorrow morning, should the selling persist, would put the shares in the neighborhood of a six-year low. Bed Bath & Beyond shareholders may not be enjoying a good night's sleep tonight.

Beth Gaston Moon is an analyst at Schaeffer's Investment Research.

Bed Bath & Beyond (NASDAQ: BBBY), a nationwide chain of retail stores, is expected to report EPS on January 3. BBBY January option implied volatility of 40 is above its 26-week average of 32 according to Track Data, suggesting larger risks.

Monsanto (NYSE: MON) will issue first quarter financial results on Jan. 3. MON closed at $114.47. MON January option implied volatility of 48 is above its 26-week average of 37 according to Track Data, suggesting larger risk.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com