(June 27) -- Bed Bath & Beyond Inc., the largest U.S. home-furnishings retailer, rose the most in more than two months in Nasdaq trading after reporting first-quarter profit that fell less than analysts estimated as it gained market share.

Sales at stores open at least a year increased 0.8 percent in the quarter, beating the projection of a 2 percent decline by Colin McGranahan, an analyst at Sanford C. Bernstein & Co. Bed Bath & Beyond's results outperformed other home furnishings retailers as it gained share, he wrote today in a research note.

``The quarter reflected solid execution and the strength of Bed Bath & Beyond's operations in a challenging and promotional environment that has seen many of its competitors founder,'' McGranahan wrote. He recommends buying the shares.

Earnings at home retailers including Williams-Sonoma Inc. and Pier 1 Imports Inc. have slid because people have spent less on rugs, cookware and bedding as fewer homes are bought during the U.S. housing slump. Bed Bath & Beyond may be taking market share from bankrupt Linens 'n Things Inc., according to Morgan Keegan Inc.'s Laura Champine.

``Bed Bath is a good retailer, and they perform well in a tough environment,'' Champine, an analyst based in New York, said yesterday in an interview. ``They also didn't stoop to the level of promotions their competitors did, like Linens 'n Things.'' She recommends selling Bed Bath & Beyond shares and doesn't own any.

Bed Bath & Beyond rose $1.22, or 4.3 percent, to $29.79 by 4:30 p.m. New York time in Nasdaq Stock Market trading, the biggest one-day gain since April 18. The shares lost 1.4 percent this year.

Hardest-Hit Areas

Profit in the second quarter, which ends Aug. 30, may decline less than some analysts predicted. First-quarter net income dropped 27 percent to $76.8 million, or 30 cents a share, Union, New Jersey-based Bed Bath & Beyond said yesterday in an announcement after U.S. markets closed.

Sales rose 6.1 percent to $1.65 billion in the three months ended May 31, also beating analysts' projections in a Bloomberg survey.

Same-store sales were ``noticeably weaker'' in areas hit hardest by the housing slump, including Arizona, California, Florida and Nevada, Chief Executive Officer Steven Temares, 49, said on the call yesterday.

Full-Year Profit

The chain, which runs 981 stores, reiterated that full-year earnings per share may decline by a ``low double-digit to a mid- teens'' percentage from $2.10 a year earlier. Twenty-one analysts surveyed by Bloomberg estimate $1.82 a share, on average.

Executives said yesterday on the call the chain would earn 43 to 48 cents a share in the second quarter. Nineteen analysts surveyed by Bloomberg estimated average profit of 45 cents.

Bed Bath & Beyond plans to open 50 to 55 of its namesake stores in the U.S. and Canada this year. It also runs the Christmas Tree Shops, Buybuy Baby and Harmon chains.

This year ``will afford us the opportunity to take advantage of these times to be in a superior and stronger position,'' Temares said on the call yesterday. ``We are confident we'll be able to look back at this period as one of affording exceptional opportunity to gain market share.''

Analysts' Estimates

Gross margin, or the percentage of sales left after subtracting the cost of goods sold, slowed to 39.8 percent from 41.6 percent, as more customers redeemed discount coupons.

The chain had forecast first-quarter profit of 26 cents to 30 cents a share. Twenty analysts estimated average profit of 27 cents, while 15 predicted sales of $1.62 billion in a Bloomberg survey. Bed Bath & Beyond earned $104.6 million, or 38 cents, a year earlier.

Linens 'n Things, taken private in 2006 for $1.3 billion by Apollo Management LP, filed for bankruptcy on May 2 in the biggest leveraged buyout failure since credit-market disruptions began in July. The company said it plans to close 120 ``underperforming'' stores, some of which are in areas that Bed Bath & Beyond has locations.

Retailers Sharper Image Corp., Lillian Vernon Corp., Bombay Co. and Levitz Furniture Inc. also have filed for bankruptcy protection.

(Editor: Haijing Qu)