Earnings fell to $87.7 million, or 34 cents a share, for the fiscal third quarter ended November 29, compared with $138.2 million, or 52 cents a share, a year earlier.
Analysts, on average, had expected earnings of 33 cents a share, according to Reuters Estimates.
Total sales fell 0.7 percent to $1.78 billion. Same-store sales, a key measure of retail performance, fell about 5.6 percent.
Linens 'n Things, a key competitor, sharply discounted its goods in recent months as it liquidated its stores after filing for bankruptcy last year.
Additionally, home-goods chains Pier 1 Imports
Bed Bath & Beyond forecast profit of 40 cents to 46 cents a share for the fourth quarter that ends in late February and $1.50 to $1.56 a share for the full year. Analysts expected 51 cents a share for the fourth quarter and $1.59 a share for the year.
The retailer had cut its third quarter forecast in December, citing liquidation sales of a major rival and the challenging economy.
(Reporting by Karen Jacobs; Editing by Tim Dobbyn)