The San Juan Daily Star
Bed Bath & Beyond tries to turn itself around, again
By Jordyn Holman and Lauren Hirsch
Bed Bath & Beyond on Wednesday laid out an aggressive plan of store closures, cost cuts and layoffs that the home goods retailer hopes will return it to the relevance it enjoyed in its heyday.
It is the chain’s latest attempt to turn around its fortunes. In recent years, successive investors and executives have tried to revive it, to little avail. Sales and profits have fallen for the past four years, even as Americans have splurged to spruce up bedrooms, bathrooms and other parts of their homes during the pandemic.
“This really is the last roll of the dice for them,” said Neil Saunders, the managing director at GlobalData, a consulting firm. “You can’t keep going through reinvention after reinvention and getting it wrong.”
For many years, Bed Bath & Beyond, which was founded in New Jersey in 1971, benefited from rare cultural cachet for a big-box chain, serving as a rite-of-passage destination for college students outfitting their dorm rooms, a weekend hangout for home improvement enthusiasts in the market for kitchen knickknacks, and an anchor of suburban shopping centers. Its big blue coupons were ubiquitous, celebrities professed their love for the stores on talk shows, and its wide selection of merchandise became a plot point in movies and TV shows.
At its peak in 2013, the company’s market value was $17 billion.
But the company was slow to roll out a digital strategy to compete with Amazon and struggled to stock its shelves with products that shoppers wanted to buy. It began sending out fewer of the coupons in 2020 as its profits shrank. A $1 billion share buyback program it started the same year stripped it of cash to invest in its operations. Like other down-on-their-luck consumer companies, it caught the eye of meme stock traders, sending its stock on wild ups and downs.
Bed Bath & Beyond said Wednesday that it planned to close 150 of its approximately 1,000 stores, lay off employees and slash spending as it looked to stabilize its business by revamping its operations and raising extra cash. The company said it expected to record another quarter of negative cash flow and forecast that sales would fall around 20% this year.
The retailer is reducing the number of workers at its corporate offices and supply chain operations by 20%. It also said it expected other layoffs related to the store closures, which are already underway. As of February, the company had about 32,000 employees.
To bolster its balance sheet, Bed Bath & Beyond has secured $500 million in new financing, including $375 million from a loan by the investment firm Sixth Street, and announced a plan to sell up to 12 million additional shares of its stock. The retailer had about $100 million cash on hand at the end of May. It expects to save $250 million in costs this year and said it would slash its planned capital expenditure to $250 million, from $400 million.
The funds will buy the company time for its strategy focused on increasing foot traffic and stocking stores with more products that shoppers want to buy. It also eliminated the roles of chief operating officer and chief stores officer in favor of brand presidents overseeing its Bed Bath & Beyond and BuyBuy Baby brands.
The BuyBuy Baby business, which the company had considered selling, will stay part of the portfolio, it said, as the company determined that growth of the roughly 125-store chain “can best be accelerated” that way.
Bed Bath & Beyond’s stock plunged more than 20% Wednesday. Its market value is now about $760 million.
“We are embracing a straightforward, back-to-basics philosophy that focuses on serving our customers, driving growth and profitability, and delivering business returns,” Sue Gove, the company’s interim CEO, said on a call with analysts.
Bed Bath & Beyond’s new plan rips up the strategy of Mark Tritton, who left the company in June after 2 1/2 years as CEO. Tritton, a former chief merchandising officer at Target, was brought in after three activist investors took a stake in the retailer and demanded that it be more like Target, known for its streamlined aisles and array of private-label brands.
Under Tritton, Bed Bath & Beyond promised to revamp its website, improve its merchandise assortment and modernize its stores. It committed to spend $300 million to improve its supply chain and better stock its shelves. It created eight private-label brands, like Our Table for kitchenware and Squared Away for storage.
“It did feel like he did everything at once,” Jessica Ramírez of Jane Hali & Associates said of Tritton’s strategy. “If you look at what he was trying to do, everything was needed. It just feels like the execution fell flat.”
Then the pandemic put huge strains on supply chains, extending delivery times and increasing costs. While online sales got an initial bump as quarantined shoppers stocked up on throw pillows, blenders, and pots and pans, Bed Bath & Beyond had to quickly scale up the kind of offerings, like curbside delivery, that became lifelines for competitors like Target and Walmart.
In another twist, Ryan Cohen, who became a champion of meme stock traders as the chair of GameStop, disclosed a stake in Bed Bath & Beyond in March. He chided the retailer’s executives as being “too ambitious,” pushed for it to sell off the BuyBuy Baby business and put three of his nominees on the company’s board. BuyBuy Baby had roughly $1 billion in sales in 2020, according to an investor presentation.
Cohen sold his stake in the company in mid-August.
Bed Bath & Beyond seems to agree with Cohen on at least point: It needs to simplify its plan.
On Wednesday, it said it would scale back its push into private labels, discontinuing one-third of them and liquidating those products. Shoppers had preferred the brands they knew better, like Cuisinart or Keurig.
The company is planning a fall advertising campaign with a focus on national brands, an effort to tell a new story to shoppers. Executives said stores would also stock shelves with lesser-known direct-to-consumer brands, in hopes of recapturing the treasure hunt feel that brought shoppers to the stores in the chain’s glory days. They have not said what those brands would be.
“Discovering innovative and unexpected brands, products and categories will return to being a core experience for our customers,” Mara Sirhal, who was named the Bed Bath & Beyond brand president Wednesday, said on a call with analysts.
The chain’s financial travails have weighed on its relationships with suppliers, a dangerous prospect since similar problems at Toys R Us and Sears led to understocked stores that were hard to revive. Gove, the interim CEO, said she had personally talked with suppliers over the past few weeks to “reset” those relationships.
“It has been a very careful and close balancing act,” she said on the call.
Who is willing to take on the challenge? The company is still working with an executive search firm to find a permanent CEO. “We are in the earliest phase of the search process and will provide an update when appropriate,” the company said.