Bed Bath & Beyond has a story to tell.
Unfortunately, though, for some analysts and investors, the retailer is only in the first or second inning of a massive turnaround. Here, patience is going to be key.
Chief Executive Mark Tritton took over the embattled home-goods business, leaving his post as chief merchant officer at Target, in November 2019.
He swiftly cleaned house, bringing in a new suite of executives to sit alongside him. He announced a sweeping store-closure road map to rid the business of unprofitable shops and to allow it to invest more in digital. He also led a number of divestitures, including Christmas Tree Shops and Cost Plus World Market, to whittle the business down to core banners. Much of this work, notably, took plan during the span of a global pandemic.
After Bed Bath & Beyond released its fiscal fourth-quarter earnings results Wednesday, shares tumbled more than 11%.
While it swung to a profit, net sales were down double digits year over year. That was in large part due to ongoing store closures and divestitures that the company has made in the past 12 months.
Comparable sales were up 4% overall. Within its namesake Bed Bath & Beyond banner, comparable sales climbed 6%. Digital sales, in total, were up 86%.
“What we’re seeing coming through is new confidence from customers as vaccines start to take off,” Tritton told CNBC’s Courtney Reagan on Wednesday. “It’s still early, there’s a lot of ambiguity out there … but we’re seeing a return to stores and a rebalancing of that digital and physical space.”
One of the biggest criticisms Bed Bath & Beyond has faced in past years is over its sloppy stores that almost resemble warehouses: Complaints include outdated fixtures and merchandise piled so high that shops feel cramped and unorganized.
Tritton is clearly trying to fix that. Bed Bath & Beyond is in the process of remodeling 130 to 150 stores this fiscal year, including 26 during the first quarter. It just completed its first batch in the Houston market in February.
The company said it will spend about $250 million over the next three years to remodel roughly 450 Bed Bath & Beyond shops in total. That involves decluttering aisles, adding fresh signage and installing more modern light fixtures.
“It’s early days,” Tritton told CNBC about the remodeling. “Normally we have a period of adjustment as we go through every remodel. … It’s about a 12-week process.”
Meantime, Bed Bath & Beyond must also prove that its gains can last beyond the Covid pandemic. It has now booked three consecutive quarters of same-store sales growth. But when customers aren’t stocking up on hand sanitizers, cleaning supplies and bread makers, what will they be buying?
Bed Bath & Beyond wants to be known as a destination for all-things home.
Earlier this week, it debuted its “Home, Happier” campaign, which includes a 30-second national TV ad and social media spots that feature different families enjoying their homes.
As part of the launch, store employees are also going to be outfitted with new uniforms, name tags and face masks, the company said.
In coming years, Bed Bath & Beyond will strengthen its lineup of private labels across different categories of home goods. It’s planning to launch at least eight brands this year.
Last month, it debuted Nestwell, which sells soft bedding and bath items like towels. Haven, a spa-inspired bath brand, will launch next week. Next month, it will debut Simply Essentials, a brand that the company says will be known for its “great value.”
“By introducing brands that can only be found at Bed Bath & Beyond, we create a unique reason for customers to shop with us,” Chief Merchandising Officer Joseph Hartsig said during a conference call with analysts.
As a bonus, these efforts should also also help boost Bed Bath & Beyond’s profitability. The retailer has said it expects its private-label sales will grow to represent 30% of its business within three years, up from about 10% from today.
“These are huge investments,” said Jessica Ramirez, a retail research analyst for Jane Hali & Associates. “But, so far, we’ve only seen that one label come from [Tritton].”
Investors might have expected to see more signs of progress in Wednesday’s report, Ramirez said, but they’re going to have to wait a bit longer to see how the remodeling, the new brands and Tritton’s other initiatives pay off.
Tritton also has a plan for those iconic Bed Bath & Beyond coupons. While not getting rid of them entirely, the company has been scaling back the number of coupons it sends online and to customers’ homes. It’s also trying to cater them more specifically to things people might be looking for, based on the customer data it has on hand.
Bed Bath & Beyond shares are up about 34% year to date, giving the company a market cap of $3.4 billion.
—CNBC’s Katie Tsai contributed to this reporting.
Source: Business - cnbc.com
