Is Bed, Bath & Beyond Out of Time to Turn Things Around?

Bed, Bath & Beyond has laid out plans to turnaround the retailer's struggling business, while also looking at selling off some of its assets.

In a letter to shareholders, Bed, Bath & Beyond interim CEO Mary Winston and independent board chairman Patrick Gaston gave a detailed update on the company’s progress, which included confirmation that the retailer has hired Goldman Sachs and “other outside advisors” to explore asset sales. 

“We continue to evaluate our fleet to create a better balance between our physical and digital presence within the markets we serve, to deliver the shopping experience our customers want,” the letter said. It also noted the company is “well underway” with a review of the strategic alignment of its other business concepts and is working with outside advisors, including Goldman Sachs, and is “currently evaluating several different opportunities.”

Bed, Bath & Beyond laid out several ways it plans to transform the business, including:

• An aggressive reduction of up to $1 billion of inventory expected to be executed over the next 18 months, including the removal of excess aged inventory from stores before the 2019 holiday season. 
• A rapid refresh of nearly 160 Bed Bath & Beyond stores, underway and expected to be finished in advance of the 2019 holiday season.
• A longer-term comprehensive store renovation program, in conjunction with further investments in customer-facing digital channels as well as marketing and loyalty initiatives.
• Cost savings from comprehensive lease renewal efforts and the corporate workforce reduction announced in late July 2019
• Nine new independent board directors have been appointed over the past few months, significantly reducing the average tenure of the board.
• CEO Search-With the support of a leading executive search firm, the board's CEO Search Committee has undertaken a process to identify a leader who has a multifaceted skill set, including transformation and innovation experience in the retail sector as well as e-commerce and marketing experience.  

Whether these changes will help remains to be seen, but the retailer has been transparent with its efforts.

"Bed, Bath and Beyond is certainly experiencing an overall decline in store visits, but considering the pace of closures there is clearly still a strong brand driving ongoing demand,” the Placer.ai team tells RIS. “These are huge assets in the current retail climate that could provide immense value.”

The foot traffic analytics platform recently dove into the company’s location analytics to identify the areas that could serve as the foundation for a successful turnaround.  It found Bed, Bath & Beyond has experienced a significant decline over foot traffic the last few years.

“To show the point in context, we compared foot traffic data with another leader in the sector – Home Goods,” Placer.ai's Ethan Chernofsky wrote in a company blog post. “We analyzed both companies’ visits compared to their respective baselines for the period from January 2017 through July 2019. Bed, Bath & Beyond saw a 2019 that routinely produced weekly visit numbers that were 30% or more below the baseline. On the other hand, Home Goods trended up throughout 2018, with 2019 continuing on the performance.

“This comparison is critical as it shows that there is still a strong consumer appetite for buying products like these in-store."

Chernofsky recommends Bed, Bath & Beyond can reverse this trend by focusing on visit duration, where the retailer sees 9.1% lower time spent in store than visitors to Home Goods.

“Forty percent of Bed, Bath & Beyond visitors spend 15-29 minutes in a branch, as opposed to less than 30% for Home Goods, who instead enjoy advantages in every period beyond 45 minutes. This indicates a significant strength for Home Goods, and the difference speaks to a need for Bed, Bath & Beyond to create experiences that increase visit duration, leading to a higher chance of driving purchases.”

Bed, Bath & Beyond said of its planned “rapid refresh” to stores “we expect this multi-million-dollar investment in physical improvements to be clearly visible to the customer and favorably impact the in-store shopping experience over the short term.”

The refresh of 160 stores is still a small portion of its fleet. As of June 1, 2019, the company had a total of 1,536 stores, including 995 Bed Bath & Beyond stores. What the company plans for its “longer-term comprehensive store renovation program” remains to be seen.