Bed, Bath and Beyond (BB&B) has been receiving regular attention in the press lately, and not for the best reasons. So we decided to dig into what has been happening with BB&B, exploring what's next for the home products retailer—and what other retailers might learn from its challenges.
With the BB&B’s annual meeting around the corner on July 25th, news updates and stock predictions have multiplied this month. But the company’s woes began way back in 2017 and continued to escalate through the fall of 2018—and the headlines about the business continue to be bleak. It all started with an extreme earnings miss, which was attributed to competition from Amazon—but it doesn’t seem to be so simple.
Long known for its lenient coupon policies, the company also offers laid-back return policies. And while the stores are typically neat and tidy, there might simply be too much going on.
Last spring, credit ratings agency Standard & Poor's cut its rating on Bed Bath & Beyond (BBBY) to a BBB- level, the very lowest that S&P considers investment grade. Warning that the company’s bonds could be downgraded to junk if "the company cannot stabilize operating performance in the face of continued intense competition from online retailers."
Fast forward to this spring, activist investors—individual or groups of investors that buy up shares of public company or try to snag board seats to effect change in the company—have been all over the retailer, which had attempted to update its board to get back on track. But a board update was not looking like enough. Activist investors advocated for the company to streamline its product offerings and strengthen the in-store experience to drive more traffic.
Around this same time, the retailer announced that, as part of a turnaround plan, it would close 40 stores. Additionally the company used experimental “lab” locations to try new strategies—those stores outperformed regular locations by 2.2% in sales.
According to former BB&B CEO Steven Temares, the lab stores had "a greater emphasis on home decor, food and beverage, and health and beauty care.” By shaking up the store layouts, these locations aimed to give shoppers better access to merchandise.
In May 2019, Temares stepped down as CEO making way for Mary Winston, an experienced public company executive and board member to take on the role of Interim Chief Executive Officer. At the urging of the activist investors, which bought a modest share in the company and now occupy board seats, the company’s founders Warren Eisenberg and Len Feinstein have also departed.
So what’s next?
The company’s annual meeting is set for July 25th, the proxy statement and annual report is available here. Equipped with new leadership and a shift in strategy, there’s still a chance the retailer could make a comeback. But the general consensus is that it has a long road ahead of it—and it wasn’t just the coupons that were to blame for the decline.
The first step in the four step turnaround plan is a comprehensive brand review. According to this report from Bloomberg, “the company’s CEO Mary Winston also said the company would shore up its flagging sales, cut costs and change its organizational structure.”
While the company has already made efforts to revamp its brick-and-mortar stores and create a meatier online presence to be more competitive with Amazon, it’s still behind.
Unfortunately its same-store sales fell 6.6% in the quarter that ended June 1, a larger decline than the predicted 5.6%, according to Consensus Metrix.
For retailers looking to learn from BB&B, here are a few pitfalls to avoid and ways to keep your store relevant:
- Steer clear of unprofitable promotional activities: Whether it be excessive coupons or sales cycles that devalue your inventory, promotions can send mixed messages to consumers—even if they sometimes do drive traffic.
- Have a digital presence: In today’s world you have to be online but as a brick-and-mortar retailer, it shouldn’t just be for kicks. Your digital presence should help support what you do in stores and complement it, making shopping with you more convenient for your customers.
- Streamline your inventory and store layout: Bed, Bath and Beyond could be an overwhelming place to shop—and, as such, part of its brand evaluation will focus on cleaning up offerings and store layouts. Instead of trying to stock everything and cover all your bases, a better strategy may be to corner a niche. Pick several categories and nail them with premium products shoppers can’t find elsewhere.
- This article includes some additional insightful lessons to be learned from Bed, Bath and Beyond.
This article originally appeared in Sleep Retailer eNews on July 11, 2019.
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