Bed Bath & Beyond has been battered by Wall Street since its most recent earnings call. Shares have dropped from a little over $33 a year ago to trading around $5 recently. Sales in the first fiscal quarter ending May 28, 2022 dropped 25%, from nearly $2 billion last year to $1.5 billion this.
Just a year ago, people still believed in newly-appointed CEO Mark Tritton’s ambitious transformation plan that was announced in October 2020. Previously a merchant prince at Target with oversight of its private-label business, Tritton joined BBBY in November 2019 to right the struggling retailer coming off ten consecutive quarters of declining same-store sales.
But two and a half years in, Tritton failed to deliver, and during the latest earnings call, the company announced Tritton’s departure, along with chief merchandising officer Joe Hartsig. Board member Sue Gove will step in as interim CEO, and its Harmon general manager Mara Sirhal will take over Hartsig’s duties as she continues to lead Harmon. The company did not respond to a request for comment.
It’s been a tumultuous two and a half years for the company, its stockholders and most especially its customers, who’ve not yet had time to adjust to the many changes their once dependable Bed Bath & Beyond stores gave.
Too much too soon
A case in point is its evolving loyalty program. A paid-membership program that had been around for a couple of years called Beyond+ offered BBB customers free shipping and 20% off purchases with some exceptions. Late in 2020, Tritton wanted to give the program a kick and initiated an aggressive membership drive that brought in nearly half a million new Beyond+ members.
Then this month, it announced an even bigger, better membership program called Welcome Rewards that applies across all three company banners – Bed Bath & Beyond, Buybuy Baby and Harmon. Beyond+ members can roll over to Welcome Rewards, but the whole thing is confusing to me, let alone the average customer.
It all adds up to too much change too fast. Despite this misstep, among others like scaling back its popular 20% off coupons for a time, perhaps the company pulled the plug on Tritton and his company transformation plan too soon.
A road paved with good intentions
Immediately after taking the helm, Tritton ousted six senior-level executives, sold off some real-estate assets, offloaded its PersonalizationMall.com to 1-800-Flowers, announced plans to shutter 200 stores (5% of its fleet) and laid out an over $1 billion capital allocation strategy, including stock buybacks, debt reduction and investments in store remodels, supply chain and digital enhancements. Then Covid hit, leading to store closures and employee furloughs.
As the pandemic started to lose its grip later in 2020, more employees were laid off and executive leaders hired. In addition, two more banners were sold off – One Kings Lane and Christmas Tree Shops – and Cost Plus World Market followed in January 2021, before the close of fiscal 2020.
Tritton’s first year with the company was capped by announcing a three-year transformation plan in November 2020. It hinged on major store remodels, curating product assortment down by 20% to 30% while introducing more than ten private label brands and leaning into an “omni-always” digital strategy.
The company ended fiscal 2020 short 144 stores leaving a total fleet of 1,020 stores, including 834 BBB, 132 BuybuyBaby and 54 Harmon Health and Beauty stores, and with sales of $9.2 billion, down from $11.2 billion in fiscal 2019.
From bad to worse
But Tritton’s ambitious three-year transformation plan hasn’t born fruit over the course of its first year and a half.
Early hopeful signs in fourth quarter 2020 and first quarter 2021 were dashed in the second quarter 2021. Reporting results for June through August 2021, revenues were down 26% from previous year – same store sales off 1% – as store traffic “slowed significantly,” Tritton said at the time.
Third quarter 2021 was worse with revenues dropping 28% and same store sales down 7%. Supply chain snafus took much of the blame for underperformance.
Fourth quarter 2021 followed with more of the same. Sales weres off 22% and same store sales trailed previous year by 12%. The only bright spot was Buybuy Baby which ended the year up double-digits to $1.4 billion. However, it was small consolation with total revenues down 15% from $9.2 billion previous year to $7.9 billion in fiscal 2021 ending February 2022.
And then came first quarter 2022 when things went from bad to worse. With the company’s fleet optimization and banner sell-offs largely absorbed, same-store revenues fell 23%, off 24% in-store and 21% in digital. Bed Bath & Beyond sales cratered 27% and BBBY’s previous rising star, BuyBuy Baby, dropped in mid-single digits.
Tritton exits the company with little to show for his efforts, other than 50 remodeled BBB stores and a selection of private-label brands that were late on arrival due to supply-chain issues.
Over his tenure, the challenges of bringing about a massive transformation of the company all the while dealing with rising external pressures from the pandemic, supply chain issues and demands from activist investor Ryan Cohen, who made his fortune with Chewy.com, was just too much to handle.
While Tritton was focused on the company’s inner workings, the story the company’s numbers tell – quarter after quarter of declining same-store sales – reveals he may have lost sight of the customers and what they wanted.
Tritton failed in the company’s stated mission: “We make it easy to feel at home!”
Coming back home
For all its pre-Tritton flaws, Bed Bath & Beyond no longer felt like home to its loyal and even occasional customers.
While it still holds the number two market share slot after Wayfair among the 30 top pure-play home goods retailers, according to YipitData, it lost more than a percentage point SOM from calendar first-quarter 2021 to this year, from 9.7% to 8.6%. In addition, it experienced the steepest drop in number of customers among the top 30 pure-plays over that period, while Big Lots and Home Goods gained the most.
Foot traffic, a key performance indicator for every retailer, tells much the same story. Bank of America estimated foot traffic to BBB stores was down as much as 30%, according to CNN.
That may be a result of customers turning up at the store during its prime holiday shopping season last year and not finding what they expected. The company estimated it lost $100 million in sales in November due to lack of inventory and another $175 million in December through February 2022.
While the company’s board and stockholders were looking for a quick fix, its customer base wasn’t necessarily clamoring for the many changes they’ve seen and have yet been able to process.
Reporting on retail visitor metrics, Ethan Chernofsky, vice president of Placer.ai, said, “Bed Bath & Beyond visits are certainly down, but the picture is more complex,” adding that there are early signs the company’s right sizing efforts are showing results.
“Remodeled stores are outperforming existing formats and the combination of Bed Bath & Beyond’s existing brand strength, the long-term prospects for this segment and the strength of key strategic decisions are creating a far more optimistic picture for the retailer,” he continued.
So rather than counting Bed Bath & Beyond out, as its recent press coverage suggests, like this headline from Wall Street Journal, “Bed Bath & Beyond the point of no return?” the company and its customers may just need a little more time to adapt to the changes. Unfortunately, time has run out for Mark Tritton.