Bed, Bath & Beyond hope for omni-channel transformation as sales collapse, losses soar and bankruptcy talk increases
- Bed, Bath & Beyond enters what must be the end game as its omni-channel ambitions fail to save it from plummeting sales and soaring losses. A casebook of how not to do retail transformation?
Two years ago diginomica began referring to Bed, Bath & Beyond Hope as the US retailer’s tortuous attempts at omni-channel transformation hit problem after problem. We’re using the headline again, but this time, surely, it must be for the final time as things couldn’t be worse for the beleaguered firm.
Yesterday the company turned in a quarterly loss of $393 million, even worse than had been expected, as net sales tumbled by a third year-on-year to $1.26 billion. There’s an admitted prospect of heading into bankruptcy, while more store closures and staff layoffs are underway. Little wonder perhaps that management declined to take any questions on the post results analyst call. What could they possibly have said to make things any better?
What was left to CEO Sue Gove was an attempt to paper over some of the cracks, albeit with little wiggle room available to her. There have been some successes, she insisted:
For decades, Bed Bath & Beyond has set the pace across the home goods sector, and we have commanded our position in retail through many different economic cycles and serving a continuously evolving customer. We believe our concrete advantages in defining categories, offering broad and curated selection and delivering great service for customers are compelling reasons why we will continue to command a formidable presence in the Home and Baby categories in the future.
We have the talent and team to accomplish our goals. Our business was built around our loyal customers. Listening and responding to their preferences was at the center. Veering away from that path has led to our recent financial performance. We have taken aggressive action to change the elements of our business that are not aligned to what our customer wants. We are rebuilding our assortment to serve our customers’ needs by leading with national brands and reducing our owned brands merchandise at the Bed Bath banner. We are accomplishing these goals successfully as owned brand inventory penetration has declined 10 percentage points versus peak levels during the first half of the fiscal year.
Closing stores and having no go-forward inventory has taken out almost $500 million of cost on hand and on order to just over $130 million at cost in the last 6 months, she added:
We also recognize and embrace that our customer shops differently today. They visit stores less frequently and have higher expectations when they do visit around service, engagement and assortment. They want an omni-experience that we are committed to deliver. Ease of shopping is critical, and we are committed to delivering such services as BOPIS and same-day shipping. At the same time, we are listening to our customers, and we are swiftly enacting improvements to their experience…we want our customers to know that we hear them and we are charging ahead every day to meet their needs. Our entire organization is laser-focused on maximizing the value of our company by reconnecting with our customers and positioning Bed Bath & Beyond, buybuy BABY and Harmon for long-term success.
And there was an attempt made to ‘benefit’ from the wider macro-economic headwinds:
Following some of the micro and macro-economic challenges, we, and the sector faced, at the beginning of the quarter, we experienced an acceleration in vendor payment terms and credit line constraints. This led to lower receipts and, therefore, lower in-stock levels, in the 70% range, which hampered our sales further in an already competitive environment.
As part of our turnaround, we are resetting foundational elements to create a stronger and more nimble infrastructure that aligns closely with customer demand and preference.
It’s a bold attempt to create some kind of positive perception, but the reality is very different. It’s over. Done. Put a fork in it.
Bed, Bath & Beyond will stand as a testament to how not to execute an omni-channel transformation in a new age of retail. It failed to recognize the digital revolution early enough, sticking to its paper coupon business model. As customers moved online, Bed, Bath & Beyond opened more and more physical stores. These did nothing to help when COVID struck and they all were shuttered. While e-commerce numbers went up during the lockdowns, there wasn't enough of a base to build on. Former CEO Mark Tritton's much vaunted turnaround plan, which said a lot of the right things, didn't deliver enough in practice and he was gone by the second half of last year.
So now bankruptcy looms:
The company continues to consider all strategic alternatives including restructuring or refinancing its debt, seeking additional debt or equity capital, reducing or delaying the company's business activities and strategic initiatives, or selling assets, other strategic transactions and/or other measures, including obtaining relief under the US Bankruptcy Code. These measures may not be successful.
Indeed they may not.
I’ll say it again - Bed, Bath & Beyond Hope.
Except this time around, hope is hightailing it over the horizon with its ass on fire.