Earlier this year it looked it looked as though US retailers Bed, Bath & Beyond had become a digital transformation turnaround success story, something that had seeming incredibly unlikely only a couple of years ago. But diginomica cautioned at the time that while CEO Mark Tritton’s efforts to overhaul the troubled business appeared to be bearing fruit, it was still early days.
At first sight, this week’s announcement of the firm’s latest quarterly numbers might look as though our fears were well-founded as the retailer missed net income expectations on the back of hefty costs associated with its transformation. But in reality, Bed, Bath & Beyond’s performance continues to demonstrate underlying benefit from its omni-channel efforts.
The firm turned in a loss of £51 million, down from a loss of $302 million for the comparable quarter last year. Overall first-quarter sales climbed nearly 50% year-on-year to $1.95 billion, with digital sales making up 38% of that. Tritton picked up on that latter point in his post-results announcement analyst call when he noted:
This digital penetration is nearly double our 2019 levels, making digital a new strength for our organization. This growth, on a two-year basis, was 84%.
But he was keen to emphasize the importance of the firm’s store real estate, pointing to an uptick in Buy Online, Pick-up In Store (BOPIS) activity:
Through our partnership with DoorDash, same-day delivery is now available in additional 3,000 Zip codes in the US, and 47 cites across nine Canadian provinces. This follows the successful launches of our BOPIS and contactless curbside pick-up services during 2020. Our stores continue to be an operational strength for Bed Bath & Beyond during the quarter. In Q1, 31% of our digital demand was fulfilled from stores, with BOPIS representing 14% and ship-from-store and the same-day delivery accounting for 17%. Our footprint plays a vital role in our digital-first, omni-always strategy.
Overall, he said, the ongoing omni-overhaul of the business is proceeding apace:
We're making great strides in all aspects of our transformation, and customers are also recognizing the evolution. Our active customer base increased sequentially versus last quarter. Even more exciting, half of these active customers are shopping omni and digital double 2019 levels. These customers shop more frequently, and with a larger basket size.
Behind the scenes, a major technology upgrade remains on track, he added:
We are modernizing our infrastructure to further support our strategy and pursue greater operational efficiencies by enhancing our supply chain and technological foundation.
The first phase of our end-to-end supply chain transformation is underway with the construction of our North East distribution center. As part of this endeavor, we are currently finalizing an agreement with the third-party logistics partner to begin establishing our new store replenishment approach.
We've made progress towards reinventing our financial, inventory management, and merchandising capabilities through our technology transformation. We selected Oracle as our Enterprise Resource Planning (ERP) provider and the next component of our IT roadmap is progressing with the appropriate designing and planning for our full ERP migration.
It’s a big year for Bed, Bath & Beyond. Tritton notes:
This year, we'll not only mark up the 50th anniversary as a business, but [it will] also be an important inflection point in Bed Bath & Beyond's history. We are reinventing ourselves.
A couple of years ago, the idea that this particular retailer had much prospect of mapping out a future for a second half century looked dubious in the extreme, but the turnaround has been remarkable.
Memo to other aspiring omni-channel converts - it can be done!