When diginomica last checked in on Bed, Bath & Beyond, the retailer’s omni-channel transformation had hit a hefty bump in the road as the global supply chain crisis took its toll.
Things haven’t got any better in the intervening few month with the firm yesterday turning in heavy losses. The brand reported a Q3 net loss of $276 million, against a comparable year-ago figure of $75 million, while net sales fell 28% year-on-year to $1.88 billion from last year’s Q3 number of $2.62 billion. Digital sales declined 9% year-on-year compared to COVID-driven highs last year, but still makes up 35% of total sales.
Despite that the company’s share price rose on the release of quarterly results as investors held their nerve that CEO Mark Tritton’s heavily digitally-focused turnaround plan is still on track. For his part, Tritton said:
During this first year of our comprehensive transformation, our most recent results demonstrate the complexities of executing a long-term end-to-end turnaround plan, while managing a business in a highly unpredictable current short-term environment.
Unprecedented macro forces continue to permeate operating conditions, leading to a near-term versus long-term bifurcation in our performance…We continued to execute our long-term strategic initiatives to modernize our infrastructure, and enhance our agility in any future operating environments.
The ongoing supply chain crisis contributed to the firm’s downbeat Q3, he added:
The customer experience was compromised as strong demand wasn't met with strong product availability.
In other words, the shelves were alarmingly bare in many of the firm’s core categories.
That said, there was some better news in terms of football, said Tritton:
Amid somewhat normalized conditions, we converted traffic and met demand successfully both in-store and online. For example, we delivered a high single digit sales comp in the US over the Black Friday to Cyber Monday period, underscoring Bed Bath & Beyond as a top destination for customers. We're also pleased to see customers who returned to brick-and-mortar shopping this year, as our US stores delivered mid-single digit sales comps over this five day holiday period.
Addressing supply chain issues
With the short term macro environment unlikely to change much for the better, Bed, Bath & Beyond needs to make sure it has the ‘defences’ in place to ride out further turbulence as it pursues the long term turnaround strategy. Triton elaborated:
We must enhance our ability to fulfill our store demand once inventory is within our position from shipping containers to warehouses to stores. In the near-term, we've created new transfer processes that increase third-party logistics capacity and decrease warehouse holds to assist with flow.
We're also adding digital supply chain capabilities to automatically shift inventory sources between our owned vendor direct and marketplace availability. Our legacy infrastructure undermined our response times to offset the holiday inventory impediments, as visibility was limited ahead of our planned supply chain efforts.
To create a more nimble operating model enablement through better tools and processes are the basis of our ongoing supply chain and technology transformation. This reformation will help us mitigate misalignments in supply and demand, and prevent interruptions to our plan in the future.
There were some positives to be taken from Q3, he insisted, citing the firm’s Beyond Plus loyalty program as a case in point:
We grew from 1.8 to 2.2 million members after one of our largest new subscriber event in November, leading to one of our most successful membership acquisition quarters of beyond plus in years. We will leverage this momentum throughout 2022 as we support plans for our new loyalty program later this year. Spanning all our banners, our new program will be designed to reestablish ads as the preferred channels for our customers home and baby needs, while building authority, trust and long-term value across our ecosystem of banners.
Such customer engagement will lead to improvements in customer experience, he argued:
It is important we think about the ecosystem of life moments that we operate in and connect with customers. Whether we engage with a customer when they're planning their first child, or having their first child or if you skim forward to when they send them to college or when they're moving, when they're downsizing, we can capture a lot of data and a lot of engagement and really personalize our relationship with our customer by utilizing the engagement authority in family and the engagement or authority in home.
During this first year of our three year transformation, there has been no shortage of activity. From our new omni-channel and merchandising initiatives to the reformation of our supply chain and technology, we are paving a path towards greater profitability and growth for the future.
Triton is playing a long game here and that’s going to require the occasional course correction as it plays out. So far, surprisingly, Wall Street seems ready to give him time to achieve his goal of making Bed, Bath & Beyond into a “digital-firm, omni-always retailer”. As ever, this is one to keep an eye on across the rest of this year.