Bed Bath & Beyond is beginning to test changes in stores that it eventually could roll out to hundreds of locations, if it can draw shoppers in. On February 18 the retailer said it plans to spend up to $400 million on store remodels and supply chain upgrades, along with about $600 million this fiscal year on share repurchases and debt reduction.

Top of mind for Mark Tritton, CEO, who just took the reins in November after a successful stint as chief merchandising officer at Target, is fixing Bed Bath & Beyond’s stores. It has roughly 1,500, including under its other banners, such as Christmas Tree Shops, World Market and buybuy Baby.

The company is currently testing, with a small batch of three Bed Bath & Beyond locations, various remodeling strategies that consist of slashing inventory by as much as 20% and adding more marketing signage. Tritton said same-store sales at those locations are up 2% to 4% compared with Bed Bath & Beyond’s entire fleet. Currently, Bed Bath & beyond is planning to remodel about 25 locations this fiscal year. And there could be more to come in 2021.

Earlier on February 18th, Bed Bath & Beyond announced it had agreed to sell its business, known for selling gifts for special occasions and holidays, to 1-800-Flowers.Com for $252 million. Its shares had closed February 18 up more than 5% on the deal news, then climbed more than 3% in extended trading, as Bed Bath & Beyond laid out its spending plans. Tritton said the deal with 1-800-Flowers.Com, which is expected to be completed during the first quarter of fiscal 2020, is part of Bed Bath & Beyond’s broader strategy to focus more on its core home, baby and beauty businesses.

Last month, Bed Bath & Beyond said it has completed a sale-leaseback transaction with an affiliate of Oak Street Real Estate Capital, netting it $250 million in proceeds. The properties sold represented about 2.1 million square feet of commercial real estate, including stores, office space and a distribution centre. After receiving the influx of cash, Bed Bath & Beyond now pays rent to Oak Street. Bed Bath & Beyond has also said it plans to close about 40 of its namesake stores this fiscal year.

‘There are a lot of things we can rectify’

On the week of February 10, Bed Bath & Beyond said sales during the first two months of its fiscal fourth quarter were hurt by heightened promotions, falling store traffic and inventory management issues. When the data was released Tritton said “Our performance in the third quarter was unsatisfactory and underscores the imperative for change and strengthens our sense of priorities and purpose.”  Tritton knows he still has plenty of work ahead of him, especially considering that same-store sales at Bed Bath & Beyond, a crucial barometer of a retailer’s health, have been negative since May 2017 and dropped 5.4% during November and December. 

The report ignited fears on Wall Street that a turnaround with Tritton is going to take longer than initially anticipated, and drove its stock down more than 30% year to date. The company has a market value of about $1.5 billion. But the CEO, who was responsible for launching many of Target’s popular private labels, says investors need to be patient.

Wedbush analysts led by Seth Basham wrote that, “We see potential for results to improve materially starting in the second half of 2020 on the back of price/value changes, better inventory management, BOPIS [buy-online-pickup-in-store] rollout and other omnichannel enhancements.”

Tritton also said the company remains “cash rich,” unlike many struggling retailers.Bed Bath & Beyond reported roughly $900 million in cash and cash equivalents as of Nov. 30.

The company is set to report its fourth-quarter and full-year earnings on April 15, after market close.

Source: CNBC
Source: Market Watch
Source: Red Dear Advocate