Will Bed Bath & Beyond’s new turnaround plan work any better than the previous one?

Discussion
Photo: Getty Images/JHVEPhoto
Sep 01, 2022

Bed Bath & Beyond yesterday went public with the struggling retailer’s new plan to get its business on solid footing. The company says that the planned changes will enable it to meet the demands of its customers, drive sales and profits and leave it with a stronger balance sheet and cash flow. Its stakeholders certainly hope management has it right.

“We are embracing a straight-forward, back-to-basics philosophy that focuses on better serving our customers, driving growth, and delivering business returns,” said Sue Gove, director & interim CEO, in a statement. “In a short period of time, we have made significant changes and instituted enablers across our entire enterprise to regain our dominance as a preferred shopping destination for our customers’ favorite brands and exciting products. We command a special presence in the Home and Baby markets, and we intend to fulfill our opportunity to be the category retailer of choice.”

Bed Bath & Beyond is pulling back on former CEO Mark Tritton’s emphasis on building its private labels to focus on national brands. Mr. Tritton’s strategy came under criticism when supply chain disruptions in the retailer’s owned brands led to out-of-stocks and lost sales (approximately $100 million in the last quarter), particularly without a sufficient inventory of key national brands to fill the demand.

The retailer has pledged fast action in bringing in popular national brands and emerging direct-to-consumer items. Bed Bath & Beyond said it would discontinue three of the nine private label brands introduced under Mr. Tritton (Haven, Studio 3B and Wild Sage) and reduce inventory on the remaining brands it owns by 20 percent (Everhome, H for Happy, Nestwell, Our Table, Simply Essential and Squared Away).

Management also announced cost-cutting measures that include shuttering about 150 “lower producing” Bed Bath & Beyond stores out of the 700-plus stores it currently operates under the banner. The company is also laying off about 20 percent of its corporate and supply chain staff. The moves are expected to save the retailer about $250 million in the current fiscal year. Bed Bath & Beyond also said it would reduce planned capital expenditures to $250 million from $400 million.

The retailer has also secured commitments for $500 million in new financing through a $375 million loan with Sixth Street Partners and by expanding its $1.13 billion asset-backed revolving credit facility.

DISCUSSION QUESTIONS: What are the key challenges that Bed Bath & Beyond faces at this moment in time? Are the changes that it has announced the solutions to its problems?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"I love their sentiment of getting back to basics, but the reality is the ship has already sailed into Amazon waters and I don't think this will save them. "
"What’s good about their plan is that it is addressing each of these by returning to basics."
"This company never rises from the ashes. All the last CEO did was give competitors time to get further ahead."

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25 Comments on "Will Bed Bath & Beyond’s new turnaround plan work any better than the previous one?"


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Neil Saunders
BrainTrust

The most solid part of the turnaround plan is securing financing to keep the business going. Without it, Bed Bath & Beyond would be in bankruptcy. However loans come with interest and eventually have to be paid back, so they’re only one side of the equation. The other side is getting the sales line back into growth. Here the plan has some sensible elements, but it is vague and lacks oomph; it is more about correcting some of the mistakes than about making Bed Bath & Beyond a destination for home. And on top of all this, there is still no permanent CEO in place and no real update on the progress to find someone. The plan helps more than it hinders, but I am afraid it is not convincing.

Mark Ryski
BrainTrust

This retailer is in serious trouble. The dramatic steps they’re taking by cutting staff and closing stores is clear evidence. The fact is, Bed, Bath & Beyond has been on a steep downward spiral since shortly after Tritton took over, and the decline has accelerated. The changes announced may improve their financial position slightly, but it won’t bring customers back to their stores. I expect to see more desperate steps as this saga unfolds.

DeAnn Campbell
BrainTrust

I love their sentiment of getting back to basics, but the reality is the ship has already sailed into Amazon waters and I don’t think this will save them. Their private label strategy wasn’t effective because they didn’t have a strong enough reputation established to make those products desirable. Target is a good example of a company who has done a far better job at creating trust and relevance around their private labels. I’d like to see Bed Bath & Beyond survive, and they still have a chance, but they’d be better served to focus on establishing strong partnerships with other brands and retailers that have a lot of value to consumers, but are difficult to access for viewing in person. Oprah may say Cozy Earth sheets are the softest, but I’d rather feel them out myself before buying. That’s where Bed Bath & Beyond could thrive, especially with their capabilities to offer fulfillment in addition to showrooming.

Paula Rosenblum
BrainTrust

…and many other DTC retailers that have better colors.

Gary Sankary
BrainTrust

This appears to be too little, too late. Closing stores, changing assortments, and massive layoffs are desperate moves that never result in long-term viability for a company. Their focus needs to be on re-gaining market share and winning back their lost customers. These measures may improve the bottom line for a while but they won’t address the bigger problem of declining customer interest.

Steve Dennis
BrainTrust

Bed, Bath & Beyond epitomizes the collapse of the middle I have been writing and speaking about for over a decade. Category killers were powerful business models until they were not. The notion of selling a lot of average products for the average consumer is an unsustainable business model in a world of the endless aisle and thousands of more convenient brick and mortar competitors (see Toys “R” Us, among other). And closing stores does precisely zero to improve consumer relevance. The only category killers that will still be around are those that lean into the unique advantages of a strong harmonized retail experience (Home Depot) or tighter customer focus with an expanded range of services (PetSmart and Best Buy). Bed Bath & Beyond needs a radical transformation (a la RH) and it is unlikely they have the time and capital to pull it off, even if they had a remarkable strategy–which they don’t. Dead brand walking.

Dave Wendland
BrainTrust

Make no mistake, focus is always the right decision. However I’m not sure if Bed Bath & Beyond can continually claim to be reinventing themselves to survive. I fear that hocus pocus is being confused for focus.

Dr. Stephen Needel
BrainTrust

Stick a fork in them – they’re done. As Mark Ryski says, you don’t cut staff and stores to this extent without bigger problems. And Neil Saunders is right – financing needs to be repaid. With a recession, inventory, and supply chain issues, keep expectations low.

William Passodelis
Guest

That is exactly what I thought as I read this. Stick a fork in it! BB&B needs a lot of work and attention, but I have to wonder if the horse is already out of the barn and down the road.

Paula Rosenblum
BrainTrust

Personally, I have found their assortment very unimpressive for some time. I don’t care who makes their sheets. They’re the wrong weight, the wrong colors and the wrong materials for me. So, absent re-expansion of the assortment (which I’m pretty sure they won’t do), it’s still a hard no for me.

Lucille DeHart
BrainTrust

Back to basics is not a new strategy for Bed Bath & Beyond. While I completely agree that they should always be in stock and competitive on their top brands and SKUs (Dyson, Kitchenaid, OXO, etc), they need to reintroduce the element of discovery. The store experience is lost. Customers loved going in to get something specific and walking out with five other items they didn’t know they needed, but saw and wanted. They lost that magic with a focus on “owned brands.”

Jeff Sward
BrainTrust

Sounds like the prior team under-executed on balance sheet management and over-executed on merchandising realignment. That’s no small miss. That’s not a combo any CEO wants on their resume. Shades of Ron Johnson/JCP. Good ideas poorly executed. And now the balance sheet is on life support. It’s unfortunate. I was seeing improvement in my local store. The new measures sound textbook, but executing a retail transformation while on life support is no easy task.

Gene Detroyer
BrainTrust

How many times have we written about Bed Bath & Beyond’s turnaround? How many of those turnarounds were successful? They are facing past customers finding alternative sources. If those alternative sources satisfy customers’ needs, they won’t return. All of Bed Bath & Beyond’s inertia is going in the wrong direction.

Richard Hernandez
BrainTrust
Richard Hernandez
Merchant Director
3 months 8 days ago

I really thought that this rejuvenation would have helped bring Bed Bath & Beyond back to where they were a destination for home goods. The remodel to a more clean presentation was good, but the introduction of private label was muddy and did not stand out. I don’t know how much closing stores and cutting staff will help.

Dick Seesel
BrainTrust

This is not so much a new game plan as a reversion to the company’s pre-Tritton strategy. A focus on brands instead of private label was always part of the Bed Bath & Beyond formula, but it’s unclear whether the company will “error-correct” by turning back to the over-assortment and clutter it was once known for.

Will it work? Closing over 20 percent of the store base is not a good omen, as most other retailers with a big physical footprint have leveraged it to build their e-commerce business too. There may be too much to fix at Bed Bath & Beyond — and not enough time even with new financing.

Tara Kirkpatrick
BrainTrust

Relevance in a competitive landscape that includes Amazon is its biggest issue. For this reason, I find it interesting the company did not mention the mobile investment it has made recently and looks to be having success with. In June, it launched a store-branded Buy Now, Pay Later feature, Welcome Pay (powered by Zip Pay), which followed a College Savings Program launch in May. Judging by the 85 percent increase in mobile growth in August, it attracted student shoppers and likely converted sales.

Of course one good month out of the year is not going to save a sinking ship, but leaning into mobile more will at least get Bed Bath & Beyond a chance to compete with Amazon – who, by the way, is buying up home improvement search keywords in the app stores to gain share of voice in the market. If Bed Bath & Beyond were to do this and keep its locations that are near universities and Home Depots or Lowe’s, it could perhaps regain relevance.

Ken Lonyai
BrainTrust

This company never rises from the ashes. All the last CEO did was give competitors time to get further ahead. They need to drop the whole membership game and even the slew of coupons–what they promised to drop years ago and get back to meaningful retailing.

They can’t win on price. They need to be expert at product mix and service. Did I say service? They are good at hassle-free returns, but finding assistance let alone good assistance is a challenge for shoppers.

I’m not optimistic about any plan for them. They’ve lost time and although they are cost cutting, they are racking up debt. Hard to invest in quality front-line staff and a better in-store experience, while towing the line on price and paying back loans.

I think this is the making of another Sears.

Bob Phibbs
BrainTrust

Raise your prices on name brands, bring back the coupons your loyal shoppers loved, get sales training. You can’t cut your way to profitability.

Brian Delp
BrainTrust
3 months 8 days ago

Short answer … no. This is a reversal on prior tactics. They have taken their eyes off the core customer by copying other retailers. This identity crises has lost their base. The significant layoffs earlier this week as well are only going to further a shortage of talent and innovation. I feel for those left clinging to the remaining pieces and do wish them much success, but we’ve all seen this movie before.

Brandon Rael
BrainTrust

Unfortunately, the Bed Bath & Beyond brand equity has significantly diminished over the past year. The prior 2019-21 turnaround and restructuring plan was centered around modernizing the stores, curating the assortments, being “omni always,” right-sizing the store fleet, modernizing the digital capabilities, and increasing the private label assortments. This did not meet expectations and distanced the brand from their core customer.

With the rise of Amazon, Walmart, and Target in the home and lifestyle spaces, BBBY, which was once the industry disruptor, has seen its market share and brand equity diminish. At this point, BBBY is in survival mode, and its main objectives are to secure the financing to keep the ship afloat. The unfortunate and disappointing restructuring process of reducing capital expenses, mass store closures, and layoffs will only result in a zero-sum game.

Beyond buying time, it’s not clear what the path forward is for BBBY.

Craig Sundstrom
Guest

Their key challenge seems to be that they’re not very good at selling stuff or, at least, others are better, which has always been and remains a big problem (which while bad for BB&B is a good thing since it reminds us no amount of buzzword/jargon laden press-releases and reorganizations will resolve core weaknesses).

Exactly why this is, of course, is a little harder to pinpoint. In my (few) visits to the stores, I found them to be rather (over)filled with merchandise — “cluttered” would be a less kind description — and not inviting to shop. (It’s also possible they’re saddled with poor locations, or other legacy issues, though such wouldn’t be readily apparent).

Ananda Chakravarty
BrainTrust

Turnarounds are always a tricky business. My business school professor from decades ago mentioned that sometimes it’s also a rotten business — haven’t forgotten that after so many years. The worst of all are the layoffs and cost-cutting. Regardless, the question at hand is the viability of the business and BB&Y has a great market to work with and it has trusting investors willing to loan it a half a billion dollars. It also has 700, soon to be 550 stores that bring in revenue. Their challenges right now include public confidence, operational efficiency, and cash flow. What’s good about their plan is that it is addressing each of these by returning to basics. Barring unknowns, expect to see a bounce back.

Patrick Jacobs
BrainTrust

Bed Bath & Beyond will continue to struggle even with these turnaround efforts, getting customers through the doors will be challenging because the store experience is less than stellar. This wave of changes will need to keep coming, as customers are seeking products and dynamic experiences to engage with companies. Bed Bath & Beyond has a long way to go.

Nicola Kinsella
BrainTrust

Given I’ve had BBB ship me the same item twice, as a “Ship from Store” delivery from two different stores, I’m not surprised. Those sorts of mistakes can kill your margins on omnichannel orders. And not getting digital right, isn’t an option. Bed bath needs to get their inventory and logistics in order. If that means using national brands that have more reliable supply chains than their own private labels, then that’s what they should do. Unfortunately they launched many of their private labels in the middle of the biggest period of supply chain disruptions we’ve had perhaps ever in modern commerce. I’m afraid they’re going to have a tough run for a while.

Verlin Youd
BrainTrust

First, the changes are a beginning and only a beginning, just enough to secure the financing necessary to stay in business while they figure out the “real” strategy to be sustainable as a retailer. What are the challenges? Now those are basic. 1) Relevant value to customers — right product, price, experience to warrant a visit to the store and buying something. 2) Staffing that supports #1, particularly the planned store experience. 3) Management talent and investor patience to get the job done right. My concern is that they just let go some really good management talent. There is some good talent left, but without the investment and support needed they may be looking elsewhere. I wish them well, perhaps learning from Best Buy and figuring out how to stay relevant in physical retail.

wpDiscuz
Braintrust
"I love their sentiment of getting back to basics, but the reality is the ship has already sailed into Amazon waters and I don't think this will save them. "
"What’s good about their plan is that it is addressing each of these by returning to basics."
"This company never rises from the ashes. All the last CEO did was give competitors time to get further ahead."

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