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Bed Bath & Beyond Planning New Layoffs

Listeners on Bed Bath & Beyond’s third-quarter earnings call today may have expected a big announcement with the bankruptcy buzz swirling around the company over the past week. But CEO Sue Gove offered no major news aside from dismal sales numbers during the unusually brief conference call.

As expected, Bed Bath & Beyond announced brutal third-quarter sales, with a 33 percent net decline and a comparable sales drop of 32 percent. Breaking it down by brands, the Bed Bath & Beyond banner saw a comp sales decline of 34 percent while BuyBuyBaby was in the low 20s percent range.

Gove pointed to reduced inventory available during the quarter—which ended Nov. 26, 2022, and included the all-important Black Friday shopping day—as a significant driver of the losses.

“Following some of the micro and macro challenges we and the sector faced at the beginning of the quarter, we experienced an acceleration in vendor payment terms and credit line restraints,” Gove said. “This led to lower receipts and therefore lower in-stock levels in the 70 percent range, which hampered our sales in an already competitive environment.”

Inside Bed Bath & Beyond’s Upper West Side store in Manhattan.

Leading up to the holiday shopping season, several Bed Bath & Beyond vendors halted or delayed shipments because of overdue payments. Gove said those outstanding balances have been settled.

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“We have worked diligently with our supplier partners, and our payables remain at healthy levels as demonstrated by continued sequential decline in accounts payable as well as accrued expenses and other current liabilities on our balance sheet,” she said during the call.

Gove also reported a significant decrease in the company’s private label or “owned brands,” in line with Bed Bath & Beyond’s efforts to phase those products out in favor of a national brand-focused inventory strategy.

“Owned brand inventory penetration has declined 10 percentage points versus peak levels during the first half of the fiscal year,” she said. “Our closing store and no-go-forward inventory has reduced from almost $500 million at cost on-hand and on-order to just over $130 million at cost in the last six months. We’ve achieved these results by purposely utilizing our closing stores as target vehicles for clearance.”

The company’s GAAP gross margin of 22.1 percent and adjusted gross margin of 22.8 percent reflected the continuation of that incremental clearance activity related to discontinued owned brands merchandise, along with increased promotional activity.

Bed Bath & Beyond’s SG&A expense of $583.6 million was significantly below the $698.0 million during the same quarter last year, driven by aggressive cost-reduction initiatives to right-size the company’s expense structure. And the company said it’s on track to deliver approximately $250 million of SG&A savings versus last year for the second half of fiscal 2022, or $500 million on an annualized basis. Gove said more operational cuts, including layoffs, will come.

“To more accurately align resources with our focus areas and future, we are enacting an additional $80-$100 million in cost reductions across corporate, including expense and head count,” she said. Gove also identified another $80-$100 million in potential savings across the supply chain.

Gove also acknowledged the store has lost significant customer traffic, and said Bed Bath & Beyond plans to increase incentives such as buy-online-pickup-in-store shopping and next-day shipping.

But those improvements may be too little, too late for the home goods retailer. As the company limps into the final leg of its fiscal year, restructuring or bankruptcy still remain viable options for Bed Bath & Beyond.

“We continue to work with advisors as we consider all strategic alternatives to accomplish our near- and long-term goals,” Gove said. “We have a team, internally and externally, with proven experience helping companies successfully navigate complex situations and become stronger.  Multiple paths are being explored and we are determining our next steps thoroughly, and in a timely manner.”