Bed Bath & Beyond is closing about 150 stores and slashing 20 percent of corporate and supply chain jobs as part of a broad restructuring to a business in need of a shot in the arm.
As the home goods retailer continues its attempt to turnaround the business, the company announced Wednesday that it has secured commitments for $500 million in financing for incremental liquidity. That includes an expanded asset-based loan facility of $1.13 billion and $375 million in the form of a first-in, last-out loan.
Along with that, the Union, N.J.-based chain will reduce its store fleet by 150 and eliminated the chief operating officer and chief stores officer roles, held by John Hartmann and Gregg Melnick, respectively. Bed Bath & Beyond promoted two in its leadership shift, as well—Mara Sirhal, who took the role of EVP and chief merchandising officer in June was appointed EVP and brand president for Bed Bath & Beyond. Patty Wu was promoted to EVP and brand president of BuyBuy Baby after previously serving as SVP and general manager of the brand.
“We are committed to reinforcing the financial runway to execute the critical strategies need for our business,” said Sue Gove, Bed Bath & Beyond interim CEO. “We are creating sustainable improvements to our balance sheet and cash flows to deliver business returns.”
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Chief financial officer Gustavo Arnal shared preliminary results for the second quarter, which recently closed. Arnal reported an approximate comp decline of 26 percent year-over-year, with net sales at $1.45 billion dollars and a free cash flow usage of $325 million. Looking forward, Arnal anticipates a comp sales decline in the 20 percent range for the remainder of 2022.
Arnal also reported Bed Bath & Beyond’s intent to reduce fiscal capital expenditures to $250 million from an anticipated $400 million. He noted that store closures will amount to around $250 million in in-year cost savings for fiscal 2022, and that store remodels and openings would remain paused.
“The decision to close stores and reduce headcount is a difficult one, but these steps reflect changes in strategy and will allow us to focus our resources on the areas of the business that are of the highest return as we drive toward sustainable long-term profit growth,” he said.
With the promotion of Wu, Bed Bath & Beyond quelled rumors of a selloff of the BuyBuy Baby brand, which was valued by market researchers at Morgan Stanley at around $500 million in after-tax proceeds.
“Our board and strategy committee have determined that Baby’s future growth and value can best be accelerated as part of our portfolio at this time,” Gove said. “And we look forward to elevating our strategic focus on Baby under Patty’s leadership.”
Wu said BuyBuy Baby has a multi-part strategy to expand the brand’s scope, including adding age-up categories such as apparel to extend customer engagement beyond babyhood. The company also plans to partner with influencers and experts while also training staff to be a resource to parents on a number of topics.
“We have the potential to introduce someone new to Bed Bath from their time at Baby or extend the loyalty of our Bed Bath customer beyond their college days or first house as they begin their parenting journey, and these strategies will help us extend our market share,” Wu said.
Looking at strategy for the Bed Bath & Beyond brand, Sirhal said the company will shift its focus back to national brands after a push for private labels, dubbed “owned brands” by the retailer, in 2021. Last year, the company introduced eight owned brands.
In September, the company will launch a “Welcome Back, Welcome Home” campaign to anchor site, app and store experience back to national brands such as Calphalon, Ugg, Oxo and SimpleHuman. Sirhal also pointed to direct-to-consumer brands as an area of focus going forward for Bed Bath & Beyond. Last year, the company launched a partnership with Casper that included a branded shop in Bed Bath & Beyond’s New York City flagship.
With these changes, Bed Bath & Beyond will trim its stable of owned brands, dropping a third of its private labels. Simply Essential, Nestwell, Our Table, Everhome, Squared Away and H For Happy will remain for the retailer. Sirhal said the goal is to reduce owned brand penetration by 20 percentage points in favor of national brands. Over the next several quarters the company will continue implementing a three-prong approach to liquidating excess product, including leveraging promotion and clearance, using third-party sellers and stores that are closing to push through inventory, and canceling orders.
“While rebalancing our inventory will not occur overnight, we are impacting as many of our buys as possible to increase our current national brand inventory,” Sirhal said. “We anticipate sequential improvement each quarter as we continue to increase our national brand inventory and reach the appropriate penetration levels.”
To drive customer engagement, Bed Bath & Beyond will release its well-known coupons opportunistically to improve customer traffic across sales channels, while incorporating those coupons with the free Welcome Rewards program, which has seen positive growth.
“Welcome rewards has amassed 5 million customers reflecting a 20 percent increase in new memberships, and we continue to see significant positive momentum,” Gove said.
As Bed Bath & Beyond rolls out all these changes and utilizes its increased funding, the next two quarters continue to be critical in determining the success of the company’s turnaround attempts. In the meantime, the retailer’s leadership feels Bed Bath & Beyond is better positioned through these moves to take positive steps forward.
“While there’s much work ahead, our roadmap is clear and we’re confident the significant changes we announced today will have a positive impact on our performance,” she said.