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Bed Bath & Beyond Takes $175M Hit on Out of Stocks

Mere weeks after coming under fire by activist investors and installing new members to their board, Bed Bath & Beyond’s fourth-quarter earnings call gave insights into the company’s ongoing troubles.

In a Nutshell: CEO Mark Tritton called the company’s near-term results disappointing, noting fourth-quarter comparable sales were down 12 percent. And the first quarter of 2022 hasn’t fared much better, with CFO Gustavo Arnal revealing that comp sales are running negatively at approximately down 20 percent, quarter-to-date.

Tritton blamed a continued lack of inventory due to supply chain challenges as a major impediment to the company’s growth.

“Despite our overall inventory levels, product not available for sale or held at ports remain at above normal highs,” he said. “Sales through the fourth quarter suffered an impact of approximately $175 million or a high single-digit deficit as a result of the ongoing lack of in-stock and available to sell merchandise in our Bed Bath banner.”

That inventory shortfall contributed to double-digit same-store sales drops across five key categories: bedding (-18 percent), bath (-17 percent), kitchen/food prep (-13 percent), indoor decor (-20 percent), and home organization (-18 percent).

Digital sales dropped 18 percent in the fourth quarter, with in-store sales dipping 8 percent. Sales for the Bed Bath & Beyond brand decreased 15 percent compared to the fourth quarter of 2020 and 9 percent versus 2019. Total same-store sales at Bed Bath & Beyond dropped 15 percent in the fourth quarter.

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The company’s buybuy Baby brand continued to be the lone bright spot, with comp growth of low single-digits and mid-teens growth in stores. This resulted in double-digit growth for the full year on top of solid overall growth last year.

Spiking oil prices and continued shipping inflation and port fee increases hit Bed Bath & Beyond’s adjusted gross margin, which came in at 28.8 percent, 400 basis points lower than last year.

“Freight and shipping cost increases were significantly higher than expected, 170 basis points,” Arnal said. “Container rate and inbound freight rates moved unpredictably higher in late January and February, in part given the spike in oil prices as the year started.”

Going forward, Tritton said the company plans to rollout the initial shop-in-shop concepts for its Kroger partnership, along with store remodels for  130-150 Bed Bath & Beyond stores. The company also plans to capitalize on the popularity of its buybuy Baby brand by opening more than 20 new locations over the coming year.

In regard to the company’s new board members and initiatives raised by activist investor Ryan Cohen, Tritton declined to go into detail.

“At this time, we do not have an update on the work that has already been underway by our board and management team to define how we unlock further value,” he said. “We will update you all on material developments as they arise.”

Net sales: For the fourth quarter, total net sales were $2.5 billion, with a comp sales decline of 12 percent versus last year and down 8 percent compared to 2019. Sales were negatively impacted by approximately $175 million, or a high single-digit deficit as a result of the continued low levels of in-stock and available to sell merchandise in the company’s Bed Bath & Beyond banner.

CEO’s take: While Tritton acknowledged the struggles Bed Bath & Beyond has faced over the past year, he remained optimistic about the company’s future and the transition it has undergone since the last leadership shakeup.

“Transformations are complex and often non-linear, but achieving a strategy of this scale amid the current macro economic environment has made it even more difficult to deliver results commensurate with our efforts,” he said. “The friction in these moments is real, and we’re operating in a retail and consumer industry as challenging I have personally seen in my career outside of that critical COVID timeframe. However, we remain steadfastly dedicated to our customer, our brand, and our strategy.”