Bed Bath & Beyond has earmarked hundreds of millions of dollars for its digital-first future.
On Wednesday, the home goods retailer said it would invest $250 million over the next three years to reinvent its supply chain as part of a transformation plan reinventing for a digital-first strategy and improving margins while improving cash generation.
The investment will help the Union, N.J.-based retail chain move from a consolidation-based model to a modernized distribution network that is expected to be faster, more competitive and responsive to market needs. BBB said investments will modernize its technology platforms, leveraging a strategy partnership with Google Cloud and other leading technology providers.
In addition, the investments will also help the company deliver an improved customer experience that will help accelerate sales and margin growth and unlock cash flow generation.
As for its vendor base, the company “is on track to deliver approximately $200 to $250 million in sourcing benefits over the next three years by reducing the number of suppliers and successfully negotiating with existing vendors,” BBB said. It is also transitioning away from a de-centralized inventory management approach and instead is creating an “omni-always, centralized ordering and replenishment system that is expected to ensure higher in-stock levels, increased sales and long-term productivity improvements,” it added.
The home chain also plans to review its product assortment mix, with a goal of launching nearly a dozen new company-owned brands in key destination categories over the next 18 months. BBB intends to triple the number of private brands to boost opening price points and value-tier products, whether a customer shops online or in stores.
“We have made tremendous progress this year to strengthen our financial position, focus our portfolio in core Home, Baby, Beauty & Wellness markets, rebuild our executive team, and launch a series of omnichannel services to win back customers. We will build on these strong foundations with a three-year growth strategy that further elevates the shopping experience, modernizes our operations, and unlocks sales growth, margin expansion, increased cash flow and strong and sustainable total shareholder return,” Mark Tritton, president and CEO, said. “Our transformation is rooted in an omni-always, customer-inspired approach that will make it easy to feel at home with Bed Bath & Beyond. In doing so, we will deepen our relevance and connection with customers by helping them unlock the magic in every room.”
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The company plans to use data insights to engage its 37-million customer base. “The addition of 1.4 million new customers to the brand year-to-date highlights the company’s strong potential to attract, retain and drive spend across the home category,” said BBB, which has identified five customer segments: nester, minimizer, juggler, innovative and creative. Reinventing loyalty will unlock data insights around compelling price-value propositions while reducing promotions that don’t yield results.
While the retailer previously shared plans to close 200 stores by next year, brick-and-mortar will still play a key role, even though it is focusing on digital. It said the inclusion of buy online and pickup in store along with curbside pickup and same-day delivery has helped to convert over two million customers to shop more than one channel. To drive conversion and unlock omni-always services, BBB plans to invest $250 million in its store fleet over the next three years as part of its remodeling plan. It will renovate 450 doors, which represents about 60 percent of revenue.
“This test and learn approach is expected to generate a median sales lift of approximately four percent and and deliver a double-digit return on investment,” BBB said.
And to build out its presence in the baby market, the company expects to grow its physical footprint with additional stores in new markets, projecting sales to increase by 50 percent, to about $1.5 billion, by fiscal 2023.
Under the turnaround plan, comp sales for fiscal year 2021, ending Feb. 26, 2022, are projected to be stable, with gross margin down 35 percent and EBITDA (earnings before interest, taxes, depreciation and amortization) of over $500 million. By fiscal year 2023, ending Feb. 24, 2024, comp sales are estimated to grow at the low- to mid-single digit range, with gross margin of 38 percent or higher. EBITDA is projected at between $850 million to $1.0 billion.
The company also said in August that it was eliminating 2,800 jobs to streamline operations.