Bed Bath & Beyond plans to close 200 stores over the next two years to help reduce costs as the company plans investments to accelerate its digital transformation.
The store closures are part of the retailer’s “store network optimization project,” Mark J. Tritton, president and CEO, said during a recent company conference call after the company posted first-quarter results.
As for investments to up its digital game, the Tritton called the company’s temporary store closures beginning March 23 due to the coronavirus outbreak a critical moment. “It was an opportunity for us to pivot to a new model and support changing customer preferences and our omni-always approach,” Tritton said.
BB&B realigned its network and converted 25 percent of the total store fleet into regional fulfillment centers, doubling the retailer’s fulfillment capacity to handle the shift in demand at its digital channels while simultaneously unlocking store inventory. The home textiles retailer also accelerated a pre-planned rollout of its buy online, pick-up in store, or BOPIS, and curbside pickup services offered in April.
Tritton called the moves a “game changer for us as it allowed us to restart operations and serve customers at locations that were still closed to the public. By the time we ended the quarter in late May, we were offering BOPIS and Curbside Pickup at nearly 60 percent of our store locations. These new capabilities powered digital sales growth of more than 100 percent during the month of April and May.”
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The home furnishings chain in June secured a new $850 million, three-year secured asset-based revolving credit facility, which strengthened its liquidity position. It also filed layoff notices under Florida and New Jersey’s Worker Adjustment and Retraining Act (WARN), which requires business to give workers 60 days’ advance notice when closing a location or instituting mass layoffs. About 220 employees in a customer service center were impacted, while the New Jersey filing affects 148 workers, and well as possibly a call center, for a total of more than 350 employees.
For the first quarter, net sales from its digital channels grew 82 percent and represented nearly two-thirds of total net sales. Digital growth was also favorably impacted. The company also shifted its merchandising and marketing plans, including more frequent updates through its website to stay current and relevant and engage more with its customers. Tritton said nearly 40 percent of online orders were placed by customers who were new to its e-commerce site and more than 10 percent was first-time shoppers.
Tritton, who joined the company in November from his previous post as executive vice president and chief merchandising officer for Target Corp., has been trying to remake the struggling home chain. “This COVID moment also represents an opportunity for us to drive strong actions as part of our ongoing restructuring program. We have accelerated the further alignment of our cost structure with our near-term performance related to the pandemic. These include, among other things, our efforts to reduce cost of goods and drive supply chain transformation to address current gross margin pressures related to the substantial shift to sell from stores to digital channels,” he told analysts.
Tritton said the retailer plans to hold an Investor Day in mid-to-late October. The update then is expected to include some information about planned divestitures, such as personalizationmall.com and its Christmas Tree Shops and Cost Plus World Market Store operations.
For the first quarter ended May 30, the company narrowed its net loss to approximately $302,000, or $2.44 a diluted share, from a net sales decline of 49.2 percent to $1.3 million. In the same year-ago quarter, the net loss was about $371,000, or $2.91 a diluted share, and net sales were $2.57 million. The company operates 1,478 stores, including 955 doors for its core Bed Bath & Beyond nameplate. It closed 21 locations during the first quarter.