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Bed Bath & Beyond’s Private-Label Push Starts With 8 New Brands

The new Bed Bath & Beyond is starting to take shape, with the home chain officially unveiling that it will launch eight private-label brands in 2021, with six launched sequentially in the first six months of the fiscal year.

The first brand launch arrives in March, with the debut of Nestwell, an assortment of bed and bath goods that are aimed at capturing share in the growing sleep category. In April, the company plans to relaunch its Haven bath brand, providing a spa-inspired assortment of organic cotton products and more.

After that, Bed Bath & Beyond will launch Simply Essential, a new assortment positioned as the retailer’s value-driven “opening price point” leader that will include more than 1,000 household essentials across multiple destination categories.

The seller of bedding and home textiles hasn’t revealed details beyond the first three brands, but plans to introduce at least 10 new owned brands over the next two years. Across the brands, the retailer says it will launch “thousands” of new products available exclusively at Bed Bath & Beyond as it continues its brand reinvigoration and aims to drive differentiation to scoop up a bigger share of the $180 billion home market.

The brands will be launched across five core destination categories that represent more than 60 percent of Bed Bath & Beyond’s revenue: bed, bath, kitchen/dining, storage/organization, and home décor.

With the new brands, sales of Bed Bath & Beyond’s private labels are expected to grow from approximately 10 percent to nearly 30 percent within a three-year span in an effort to improve gross margins.

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“In the next six months, we will deliver the most significant transformation of our product assortment in a generation, by providing our customers with inspirational owned brands across every room in their homes,” said Mark Tritton, president and CEO of Bed Bath & Beyond in a statement. “Combined with our continued investment in the key national brands consumers know and love, this will create a platform for sustainable long-term growth and true authority in the home market, while helping customers realize the potential to create a happier home in each and every room.”

Private brands have taken on new importance for retailers in recent years, offering a means to generate higher revenue and increase their control of product. Target is the latest great example of this, bringing in one-third of its sales through its owned brands, 10 of which crossed the $1 billion sales mark last year.

Bed Bath & Beyond’s new brands are just one component of larger accelerated transformation program at the company, which is removing thousands of underperforming labels, brands and products across core destination categories. Within its stores, Bed Bath & Beyond often faced criticism for having too many products on display combined with a sometimes-disorganized presentation, making the purchasing decision more difficult than it had to be.

The retailer has made sweeping changes over the past year and a half to reinvent its business upon bringing in Tritton, the former chief merchant at Target who catalyzed its private-label push, as its CEO in November 2019. The company first entered a stage of cutbacks by divesting three of its non-core retail operations—, Christmas Tree Shops and Cost Plus World Market Store—and laying off more than 3,000 employees throughout the summer. In July 2020, the retailer announced it would close 200 stores over the next two years.

At the early onset of the Covid-19 pandemic, it started turning the wheels for its omnichannel pivot. The retailer converted 25 percent of its total store fleet into regional fulfillment centers, doubling its fulfillment capacity to handle the shift in demand at its digital channels while simultaneously unlocking store inventory.

To close the year, Bed Bath & Beyond showed it was ready to start reinvesting heavily in the business, committing $250 million to modernize its supply chain and distribution network to a more digital-first environment that transitions away from a decentralized inventory management approach in favor of an “omni-always, centralized ordering and replenishment system.” The retailer is also renovating 450 stores, which represent approximately 60 percent of the company’s revenue, and has been scaling back on its coupon-driven promotions, which were deemed ineffective in some cases.

As part of the investment, the home retailer turned to Google Cloud’s BigQuery tool to leverage machine learning and analytics capabilities that can help optimize its fulfillment capabilities. The company then selected Oracle Cloud as its Enterprise Resource Planning (ERP) technology provider to provide real-time financial, supply chain and merchandising solutions that replace the company’s legacy suite of technology systems with new data, insights and planning capabilities.

The launch of the new brands was an awaited part of the investment, with Bed Bath & Beyond previously indicating in prior announcements that it intended on tripling the number of private brands it offered.

Under the overall turnaround plan, comparable sales for fiscal year 2021, ending Feb. 26, 2022, are projected to be stable, with gross margin rates at 35 percent and EBITDA (earnings before interest, taxes, depreciation and amortization) of over $500 million.

The company anticipates that the fruits of its labor will become evident in fiscal year 2023, when comp sales are expected to grow at the low- to mid-single digit range, with gross margin improving to 38 percent or higher. EBITDA by the end of 2023 is projected at between $850 million to $1 billion.