As expected, it’s going to get worse for Bed Bath & Beyond before it gets better.
Now the big question is when.
On Wednesday afternoon, the troubled home furnishings specialty chain reported another dismal quarter with its second straight—and only second ever—loss coming on a 9% drop in overall sales, including 8.3% on a comp store basis and “a mid-single-digit” drop in online revenue. Even accounting for the shift of Thanksgiving weekend out of the quarter didn’t improve the numbers a whole lot.
Clearly signaling that there’s still more bad news to come, the company said it was withdrawing financial guidance for the balance of fiscal 2019. The “path to success,” the company said in a presentation to analysts and investors after the release of its earnings report, “will not be linear, but accomplished over a period of quarters and years.”
For Mark Tritton, the new CEO, who came on board just 66 days ago and had limited impact on this reporting period, the news had to be sobering, but he said he was encouraged by what he had seen so far and what the opportunities are for Bed Bath.
“We’ve experienced short-term pain,” he said on the analysts’ call, “some of it self-inflicted.” But he pointed to the company’s iconic status with its customers, its strong balance sheet and brand awareness, and its committed employee base.
Tritton, originally from Australia and most recently the head merchant at Target, where he helped lead a dramatic turnaround, presented a marked contrast with prior management, not only with his accent but with his forthright acknowledgement that there are significant problems at BBB and that they would take time to solve.
“The results for the quarter are unsatisfactory,” he said, but he pointed to new research that shows the retailer retains its positive positioning with shoppers. Still, there were few specifics on his plan as he indicated he would present more details in the coming months and at an investor relations session sometime this spring.
He did offer some color on what to expect:
- “We need to drastically improve our digital platform,” he said, and he used the phrase “omni-always” to describe his goal for integrating online and in-store business. To that end, he said Bed Bath will institute a true BOPIS – buy online, pick up in-store – model in the first quarter of the year.
- Among the initiatives on the research and development side is a new partnership with market research firm NPD to identify market opportunities. He said the results of that effort will be apparent as the process develops.
- He confirmed a real-estate sale and leaseback deal, reported earlier this week, that will net the company $250 million but result in $11 million in additional leasing expenses on an annualized basis. Additional asset sales of real estate are possible, he said.
- Severance costs for high-level executives who were let go right before the end of the year will amount to $11 million, which will show up on the company’s fourth-quarter balance sheet.
- Couponing, a BBB trademark, will remain part of the retailer’s promotional strategy, but he said the company needed a better balance in its value proposition, including a “priced right daily” model, which some people might call everyday low pricing.
- Development of private-label product programs is in process, but he said BBB would continue to work with its vendors on such efforts. “We are doubling down on our partnerships with our vendors; we want a much closer relationship with our vendors,” including better exchange of data, he said. But that process will take time; “it’s not an overnight sensation.”
With the pulling of financial guidance, Bed Bath risked the wrath of Wall Street, which responded on Wednesday with a nearly 10% drop in its share price in after-hours trading. Tritton repeatedly asked for and thanked the investment community for “patience,” a characteristic the stock market is not particularly good at. That patience level will be tested for at least several more months as he puts together a merchandising, staffing and overall business plan for a retailer that is now the first to admit it needs help in all three areas.