Bed Bath & Beyond Inc. (No. 58 in the 2020 Digital Commerce 360 Top 1000) says its results for its fiscal third quarter ended Nov. 28, 2020, show that it’s become a real omnichannel retailer—and not just a retail chain with an online division.
The company reported 77% year-over-year digital sales growth for the retailer as a whole and 94% for its core Bed Bath & Beyond chain. Bed Bath & Beyond is among the company’s four core brands, including buybuy BABY, Harmon Face Values and Decorist. Also, sales on mobile devices grew 107% for the quarter, compared with the prior-year period.
“Omnichannel is the future of retail and we have embraced it,” Rafeh Masood, executive vice president and chief digital office for Bed Bath & Beyond Inc., said in an interview after the company released its results Thursday. He says the retailer is on track to exceed its digital sales goal of $3 billion by the end of fiscal 2020, which ends Feb. 27. Stores fulfilled 36% of all digital sales in the third quarter, Masood says.
The retailer gained 7 million new online customers for the year to date, including 2.2 million in Q3, Masood says. The company’s online conversion rate grew 25% year over year in Q3, Masood says, including a 33% boost in mobile conversion rates. Also, about 1.2 million shoppers used buy online pick up in store (BOPIS) or curbside pickup services during Q3, representing 16% of the retailer’s total digital revenue.
Masood attributes increases in online sales and conversion rates to rolling out and expanding omnichannel services throughout 2020 and investments in online customer experience improvements and site speed.
Those investments included the re-launch of its Bed Bath & Beyond and buybuy Baby mobile apps in late October and mid-November, respectively, and new, faster mobile sites. During the five-day holiday shopping period from Thanksgiving to Cyber Monday, the Bed Bath & Beyond mobile homepage loaded 74% faster than the same period last year.
Most recently, the retailer launched same-day delivery at its Bed Bath & Beyond and buybuy BABY units as of Sept. 29, 2020, and temporarily offered the service for free for three days in December for orders over $39. The retailer provides same-day delivery via the app-based service Shipt and usually charges a flat-rate fee of $4.99 for orders over $39. In the spring of 2020, after re-opening some of its stores after coronavirus-related shutdowns, Bed Bath & Beyond Inc. expanded curbside pickup to about 1,350 locations, an addition of about 600 stores.
As of the end of Q3, the company had 1,391 stores, including 951 Bed Bath & Beyond stores in all 50 states, the District of Columbia, Puerto Rico and Canada. After rolling the service out in stages in 2020, virtually all those stores offer ship-from-store services, Masood says.
Masood says the coronavirus pandemic accelerated Bed Bath & Beyond Inc.’s digital transformation. But before the crisis, the retailer made a strategic decision to start operating as a true omnichannel retailer rather than a multi-channel retailer. Bed Bath & Beyond’s Inc.’s store and online operations, which had functioned as separate units, have now been united into a single, integrated team.
The retailer committed to rolling out omnichannel services, Masood says, because, consumers showed they wanted a more integrated shopping experience, even before the pandemic. BOPIS services were in the works before the pandemic, he says, but were implemented after the coronavirus hit the United States.
“Customers were already ahead of us,” Masood says, and were already shopping both online and in stores. Moreover, Masood says customers who shopped using both channels purchased about twice as much from the retailer as those who shopped using only one.
In a statement, Bed Bath & Beyond Inc. declined to provide financial guidance for its fiscal fourth-quarter and full-year results, citing the uncertainty the ongoing pandemic creates for the economy.
In a Jan. 7 conference call with Wall Street analysts, CEO Mark Tritton said: “We have many bold and exciting plans for fiscal 2021, such as launching new own brands that will help differentiate us in our key destination category, remodeling approximately 150 stores,” according to a Seeking Alpha transcript. Tritton also cited plans to roll out “new and unique digital services,” modernize the retailer’s technology and “reinvent” its supply chain but did not provide specifics.
Recent asset sales
In the past year, Bed Bath & Beyond Inc. sold non-core assets to concentrate on investing in its core brands.
In December, the retailer agreed to sell its Cost Plus World Market unit to Kingswood Capital Management, a Los Angeles-based private equity firm. The parties did not disclose the financial terms of the deal. The retailer expects to close the sale before its fiscal year ends at the end of February. That followed the sale of its Christmas Tree Shops chain, its institutional Linen Holdings business and a distribution center located in Florence, New Jersey. Total cash proceeds from the three separate sale agreements were approximately $250 million.
Earlier, Bed Bath & Beyond Inc. sold PersonalizationMall.com to 1-800-Flowers.com Inc. (N0. 64) for $245 million, which was completed in early August after the two retailers settled litigation regarding the sale. In April, Bed Bath & Beyond Inc. said it sold One Kings Lane, a decor and furnishings retailer, but did not name a buyer or disclose a price.
The retailer has paired the asset sales with cost-cutting measures. In August, Bed Bath & Beyond Inc. said it would eliminate 2,800 jobs under a plan to cut costs and streamline operations amid deepening challenges for brick-and-mortar retailers. Along with other announced restructuring actions, the effort would result in as much as $150 million in annual pretax cost savings, the company said at the time. The job cuts followed plans by Bed Bath & Beyond Inc. to close 200 stores and sell assets as it navigates a coronavirus pandemic that has upended the retail sector.
For the third quarter ended Nov. 28, Bed Bath & Beyond Inc. reported:
- Net sales of $2.618 billion, down 5.3% from $2.759 billion for the comparable period a year earlier, primarily due to activities including the planned divestitures of non-core brands and store closings.
- A net loss of $75.44 million, compared with a net loss of $38.55 million for the year-ago period.
- Comparable sales growth of 2% companywide, led by 5% growth in the core Bed Bath & Beyond business.
- Positive cash flow generation of about $244 million, driven by proceeds from non-core brands, real estate monetization and operational earnings improvements.
- Gross margin increased 340 basis points to 36.5% compared with the prior-year period.
- $1.5 billion of cash and investments and $2.2 billion of total liquidity.
Percentage changes may not align exactly with dollar figures due to rounding.