The home goods retailer says inventory shortages cost $100 million in lost sales in Q3 and warns that more supply chain problems loom.

Bed, Bath & Beyond said sales dropped a whopping 28% year over year to $1.88 billion in the third quarter of fiscal 2021 ended Nov. 27, as the retailer struggled to maintain inventory during the global supply chain crisis. That’s a 32% drop from the comparable quarter of 2019 before the pandemic began.

Comparable digital sales fell 9% from a year earlier.

In a call with Wall Street analysts, CEO Mark Tritton attributed the problem to orders that “didn’t materialize from our vendors, particularly in the top 200 items that are crucial,” according to a transcript from Seeking Alpha.  He cited availability issues for raw materials and merchandise stuck on a ship or in distribution centers. “It wasn’t where it needed to be in a timely way,” he said.

In a research note, analysts at Wells Fargo said the quarterly data showed “poor results and choppy execution.”

Seth Basham, a retail analyst with Wedbush Securities, expressed dismay with the results. “No doubt there are some transitory factors that impacted their results in the quarter, such as fewer-than-planned coupons and supply chain challenges, but the company is still losing a lot of market share on an underlying basis,” Basham says.

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Bed, Bath & Beyond said supply problems cut sales by roughly $100 million in the third quarter, which ended on Nov. 27. Those inventory shortages were also a problem as Q4 began during the last few weeks of the holiday shopping season,

In the retailer’s earnings call, Gustavo Arnal, Bed, Bath & Beyond’s chief financial officer, said, “sales in December followed a highly volatile pattern, unlike any prior year, ranging from low single-digit growth to double-digit declines depending on the week of the month due to the pull-forward of retail business, as customers shopped earlier, as well as on-shelf availability of inventory.”

Inventory shortages will continue to cause problems in the near term, according to Tritton, “We are working with our vendors to target constrained inventory and improve flow to stores. We must enhance our ability to fulfill our store demand,” he said during the conference call.

Bed, Bath & Beyond, No. 26 in the 2021 Digital Commerce 360 Top 1000, warned back in September that it was struggling with supply chain issues.

Bed, Bath & Beyond and BOPIS

The drop in sales comes a year after the retailer announced a major technology initiative aimed at making its ecommerce and store operations function more seamlessly together. Related to that plan was the retailer’s commitment to using buy online pick up in store (BOPIS) to drive sales.

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That plan seemed to not yield the hoped-for results in Q3. “Omnichannel is critical to the outlook, and this quarter did not show a lot of improvement,” Basham says.

Stores fulfilled more than 30% of digital sales in the quarter. That’s down from 36% a year earlier.

“The problem here is that retailers think innovation means to move everything online. That is not a silver bullet solution in every case,” says Gregory Ng, CEO of digital analytics and optimization consultancy Brooks Bell.

“Switching to digital may seem like the best way to combat lagging in-store sales, but that transition comes with huge investments in technology and the internal team to compete,” Ng says. “And if retailers like Bed, Bath, and Beyond hope to win market share in digital against the Amazons, Targets, and Walmarts of the world, they will need to have a robust offering and maturity in content creation, supply chain management and SEO.”

Don’t throw the (BuyBuy) baby out with the bathwater

One bright spot in BBBY’s earnings was its BuyBuy Baby unit. Same-store sales rose in the mid-single digits at the baby-focused retail brand, the company said without releasing the exact number. By contrast, same-store sales at Bed, Bath & Beyond stores fell 10%.

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“Bed Bath and Beyond has made some clear in-roads into the strategy of ‘life moments,’ such as their work with Buy Buy Baby,” Ng says. “A strategic approach to the consumer psychology around those moments will benefit them greatly.”

Another positive in the earnings report was the retailer’s Beyond+ loyalty program, which offers free standard shipping and access to all coupons for $29 a year. The retailer said that some half a million shoppers joined the program in the quarter.

For the quarter ended Nov. 27, Bed, Bath & Beyond reported:

  • Net sales of $1.88 billion, a drop of 32% from the $2.61 billion a year earlier.
  • A net loss of $276.4 million, a 266.6% widening from the $75.4 million loss in Q3 2020.
  • An operating loss of $122.9 million, a 43% widening from the $86.1 million loss reported in Q3 2020.

For the nine months ended Nov. 27, Bed, Bath & Beyond reported:

  • Net sales of $5.81 billion, a 13.7% decrease from the $6.61 billion in the first nine months of fiscal 2020.
  • A net loss of $400.5 million compared with a $159.8 million million in the comparable period of fiscal 2020
  • An operating loss of $242.0 million, an improvement from the $313.2 million loss in the comparable period

Percentage changes may not align exactly with dollar figures due to rounding.

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