Bed Bath & Beyond reported a 28% year over year drop in total sales, and a 22% drop in digital sales in its fiscal second quarter, as the beleaguered retailer continued to struggle. The mass merchant has now reported a decline in total sales for five consecutive quarters.
Although digital sales fell 22%, online remains approximately 40% of total net sales, Laura Crossen, interim finance chief, said in a call with analysts Sept. 29. Comparable store sales fell 28%.
Even the retailer’s Buy Buy Baby banner — a rare bright spot in recent earnings reports — saw comparable sales drop by a “high-teens percentage compared to growth of high-teens percentage in the year-ago period,” the merchant said.
Bed Bath & Beyond Inc. ranks No. 30 in the 2022 Digital Commerce 360 Top 1000, a database of the largest e-retailers in North America.
No turnaround yet
The earnings for the period ending Aug. 27 do not reflect the turnaround effort the retailer announced Aug. 31 in which the retailer said it would close 150 stores, lay off 20% of its staff, borrow $500 million, and shift its inventory strategy toward well-known national brands.
“Although still very early, we are seeing signs of continued progress as merchandising and inventory changes begin,” interim CEO Sue Gove said in a written statement. “Regaining market share and enhancing liquidity are our top priorities.”
Bed Bath & Beyond executives said they do not expect a rapid turnaround.
“We continue to expect comparable sales decline in the 20% range in the second half of fiscal 2022,” Crossen told analysts. Crossen took over the finance department earlier this month following the death by suicide of CFO Gustavo Arnal on Sept. 3. Previously, Crossen had been Bed Bath & Beyond’s chief accounting officer.
The fourth quarter is historically cash-flow positive for Bed Bath & Beyond, but it is expected to only break even this year, Crossen said. She told analysts the retailer is working through “our store closure program, which has a number of dynamics, and the progression of our national brand inventory builds, which we want to continue into the back half of 2022 and into 2023.”
Layoffs, death and a lawsuit
The earnings report is the first since the shocking death of Arnal. Two weeks before Arnal’s death, activist investor Ryan Cohen sold his entire stake in Bed Bath & Beyond. Shares fell 40% in the wake of Cohen’s action.
Cohen, who co-founded Chewy and is the chairman of GameStop, had bought more than 7 million shares and call options of Bed Bath & Beyond earlier this year. His purchases helped drive retail investor interest in Bed Bath & Beyond in online forums dedicated to “meme” stocks.
CNBC estimates Cohen made roughly $59 million on his share sale. Two weeks before Arnal’s death, both he and Cohen were named in a lawsuit alleging they had engaged in a “pump and dump” scheme to artificially inflate the price of the retailer’s shares.
‘Disastrous results’ for Bed Bath & Beyond
Mara Sirhal, executive vice president and chief merchandising officer for the retailer, told analysts that the turnaround plan — which calls for discontinuing three of its private-label brands (Haven, Wild Sage and Studio 3B) and emphasizing national brands such as Calphalon and Oxo — will bring results.
“Our customer is still reachable and we are committed to making our business better through steady, sequential improvement,” Sirhal said
But analysts and industry observers expressed pessimism.
Neil Saunders, managing director of GlobalData Retail, told his more than 25,000 Twitter followers that Bed Bath & Beyond’s earnings report was “disastrous.”
Another disastrous set of results. Losses of over a third of a billion (yes, with a b). Total sales down 27.6%; comps down 26%. A weak turnaround plan fueled by loans when liabilities already exceed assets. Not a pretty picture. https://t.co/5imPZ8THd7advertisement
— Neil Saunders (@NeilRetail) September 29, 2022
Children are Bed Bath & Beyond’s future
While Bed Bath & Beyond is retreating from private labels, its Buy Buy Baby banner is moving in the opposite direction, according to Patty Wu, who was named brand president in August. Wu told analysts that Buy Buy Baby would roll out its first private label in November.
“Our first label will offer customers a really great selection of apparel, furniture and decor for infants to toddlers and compelling opening price points,” she said.
Wu said the company will not release the name of the brand or the nature of most products until November. However, she did say the brand had developed “a snow suit that is priced almost 50% below some value based retailers.” In addition, Buy Buy Baby will “be marketing our first owned brand much like a DTC brand by partnering with key influencers to differentiate and highlight our products. Social commerce will also play a key role in how we promote solutions and provide education to families as a way to drive sales.”
For the quarter ended Aug. 27, Bed Bath & Beyond reported:
- Net sales of $1.44 billion, a 28% decline from $1.99 billion in the second quarter of 2021.
- A net loss of $366.16 million, a widening of $73.22 million from the $292.94 million loss a year earlier.
- Cash on hand of $135.27 million, a drop of 86.06% from the $970.59 million at the end of Q2 2021, as the retailer paid down accounts receivables.
Percentage changes may not align exactly with dollar figures due to rounding.
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