Bed Bath & Beyond shares soared on Wednesday, surging more than 40% after the struggling home decor retailer was swept up by meme-stock fever on Wall Street and after announcing the launch of several new owned-brand offerings.
Bed Bath on Wednesday revealed three new owned brands, part of its push to turn itself around from the store-floor up after mounting losses and shareholder pressure, both of which occurred well before the pandemic slammed retail.
Part of its efforts to “rebuild its authority” in the $180 billion home furnishings and accessories market, Bed Bath unveiled Our Table, a line of branded kitchen wares; Wild Sage, a collection of "youthful" and "eclectic" home furnishings; and Squared Away, a line of storage and organization solutions that it hopes will be a hit among the lucrative back-to-school shopping crowd.
The addition of the three specifically labeled “owned brand” offerings marks what CEO Mark Tritton called a turning point for Union, N.J.-based Bed Bath, which has suffered from lagging sales, overstocked stores and a hodgepodge of offerings that weren’t hitting the mark - and in turn prompting a revolt from shareholders.
It also marks a milestone in Tritton’s ongoing efforts to turn Bed Bath & Beyond from a has-been big-box retailer with too much product and too many share buybacks into a real competitor of Lowe’s (LOW) - Get Report, Target (TGT) - Get Report and others that were already taking away Bed Bath customers before the pandemic hit.
“We’re a turnaround story,” Tritton told TheStreet. “The company wasn’t performing. It had become more stuff rather than more opportunities, and we needed to revive that. Now you walk into one of our stores and there is 30% less product on the floor.”
Indeed, Bed Bath's woes were entrenched long before COVID was a household word. The company founded by Warren Eisenberg and Leonard Feinstein in April 2019 posted its first annual loss and sales decline in its history as a public company.
Bed Bath ... and Beyond Just COVID
That sparked a group of private investors including Legion Partners, Macellum Advisors and Ancora Advisors to shake up the company's board as part of its push to force the company to cut costs and revamp its focus.
Bed Bath & Beyond in late May 2019 announced the appointment of four of its own board members as part of a truce with the activist investor group. Tritton, a former Target executive, joined the company six months later.
But it was the Tritton’s January 2020 mea culpa about Bed Bath's tougher-than-expected holiday shopping season as well as the decision to pull earnings guidance that truly got to investors - and immediately put Tritton in the hot seat in terms of executing a viable turnaround plan.
Part of that plan was accelerated by the pandemic. In July 2020, eight months after taking the helm and less than four months into the pandemic, Bed Bath said it was closing 200 of its stores over two years and laying off hundreds of employees.
An additional part of Tritton's turnaround plan was reimagining stores, even as they were shuttered, as well as dumping excess inventory, decluttering, boosting the retailer’s crummy and lagging digital presence and stocking real and virtual shelves with less pillows and tchotchkes and more curated items unique to Bed Bath.
“We were No. 1 in brand perception, but we were losing market share,” Tritton said. “We doubled down on our digital efforts, re-launching it during COVID, and not only increased our business but saw three consecutive quarters of growth."
That also included revamping the company's online presence from scratch - not only with products and content that matched what customers were looking for, but with new services like same-day delivery and curb-side pickup. That bumped digital sales from 16% in 2019 to a whopping 86% as of the company's most recent quarter.
Bed Bath & Beyond Physical Stores
“Our digital channel is a $3 billion business in 2021, which is double where it was before," Tritton said. "And yes, that’s partly due to the pandemic, but it’s also how we have re-imagined our customer experience.”
Bed Bath's and Tritton's long-term plan is to continue re-shaping the customer experience and rolling out “unique things" that can only be bought at a Bed Bath & Beyond. That includes the introduction of at least 10 new owned brands over the next three years as the retailer establishes multiple in-house brands to strengthen customer loyalty and boost sagging profits.
That also includes some streamlining and revamping at its other brands, including Buy Buy Baby, which it bought from Toys 'R' Us back in 2007. And it includes an overhaul of its physical stores, one of which has already occurred in Brooklyn. The company's flagship Manhattan store is also getting a do-over to be completed by year-end.
In addition to 834 Bed Bath stores, the company operates 132 Buy Buy Baby stores and 54 Harmon Face Values stores. It recently divested several online retail businesses including Personalizationmall.com, Christmas Tree Shops and Cost Plus World Market.
The one remaining piece to the turnaround story: Bed Bath's languishing stock price, which started the year at under $18 and shot up as high as $52.89 in late January as the retailer became part of the meme-stock retail buying frenzy, which at last check pushed the shares up more than 41% to $38.61, putting the stock on track for year-to-date gains of more than 114%.
“It’s sequential; you have to start with the Mothership,” said Tritton. “You have to start with the core brand and then go from there.
“We’re a turnaround, and like any turnaround you have to be sequential, you have to deliver, you have to have a plan. We have a three-year transformation plan. I think that there’s a trajectory here. Analysts know. We’re going to turn around and grow.”