Bed Bath & Beyond's Tritton Vows Quick Turnaround After Dismal Quarter

Bed Bath & Beyond, which purged six C-level executives last month under new CEO Mark Tritton, released Q3 2019 results yesterday that left investors scurrying for the exit.



“Shares of the embattled retailer were halted in after-hours trading after Wednesday’s close minutes before it reported its fiscal third-quarter results. They plunged as much as 18% after they resumed trading at 4:45 p.m. Eastern time.  And it’s no wonder why,” Barron’s Carleton English reports.

“Bed Bath & Beyond (ticker: BBBY) reported an adjusted loss of 38 cents a share. The Street wanted to see profits of two cents. Sales also fell short of analyst earnings estimates, coming in just under the $2.8 billion analysts expected. And same-store sales plunged 8.3% compared with the year-ago quarter,” English continues.

“Slumping sales, partly due to a weak connection with young shoppers, led the new CEO of Bed Bath & Beyond to say the company's performance is ‘unsatisfactory’ and needs to usher in change,” Charisse Jones writes for USA Today.

“We will move quickly to course-correct and drive the business forward,” Tritton continued in a conference call with analysts transcribed  by Seeking Alpha.

“The Union, New Jersey-based home goods retailer, which also operates Buy Buy Baby, Harmon Face Values and World Market,  announced in October that it would shutter 60 stores company-wide in the fiscal year,” Jones reminds us. “To not step on sales of the merchandise that it will be clearing out, the company will delay the closing of [20] of its namesake brand’s locations.”

Bed Bath & Beyond also “gave up on meeting its previous financial targets for investors,” Nathaniel Meyersohn  writes  for CNN Business.  

“The company said it was withdrawing its forecast because of ‘headwinds.’ It expects sales and profit to remain under pressure during the final quarter of the year. Tritton, who was hired in October, is also assessing the business and finalizing his turnaround plan. So the company decided to throw out its previous guidance,” Meyersohn adds.

“On Monday, the company announced it had completed a real estate deal with an affiliate of Oak Street Real Estate Capital, netting it $250 million in proceeds. It sold roughly 2.1 million square feet of commercial real estate, which includes stores, office space and a distribution center, to the firm and will lease it back. Tritton described the transaction as marking ‘the first step toward unlocking valuable capital’ at Bed Bath & Beyond,” CNBC’s Amelia Lucas and Lauren Thomas write.

“In December, Tritton ousted six senior executives -- in the midst of the holiday shopping season -- including the retailer’s chief merchandising officer, marketing officer, digital officer, its general counsel and chief administrative officer,” they continue, adding that Tritton says he has been active in recruiting replacements. 

Bed Bath & Beyond said the quarter was significantly impacted by the calendar shift of Thanksgiving, resulting in one fewer week of holiday sales.

“This year there was one less week of holiday sales compared to the prior year period. Adjusting for this calendar shift to include Thanksgiving and Cyber Monday weeks in both periods, our comp sales declined only 3.6% with a decline in store sales of 6.5%, and growth in digital sales of 9.4%,” CFO Robyn D’Elia said on the conference call.

“Tritton, who joined from rival Target…, took the reins after three activist investors  unseated Bed Bath & Beyond’s top officials, including its founders,”  Kimberly Chin reminds us  in the Wall Street Journal.

“The activist investors called for changes, saying Bed Bath & Beyond failed to adapt its business model to a retail sector upended by e-commerce. The retailer’s formula of stocking stores sky-high with goods and using coupons to lure shoppers had become outdated in a world where most of the products it sells are available online. Its frugal corporate culture proved a hindrance to making the big technology investments needed to adapt,” Chin continues.

What’s next? 

Going forward, Tritton says the company will be “grounded in the following 5 pillars”: Product, Price, Promise, Place and People. We’ll have to wait until an investor conference in the spring to see exactly how those elements will come together to move more blanketsbath towelsbuffetsblinds and bar stools out of inventory.

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