Bed Bath & Beyond A Bumpy 2015
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In some ways, Bed Bath & Beyond’s tough 2015 is a narrative that is largely familiar to a keen student of the latter day retail trends.
The 45-year-old chain undertook a massive expansion into superstores starting in the late 80s and early 90s, only to run into the 2000s being beaten up on all sides.
Appealing to the more value-conscious shoppers are general merchandise big box megastores, especially Target, which in the last 18 months has increased its focus on interior design and home decor, with better name-branded merchandise, more variety and better displays.
“We realized we were making them [customers] work too hard,” Target CEO Brian Cornell told the WWD Apparel and Retail CEO Summit in New York last fall. “When you walked into our stores to browse, all you saw were a sea of racks or a string of search results. So, we owed our customers a better presentation.”
Meanwhile, on the other end of the consumer spectrum, Bed Bath & Beyond has felt pressure from small chains with goods at notably higher price points, specifically Crate and Barrel and Williams-Sonoma.
Throughout the early aughts, challenges were building in the background. In the last few years, Bad Bath & Beyond has really begun to struggle with the evolving shape of retail in the 21st century. There are over 1,500 physical Bed Bath & Beyond locations in the U.S. at a time when foot traffic is declining and consumers are increasingly pulled to buying home goods items online, including from newer entrants such as Wayfair.
So, how tough are things, and how does Bed Bath & Beyond get, well, beyond its recent struggles?
And yet, a spokesperson wrote PYMNTS in an email, the chain remains positive about the broader shape of its future and expects better results in 2016.
And while that expectation is optimistic, there is the unfortunate reality that, in recent months, it has drawn the less-than-loving attention of the market’s short seller population. As of the close of 2015, Bed Bath & Beyond was clocking in as Nasdaq’s 11th most shorted stock, as sellers are becoming increasingly convinced that the company might hang on but a big bounce-back is unlikely.
And while the firm has noted publicly that the attention of short sellers has no effect on its long-term plans, it is problematic as the brand attempts to get its stock price stabilized so it can move on to that brighter future.
And while it is hard to verify a prediction for the future, Bed Bath & Beyond’s interest in multichannel retail opportunities is certainly not new. CEO Steven Temares recently noted that, for the last decade, the chain’s customers have been able to buy online and pick up goods in store.
“We also have a long history of accepting returns in store without regard to the channel in which the purchase was completed. We believe these services are a natural extension of what we do to satisfy our customers,” Temares told analysts.
“Our omnichannel strategy is centered on the customer. We believe we have aligned our organization and our strategy to allow us to provide our customers a seamless experience, and we continue to work to improve upon this experience, whether they are interacting with us in a store, on the desktop or tablet, on a smartphone or through social media.”
Lingering Doubts
Though Temares has also noted that the firm plans to continue to invest in its commitment to “functionality to our websites and apps,” a frequent critique of Bed Bath and Beyond is — and has been — that despite some small surface improvements, its commitment to building advanced digital products is tepid.
Further, even if one does not take an incredibly dim view of the firm’s attempts at advancement, there is the reality that it is late to the eCommerce party, so to speak.
Despite the impressive growth in online sales clocked throughout the year, the fact remains that, all in, its digital channel (on desktop or mobile) represents fewer than 2 percent of the chain’s total sales.
And, in home goods, the migration to an online-only experience has been somewhat slower, as customers statistically have a greater desire to see and feel the items before purchase.
Though Bed Bath & Beyond expects to see its digital sales grow as the market continue to change, the most important part of building its digital platform is not merely boosting online sales but also making a customer’s journey to purchase as “easy and intuitive” as possible.
Before Bed Bath & Beyond can get onto building that brighter future with a better demarcated path for digital and omnichannel consumers, it must first put some of 2015’s business to bed, particularly the FY2015 Q3 earnings due to be announced mid-week.
Analysts are calling for earnings of $1.09 a share on revenue of nearly $3 billion, which would be a drop for earnings ($1.19 this time last year) and a slight revenue pickup (from $2.94 billion).
From there, it will depend on if Bed Bath & Beyond can really up its digital game and turn around growth that is going in the wrong direction .
The 45-year-old chain undertook a massive expansion into superstores starting in the late 80s and early 90s, only to run into the 2000s being beaten up on all sides.
Appealing to the more value-conscious shoppers are general merchandise big box megastores, especially Target, which in the last 18 months has increased its focus on interior design and home decor, with better name-branded merchandise, more variety and better displays.
“We realized we were making them [customers] work too hard,” Target CEO Brian Cornell told the WWD Apparel and Retail CEO Summit in New York last fall. “When you walked into our stores to browse, all you saw were a sea of racks or a string of search results. So, we owed our customers a better presentation.”
Meanwhile, on the other end of the consumer spectrum, Bed Bath & Beyond has felt pressure from small chains with goods at notably higher price points, specifically Crate and Barrel and Williams-Sonoma.
Throughout the early aughts, challenges were building in the background. In the last few years, Bad Bath & Beyond has really begun to struggle with the evolving shape of retail in the 21st century. There are over 1,500 physical Bed Bath & Beyond locations in the U.S. at a time when foot traffic is declining and consumers are increasingly pulled to buying home goods items online, including from newer entrants such as Wayfair.
So, how tough are things, and how does Bed Bath & Beyond get, well, beyond its recent struggles?
The Numbers Don’t Lie — And Aren’t Pretty
The strain is showing in the numbers. The chain has posted surprise negative sales growth for seven of the last eight quarters and has seen its share price decline 36.4 percent between Dec. 2014 and 2015. Performance was overall so weak that the company revised down its net sales for the third quarter to 0.3 percent year over year to $3 billion, as opposed to its previous estimates of a range between 1.8 percent and 4 percent.And yet, a spokesperson wrote PYMNTS in an email, the chain remains positive about the broader shape of its future and expects better results in 2016.
And while that expectation is optimistic, there is the unfortunate reality that, in recent months, it has drawn the less-than-loving attention of the market’s short seller population. As of the close of 2015, Bed Bath & Beyond was clocking in as Nasdaq’s 11th most shorted stock, as sellers are becoming increasingly convinced that the company might hang on but a big bounce-back is unlikely.
And while the firm has noted publicly that the attention of short sellers has no effect on its long-term plans, it is problematic as the brand attempts to get its stock price stabilized so it can move on to that brighter future.
The Digitized Future
Despite weak recent quarterly reports, the recurring bright spot has been digital traffic, particularly with 25 percent growth in online sales. That growth, officials have noted, combined with Bed Bath & Beyond’s long-term commitment to omnichannel retail will be a cornerstone as the firm looks to expand and profit.And while it is hard to verify a prediction for the future, Bed Bath & Beyond’s interest in multichannel retail opportunities is certainly not new. CEO Steven Temares recently noted that, for the last decade, the chain’s customers have been able to buy online and pick up goods in store.
“We also have a long history of accepting returns in store without regard to the channel in which the purchase was completed. We believe these services are a natural extension of what we do to satisfy our customers,” Temares told analysts.
“Our omnichannel strategy is centered on the customer. We believe we have aligned our organization and our strategy to allow us to provide our customers a seamless experience, and we continue to work to improve upon this experience, whether they are interacting with us in a store, on the desktop or tablet, on a smartphone or through social media.”
Lingering Doubts
Though Temares has also noted that the firm plans to continue to invest in its commitment to “functionality to our websites and apps,” a frequent critique of Bed Bath and Beyond is — and has been — that despite some small surface improvements, its commitment to building advanced digital products is tepid.
Further, even if one does not take an incredibly dim view of the firm’s attempts at advancement, there is the reality that it is late to the eCommerce party, so to speak.
Despite the impressive growth in online sales clocked throughout the year, the fact remains that, all in, its digital channel (on desktop or mobile) represents fewer than 2 percent of the chain’s total sales.
And, in home goods, the migration to an online-only experience has been somewhat slower, as customers statistically have a greater desire to see and feel the items before purchase.
Though Bed Bath & Beyond expects to see its digital sales grow as the market continue to change, the most important part of building its digital platform is not merely boosting online sales but also making a customer’s journey to purchase as “easy and intuitive” as possible.
Before Bed Bath & Beyond can get onto building that brighter future with a better demarcated path for digital and omnichannel consumers, it must first put some of 2015’s business to bed, particularly the FY2015 Q3 earnings due to be announced mid-week.
Analysts are calling for earnings of $1.09 a share on revenue of nearly $3 billion, which would be a drop for earnings ($1.19 this time last year) and a slight revenue pickup (from $2.94 billion).
From there, it will depend on if Bed Bath & Beyond can really up its digital game and turn around growth that is going in the wrong direction .
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