It's Day One at Bed Bath & Beyond
After months of overhauling its management team, we now know how Bed Bath & Beyond is planning to turn around the company.
Ahead of a meeting with investors on Wednesday, the Union, New Jersey-based retailer has laid out a three-year road map, offering new (and improved) financial guidance and the strategies it plans to leverage to achieve success.
Bed Bath & Beyond said that it expects its turnaround plan to help stabilize same-store sales in fiscal 2021, and rise in the low- to mid-single digits by 2023.
"We have made tremendous progress this year to strengthen our financial position, focus our portfolio in core Home, Baby [and] Beauty & Wellness markets, rebuild our executive team, and launch a series of omnichannel services to win back customers," said Mark Tritton, president and CEO. "We will build on these strong foundations with a three-year growth strategy that further elevates the shopping experience, modernizes our operations, and unlocks sales growth, margin expansion, increased cash flow, and strong and sustainable total shareholder return. Our transformation is rooted in an omni-always, customer-inspired approach that will make it easy to feel at home with Bed Bath & Beyond. In doing so, we will deepen our relevance and connection with customers by helping them unlock the magic in every room."
Key initiatives supporting the company's new strategy will include:
- As part of its strategic growth plans, Bed Bath & Beyond will launch a clear customer value proposition to deepen connections with five core customer segments: the nester, the minimizer, the juggler, the innovator and the creative. In addition, the company will develop an enterprise-wide strategy to unlock value across its core brands in the Home, Baby, and Beauty & Wellness markets, including plans for a reinvented loyalty program to deepen its customer relationship and motivate increased shopping across categories, channels and banners.
- By completely resetting its assortment, Bed Bath & Beyond will provide a more curated, inspirational and differentiated product collection across categories. Over the next 18 months, Bed Bath & Beyond expects to launch more than 10 new owned brands in key destination categories, with the goal of tripling the penetration of owned brands within its assortment over three years. At the same time, the company will create opportunities for market share growth by increasing the availability of opening price points and value-tier products, while also elevating the customer experience in destination rooms, to provide ease and inspiration in-store and online.
- The company is also moving away from its former decentralized inventory management approach to create an omni-always, centralized ordering and replenishment system that's expected to ensure higher in-stock levels, increased sales and long-term productivity improvements.
- Bed Bath & Beyond will continue to improve its base price competitiveness across key categories while also addressing assortment gaps in value tiers, to help the company compete better with mass retailers and attract new customers to the business. The company will use data and insights to build discipline into the use of promotions, to increase return on investment and remove ineffective promotional activity. In addition, the company will continue to improve the communication of value across channels, including more compelling value at first glance for customers.
- Bed Bath & Beyond will continue to create a more inspirational omni-always digital and in-store shopping experience, building on the recent launch of Buy-Online-Pickup In-Store (BOPIS), Curbside Pickup and Same Day Delivery services, which have helped convert more than 2 million customers to shop more than one channel this year. The company will elevate the customer experience to drive conversion, unlock omni-always services to inspire more customers to shop across channels, and transform to a digital-first culture to acquire new customers.
- The company also plans to invest significantly in its store fleet to make shopping easy and inspiring, as part of an overall store optimization program. The store remodel plan includes investments of around $250 million over the next three years across approximately 450 stores representing about 60% of revenue. This test-and-learn approach is expected to generate a median sales lift of approximately 4% and deliver a double-digit return on investment.
- As previously disclosed, the company is moving quickly to right-size its store network and is on track to close about 200 Bed Bath & Beyond stores by 202, from which it expects to generate annualized EBITDA savings of approximately $100 million. Separately, as part of the company's strategy to build authority in the baby market, the company expects to grow its physical footprint with additional stores in new markets and increase sales by 50%, to approximately $1.5 billion, by fiscal 2023.
- Bed Bath & Beyond will improve its operational proficiencies to support a more agile, customer-centric approach. The end-to-end modernization of its supply chain and technology capabilities are expected to deliver significant operational efficiencies. The company expects to invest approximately $250 million over the next three years to reinvent its supply chain, and pivot from a consolidation-based model to a modernized distribution network that's faster, more competitive and responsive to the market. The company will also invest approximately $250 million over the next three years to drive modernization and innovation in its technology platforms, leveraging a strategic partnership with Google Cloud and other leading technology providers.
- The company's strategic plan and disciplined investments are expected to deliver an improved customer experience and accelerate sales and margin growth, as well as unlock significant cash-flow generation and drive strong and sustainable total shareholder return. Bed Bath & Beyond's three-year financial road map includes several performance metrics, including sales, gross margin, EBITDA, return on invested capital, inventory position, gross debt, and total return to shareholders.
In August, Bed Bath & Beyond said that it would cut its workforce by about 2,800 positions, launch brands and take other steps to build out its omnichannel powers in the coming months. It has made some vital executive hires as part of the push.