Bed Bath & Beyond Inc. (NASDAQ: BBBY) announced a corporate and business development plan to meet client demand, expand revenue and profitability, and enhance its balance sheet and cash flows.
“We’re going back to basics and putting our customers first, boosting growth and earning profits,” says Sue Gove, Director & Interim Chief Executive Officer. We have made significant changes and established enablers across our entire business quickly to reclaim our position as a preferred shopping destination for our clients’ favorite brands and unique products. We currently have a distinct presence in the Home & Baby marketplaces, and we intend to capitalize on this opportunity by being the category retailer of choice.”
“We have devised a plan to regain market share and improve our cash flow that we are working tirelessly to implement,” she said. “We’re working swiftly and steadfastly to improve liquidity and chart a path for the future. We’ve thoroughly reviewed our business, and today we’re announcing immediate actions intended to boost customer engagement, drive traffic, and reclaim market share. We are revamping our strategy to focus on national brands, including changes in merchandising and inventory. Additionally, we want to increase digital and foot traffic while ensuring our store fleet runs smoothly. We think these widespread changes will improve customer experience, supply chain execution, and cost structure while being responsive to what customers want.”
Liquidity
The Company announced that it had secured more than $500 million in new financing commitments, including its newly expanded ABL facility for $1.13 billion and a new FILO facility for $375 million. J.P. Morgan is leading the refinancing of the ABL Facility, and Sixth Street Partners serves as the Lender and Agent for the Company’s FILO facility. The commitments are subject to customary closing conditions; it is unclear whether the requirements will be satisfied at this time. However, the Company anticipates that the closing and funding of the loans will occur very soon.
This morning, the Company filed a Form S-3 Registration Statement with the SEC as it prepares to launch an at-the-market offering program (“ATM”) for up to 12 million shares of common stock. The potential proceeds from this ATM would be used for various corporate purposes, including repurchasing or repayment of some of the Company’s outstanding debt.
Cost Structure
The Company has implemented substantial; additional SG&A cuts to restructure its cost structure. These correspond with the Company’s current merchandising, inventory, and traffic goals, a change in store footprint, lower Owned Brands development and support, and deferral of longer-term strategic initiatives. Among the cost, optimization plans, a reduction in force (including about 20% across corporate and supply chain).
The Company forecasts that the measures announced today will result in a $250 million drop in SG&A throughout fiscal 2022.
Moreover, the Company has decreased its plans for capital spending. In fiscal 2022, newly forecasted capital expenditures are now $250 million instead of the previously mentioned $400 million. These planned investments should provide vital strategic funds for technology, digital capabilities and offerings, and store upkeep.
Real Estate and Store Fleet Optimization
Bed Bath & Beyond has already closed 150 underperforming stores. It evaluates all aspects of its business, from leases to staffing, to ensure they best meet customer demands.
Merchandising and Inventory
Our Company is taking swift actions to improve inventory and rebalance its assortment in the Bed Bath & Beyond banner, which customers are expected to benefit from. These include adjusting merchandise allocations so we’re leading with customer preference, bringing back popular national brands, and introducing new, emerging direct-to-consumer brands. We’re working quickly to increase our National Brands inventory where possible, and we’ll be increasing inventory penetration by 20 percentage points over the long term.
In the future, the Company will discontinue three of its nine labels (Haven™, Wild Sage™, and Studio 3B™), exiting a third of its owned Brands. The inventory for the six remaining Owned Brands (Simply Essential™, Nestwell™, Our Table™, Squared AwayCallaway ا H for Happy&trade:) will be reduced by 20 percentage points to keep a more balanced sales-to-stock ratio.
Customer Engagement
The Company intends to leverage its new, cross-banner loyalty program, Welcome RewardsTM, to drive traffic, sales, and customer retention. Customers may earn and redeem points across all three retail banners with every purchase across all retail channels and banners. Consumers may accrue and use punches with each online or in-store purchase throughout the country at Bed Bath & Beyond, Buybuy BABY, and Harmon. Since launching nationally, the program has gained a lot of attention because it already has 5 million members worldwide.
Supporting Suppliers and Vendor Partners
With several new and exciting programs on the way, you can expect to see more significant competitive pressure from competitors. The Company will continue to employ strong distribution capabilities, keeping in mind that its success is dependent on the availability of products at competitive pricing when available throughout all channels. Supplier and vendor partners are working with the Company’s teams to guarantee consumers have access to a wide range of their favorite brands across both physical and digital outlets. In early-Fall 2022.
Bed Bath & Beyond Leadership Changes
The Company has rearranged its senior leadership team to reflect the new strategic objectives and changes announced today. Mara Sirhal has been named Executive Vice President and Brand President of Bed Bath & Beyond, effective immediately. In addition, buy BABY’s Patty Wu has been elevated to Executive Vice President and Brand President. The newly created Brand Presidents will handle each banner’s merchandise planning, allocation, brand marketing, and stores and report directly to Ms. Gove.
Ms. Sirhal most recently served as Bed Bath & Beyond’s Executive Vice President and Chief Merchandising Officer. Ms. Sirhal began working for the Company in January 2021 as Senior Vice President and General Manager of Harmon to assume responsibility for all operational aspects of this business. Ms. Sirhal’s retail expertise includes nearly 20 years across various categories, including merchandising, product development, planning, digital, inventory management, supplier variety, and leased operations at Macy’s Incorporated.
Ms. Wu has been the Senior Vice President and General Manager of buying BABY since she joined in January 2021. Before buying BABY, Ms. Wu had several executive leadership positions across retail and business, for example, Chief Commercial Officer of Beautycounter, Chief Commercial Officer and General Manager of the Baby Division at The Honest Company, and Ms. Wu held senior management roles at Mattel Inc. and Walmart.
Eliminating the position of Chief Operating Officer and Chief Stores Officer, John Hartmann and Gregg Melnick will no longer be with the Company.
Bed Bath & Beyond CEO Search
Harriet Edelman, the Independent Chair of Bed Bath & Beyond Inc.’s Board of Directors, said: “Sue has effectively changed customer-facing strategy, operations, management team, and cost structure.” She continued, “It is clear from the focused work to date that these changes have positively impacted liquidity.” We are delighted with Sue’s leadership and know that it will continue to benefit the Company. As for finding our next CEO, we enlisted Russell Reynolds–a very reputable firm–to help us in the search process. We’re still early in the said process but promise to update everyone when we have news.”
Financial Update (Interim)
At this time, the firm is providing the following interim financial statement for the second quarter of fiscal 2022, which ended August 27, 2022:
- Our net quarterly sales were $1.45 billion, a 26% decline from last year’s second quarter.
- We also used up about $325 million in free cash flow during this period.
The Company is pleased to present the following interim financial statement for its expectations for the year 2022:
- Comparable Sales will drop by 20%, but this is driven by the fact that improvements are taking place in the second half of fiscal 2022 as opposed to the first half.
- Additionally, Adjusted SG&A expenses will be approximately $250 million below what they were last year due to cost optimization actions being carried out during the latter part of fiscal 2022.
- Capital expenditures are currently projected at $250 million, which is lower than initially planned because those plans estimated expenses at around $400 million.
The Company has not yet completed its quarterly financial close and will publish its full second-quarter financials on Thursday, September 29, 2022. The preliminary findings described in this news release are estimates only until the time comes for management to review the quarter’s results and finish all closing process activities.
