The Struggle of Bed Bath & Beyond: Facing Challenges in the Retail Industry
As the largest big box retail store specializing in bed and bath products in the United States, Bed Bath & Beyond has faced significant challenges over the past few years. Despite generating $12 billion in sales in 2018 and having over 1,500 locations, by 2022, it had lost half its sales and half its stores, with only $6.21 billion in revenue and 771 stores remaining. The company’s market value has plummeted from $17 billion in 2014 to less than $212.4 million today. The decline results from several factors, including increasing competition, failed turnaround plans, and stock buybacks instead of reinvesting in the business operations. BBBY stock is also currently the third most shorted with a 48.54% short interest.
The Rise and Fall of Bed Bath & Beyond
Bed Bath & Beyond’s initial success was due to its various products. It became a “category killer” by opening cost-efficient, large stores that offered an incredible variety of products at low prices. The company’s in-store selection was unmatched, quickly becoming a favorite among consumers. However, the rise of e-commerce has made it difficult for the company to compete, and failed to make significant successful investments in online sales.
Additionally, the company’s excessive in-store selection turned into a bad thing. With so many products to choose from, it became difficult for customers to navigate the store and find what they were looking for. Bed Bath & Beyond became reliant on coupons to attract customers, leading to less profitable sales.
The company’s financial performance has been a rollercoaster. In 2012, it generated $11.5 billion in sales and had a market value of $15 billion. However, the company’s inability to adapt to the changing retail landscape has led to declining sales and market value. In 2018, the company generated $12 billion in sales, but its market value dropped to $2 billion. In 2020, the COVID-19 pandemic further exacerbated the company’s financial struggles, and had to close over 200 stores. The lockdowns and pandemic were the final tipping point for Bed Bath and Beyond in 2020 as it was unprepared for the massive shift to online sales, and its debt load, along with the plunge in revenue and profits, brought it to the breaking point very quickly. From 2020 to 2023, Bed Bath and Beyond has been fighting to stay a viable business as it risks bankruptcy and a complete shutdown of operations.
Failed Turnaround Plans and Stock Buybacks
Bed Bath & Beyond has attempted several turnaround plans to improve its financial performance. In 2019, the company appointed a new CEO, Mark Tritton, who had previously been the chief merchandising officer at Target. Tritton planned to improve the company’s online sales, revamp its in-store selection, and reduce its reliance on coupons. However, the plan failed to produce the desired results, and the COVID-19 pandemic further disrupted the company’s operations.
The company has also engaged in several stock buybacks, which investors have criticized. In 2019, the company bought back $825 million in shares, which had little impact on its stock price. Despite its financial struggles and the pandemic, the company continued to buy back shares in 2020. It was a fatal error for the company not to reinvest its capital back into the stores and business operations to restore an edge and pivot to online sales and a more modern business model for the 21st century. The stock buyback was a complete waste of operating capital, and the stock inevitably crashed anyway; BBBY is now in the single digits at $1.81 from a high price of $30.06 on March 7, 2022. During the meme stock craze, BBBY got as high as $53.90 on January 27, 2021. These recent highs of the past two years were pure speculation and detached from the value of the underlying business operations,
The Future of Bed Bath & Beyond
Bed Bath & Beyond’s future is uncertain. The company has announced plans to close more stores and reduce its workforce. It has also launched a new loyalty program to attract customers, but it remains to be seen whether this will be successful. The company has also announced plans to invest in online sales and revamp its in-store selection.
Bed Bath & Beyond’s struggles are indicative of the challenges facing traditional retailers in the age of e-commerce. The company’s initial success was due to its variety of products, but its excessive in-store selection and reliance on coupons have been detrimental to its financial performance as traditional retail sales declined and online competition grew over the years. The company’s attempts at a turnaround plan and stock buybacks have been unsuccessful, and its future remains uncertain. However, the new CEO is making another attempt with investments in online sales and in-store selection, along with closing down unprofitable stores in an attempt at a turnaround of the company’s fortunes again.
Update:
According to recent news articles, Bed Bath & Beyond has made a last-ditch effort to avoid bankruptcy by raising $225 million in an equity offering and may get another $800 million over the next ten months [3]. However, the company is still struggling to stay in business and avoid bankruptcy [1][2]. While the company has not yet filed for bankruptcy, the situation is still uncertain, and the future of Bed Bath & Beyond remains unclear.
