3 key mistakes that doomed Bed Bath & Beyond
Bed Bath & Beyond was once a retail powerhouse and go-to destination for Americans in the market for home furnishings. But the big-box chain now finds itself on the doorstep to bankruptcy, another in a long line of once dominant retailers that failed to change with the times.
The company's revenue has plummeted, its stock price has fallen nearly 70% year over year and management has scrambled to cut costs by closing dozens of stores nationwide. Things have gotten so rough that executives said last week there's "substantial doubt" Bed Bath & Beyond can continue in its present form.
A Bed Bath & Beyond spokesperson told CBS MoneyWatch that the company has "a team with proven experience helping companies successfully navigate difficult situations and become stronger." Still, the company said it's mulling bankruptcy, among other strategic options.
Experts point to three main reasons for the retailer's steady decline over the years.
Slow to embrace the internet
Bed Bath & Beyond opened as a privately held business in 1971 and went public in 1992. As the U.S. economy boomed, the company then had a 15-year run of earnings that met or beat Wall Street expectations. Back then, Bed Bath & Beyond was one of the hottest stocks an investor could own, KeyBanc analyst Bradley Thomas said.
But momentum slowed once online shopping hit its stride. E-commerce was already taking off by the early 2000s, and consumers embraced online shopping for home goods starting around 2010, said University at Buffalo professor Charles Lindsey. Once products started arriving on their doorstep promptly and it became easier to return items purchased online, customers were sold, added Lindsey, an expert on consumer behavior.
During its heyday, Bed Bath & Beyond was led by former CEO Steven Temares, who Wedbush analyst Seth Basham described as an "old-school retail merchant" whose business model came down to "stack it high and let it fly." By the early 2000s it had opened hundreds of stores across the U.S., including many large-footprint outlets that required a constant flow of customers and that characterized how many Americans preferred to shop at the time.
"He thought that was all they needed to do and he wasn't willing to adjust," Basham said of Temares. "So it was too late to catch up quickly when retail started going online."
Bed Bath & Beyond finally hopped on the e-tailing bandwagon after naming Mark Tritton, a former top Target executive, CEO in 2019. But by then the company was nearly a decade behind leaders in the field, Basham said.
"They kept with the brick-and-mortar model and didn't introduce a website quickly enough," he said.
Key financial misstep
Experts said Tritton's tenure at Bed Bath & Beyond was marked by two noteworthy moves. He redesigned the look of stores while shrinking the amount of merchandise on shelves. Under Tritton's direction, Bed Bath & Beyond in 2021 also spent $625 million buying back shares in a move that later proved costly, Basham said.
The large stock buyback sent an unsettling message to suppliers who ship merchandise to stores, with vendors fearing the company wouldn't have enough cash on hand to pay them, Basham said. Many scaled back their business with Bed Bath & Beyond, leading to fewer products on shelves and unhappy customers.
Notably, that came at perhaps the worst possible time — the two years leading up to the coronavirus pandemic. By 2018 and 2019, consumers were relying more on companies like Amazon, Target, Walmart and Wayfair for home goods, Lindsey said.
And once the pandemic hit, customers started thinking about ways to spruce up their home office.
"When they went to shop online, Bed Bath & Beyond wasn't really the first thought in terms of most customers," he said. "They weren't positioned as strongly as other online retailers."
Private-label fail
Several years ago, Bed Bath & Beyond sought to emulate Target's success selling private-label products, Thomas said. Under Tritton, store managers began stocking shelves with products from at least 10 company-owned brands.
But the experiment failed because the products were low quality, exacerbated by a lackluster marketing push, Basham said. Bed Bath & Beyond announced last August it would discontinue three of its private labels — Haven, Studio 3B and Wild Sage. Ultimately, that was "a misread of what demand was for their products," Basham said.
Can Bed Bath & Beyond step back from the brink? Unlikely, the experts said.
"At the end of the day, Bed Bath & Beyond did not do enough from a merchandising standpoint and distribution standpoint in e-commerce," Thomas said. "They didn't evolve fast enough."
- In:
- Bed Bath & Beyond
Khristopher J. Brooks is a reporter for CBS MoneyWatch covering business, consumer and financial stories that range from economic inequality and housing issues to bankruptcies and the business of sports.
TwitterDisclaimer: The copyright of this article belongs to the original author. Reposting this article is solely for the purpose of information dissemination and does not constitute any investment advice. If there is any infringement, please contact us immediately. We will make corrections or deletions as necessary. Thank you.
