New Bed Bath & Beyond Inc. (NASDAQ: BBBY) CEO Mark Tritton has decided that among his best moves to turn around the company is to fire virtually all senior management. Even if each of these managers is incredibly incompetent, it cripples the ability of the dying company to turn itself around because the people cannot be replaced fast enough with first-class executives. And Tritton did not replace them, which means a level of institutional knowledge is gone and cannot be replaced.
Tritton wants investors to believe that the threats of competition, outdated stores and a massively crippled brand are due in large part to the stumbles of a small number of people. Because these great challenges are actually the root of the problem, ousting executives will not do the trick. Dying companies also find it difficult to replace key leaders. However, Tritton said, “While interim leads have been appointed, the Company has commenced a search to fill the positions of Chief Merchandising Officer, Chief Digital Officer, General Counsel, as well as a newly combined Chief Marketing and Brand Officer position.” This level of recruitment will take months, which the company does not have.
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Tritton has been in his job since November 4. Just prior to that, Bed Bath& Beyond announced revenue had fallen from $2.94 billion in the quarter a year ago to $2.72 billion. Worse, the company lost $182 million, compared to $79 million profit in the year-ago period. Comparable store sales dropped 6.7%, the equivalent of a flat spin in brick-and-mortar retail. Interim CEO Mary A. Winston said she had a list of solutions: “(1) stabilizing sales and driving top-line growth; (2) resetting the cost structure; (3) reviewing and optimizing the Company’s asset base, including the portfolio of retail banners; and (4) refining our organization structure.” Tritton did not say if he planned to follow the same course. If not, it will be another large change of direction for the domestics retailer.
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Bed Bath & Beyond shares are down 78% in the past five years while the S&P 500 is up 53%. The drop is about the same as another struggling retailer, J.C. Penney, over the same period. A wholesale replacement of management, particularly without competent replacements, does not help the long odds that Bed Bath & Beyond can survive. In fact, it may make them worse.
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