Bed Bath & Beyond’s Real Problem Is People Don’t Want to Shop There

Bed Bath & Beyond Inc. (NASDAQ: BBBY) has rolled out a new set of plans to improve its operating performance. Investors greeted these positively. Or, perhaps the rise in its shares was based on the sale of an asset. Bed Bath & Beyond, however, still has a stock price ravaged by poor results. Its core problem is that people do not want to shop at its stores, and there is no evidence management can ever reverse that.

Bed Bath & Beyond’s only really good news is that it sold its PersonalizationMall.com to 1-800-Flowers.com for $252 million and possible minor adjustments. It gets rid of an asset that management says is not core to its new mission, and it gives the company some needed capital. But that does not reverse substantial trouble.

CEO Mark Tritton has several important plans. First among them is to take clutter out of stores and widen aisles. Presumably, that makes a better shopping experience. Of course, that is an educated guess and may do nothing. He also wants to cut the number of options people have when they buy an item. Does reducing 10 pillow brands to four make a difference to shoppers?

Tritton will spend $400 million to redesign stores and lower inventory.

Bed Bath & Beyond’s brutal position was described by management recently. That announcement was complex and convoluted:

For the first two months of the fiscal 2019 fourth quarter (December 2019 and January 2020), the Company’s comparable sales declined 5.4%, reflecting a low-double-digit percentage decrease in transactions in stores, partially offset by a mid-single-digit percentage increase in the average transaction amount. On a directional basis, comparable sales from stores declined nearly 11%, while comparable sales from digital channels grew approximately 20%.

Comparable sales include the shift of the Cyber Monday holiday week, which is in the Company’s fiscal fourth quarter this year versus the fiscal third quarter of last year. Adjusting for the calendar shift to exclude Cyber Monday week in both periods, comparable sales for the first two months of the fiscal 2019 fourth quarter declined 13%.

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Bed Bath & Beyond can lower the number of stores it has to save money and become more efficient. It can sell assets or lease its real estate. None of these will bring people back to its stores. Many customers have gone elsewhere or never have shopped there, and they won’t change that habit.

Bed Bath & Beyond is not even among retail’s walking wounded. It is worse off than that.

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