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Bed Bath & Beyond, a retail fixture since 1980, has been in the news a lot lately. The company is closing hundreds of stores and slashing thousands of jobs. That's not only because it's struggling to compete with Amazon, Walmart and other big box retailers—it's also because Bed Bath & Beyond has been reluctant to change its retail model when it should have years ago.
As part of the company’s restructuring plan, Bed Bath & Beyond is closing another 200 stores in the next two years. That will bring its number of store closures since 2015 to roughly 250, or about 3% of its total. The company also plans to cut thousands of jobs and close several distribution centers as it tries to turn around a business that has lost $1.5 billion in sales since 2010.
On Friday, CEO Steven Temares said he would seek rent reductions for about half of their leases and renegotiate some others altogether if necessary — an acknowledgment that these changes could end up requiring some stores to close sooner than expected. “I think we’re going to have a few [stores] here or there where we just don’t have any choice but to exit them early because they are just not working out economically,” Temares told investors on the company’s first-quarter earnings call with analysts
Bed Bath & Beyond, which is closing about 200 stores in the next two years and slashing thousands of jobs, continues to be under pressure.
The retailer has a store-heavy mix for its more than 1,300 U.S. locations, compared with competitors like Macy's Inc. that have been able to move away from brick-and-mortar stores and rely on e-commerce sales as well as physical outlets to sell their wares.
Bed Bath & Beyond's shares fell as much as 9% Thursday after reporting difficulties with its new e-commerce site, which has seen underwhelming growth since it launched in April 2018. The company said it expects sales at stores open at least a year—an important metric—to decline 2% in its fiscal year ending February 2020 versus flat results last year because of higher costs associated with fulfilling orders through its digital channels and shuttering unproductive locations previously used to fulfill online orders."
Bed Bath & Beyond has been a fixture in the retail industry for decades, but the company has been struggling financially for several years. The company has closed about 200 stores in the last two years and will continue to do so until it reaches its ideal store count of 1,500 locations—a number that represents about 50% less than what it had at one point. As part of this downsizing process, Bed Bath & Beyond cut thousands of jobs and announced that it's closing Harmon Face Values by the end of 2019 (there are currently 32 locations).
Historically speaking, Bed Bath & Beyond relied on a store-heavy mix; however, while e-commerce is still small compared with what it could be, CEO Steven Temares told investors last month that he believes there's "more opportunity" in moving toward an omnichannel strategy where customers can buy online or offline.
The retailer, which closed about 200 stores in the last two years and laid off thousands of workers, is looking to renegotiate leases with landlords. It also wants to sell some of its real estate portfolio or raise money through other means.
All this comes as Bed Bath & Beyond struggles to get back on its feet after weathering a sales slump and an expensive acquisition that didn't pan out. The company has traditionally relied on a store-heavy mix—indeed, 88% of Bed Bath & Beyond's $5 billion in revenue came from retail locations according to analyst estimates compiled by Bloomberg—but it's now moving toward online sales as part of its recovery efforts.
If Bed Bath & Beyond is going to survive in this new retail environment, it’s going to have to rethink its strategy. The company needs to find a way to reach consumers who are turning away from brick-and-mortar stores, and that may not be easy. But with so much at stake for Bed Bath & Beyond—and the many companies like it facing similar pressures—this seems like an opportune moment for investors and executives alike: an opportunity for something new.
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