Bed Bath & Beyond was once a retail powerhouse and a go-to destination for Americans in the home furnishings market. But the big chain now finds itself on the brink of bankruptcy, another in a long line of once-dominant retailers that have failed to change with the times.
from the company revenue droppedits stock price has dropped nearly 70% year-over-year and management has struggled to cut costs in closing dozens of stores across the country. Things have gotten so difficult that executives said last week that there are “substantial doubts” that Bed Bath & Beyond can continue in its current form.
A spokesperson for Bed Bath & Beyond told CBS MoneyWatch that the company has “a team with a proven track record of helping businesses successfully navigate difficult situations and become stronger.” Still, the company said he is considering bankruptcyamong 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 private company in 1971 and went public in 1992. As the US economy boomed, the company had a 15-year earnings streak that met or exceeded Wall Street expectations. Back then, Bed Bath & Beyond was one of the hottest stocks an investor could own, said Bradley Thomas, an analyst at KeyBanc.
But the momentum waned as online shopping hit its stride. E-commerce was already taking off in the early 2000s, and consumers embraced online shopping for household goods starting in 2010, said Charles Lindsey, a professor at the University at Buffalo. Once products started arriving promptly at their doorsteps and it became easier to return items purchased online, customers were sold, added Lindsey, an expert in consumer behavior.
During its heyday, Bed Bath & Beyond was led by former CEO Steven Temares, whom Wedbush analyst Seth Basham described as an “old-school retailer” whose business model was all about “stacking high and letting it go.” to fly”. By the early 2000s, it had opened hundreds of stores across the United States, including many large stores that required a steady 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 quickly recover when retail started going online.”
Bed Bath & Beyond finally jumped on the e-commerce bandwagon after naming Mark Tritton, a former Target executive, CEO in 2019. But by then the company was nearly a decade behind leaders in the field, Basham said.
“They kept the brick-and-mortar model and didn’t introduce a website quickly enough,” he said.
Top financial mistakes
Experts said Tritton’s tenure at Bed Bath & Beyond was marked by two notable moves. He redesigned the appearance of the stores while reducing the amount of merchandise on the shelves. Under Tritton’s direction, Bed Bath & Beyond in 2021 also spent $625 million buying back shares in a move that later proved to be costly, Basham said.
The large share buyback has sent an unsettling message to vendors shipping goods to stores, with vendors fearing the company won’t have enough cash on hand to pay them, Basham said. Many have reduced their business with Bed Bath & Beyond, leading to fewer products on shelves and unhappy customers.
Remarkably, this happened at perhaps the worst possible time – the two years leading up to the coronavirus pandemic. In 2018 and 2019, consumers relied more on companies like Amazon, Target, Walmart and Wayfair for home products, Lindsey said.
And once the pandemic hit, customers started thinking of ways to spruce up their home office.
“When they went online to shop, Bed Bath & Beyond wasn’t really the first thought in terms of most customers,” he said. “They weren’t positioned as well as other online retailers.”
own brand failure
Several years ago, Bed Bath & Beyond sought to emulate Target’s success by selling private-label products, Thomas said. Under Tritton, store managers began stocking shelves with at least 10 private label products.
But the experiment failed because the products were of poor quality, exacerbated by a lackluster marketing effort, Basham said. Bed Bath & Beyond announced last August that it would discontinue three of its flagship brands – Haven, Studio 3B and Wild Sage. Ultimately, this was “a misreading of what the demand for their products was,” Basham said.
Can Bed Bath & Beyond pull back from the brink? Unlikely, experts said.
“At the end of the day, Bed Bath & Beyond didn’t do enough from an e-commerce merchandising and distribution standpoint,” said Thomas. “They didn’t evolve fast enough.”
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