Business Strategy and Outlook| Jaime M. Katz, CFA |
In October 2020, Bed Bath & Beyond put forth an updated strategy to revitalize its brand and regain customer confidence by focusing on its core properties. As such, the firm divested peripheral brands such as Cost Plus and Linen Holdings in order to focus on the Bed Bath & Beyond, Buy Buy Baby, Harmon Face Value, and Decorist labels. To help elevate its brand perception, it has combined its online and in-store inventory management with its omni-always initiative in the hopes of capturing more e-commerce business and avoiding the long restock times and uneven inventories that previously plagued the firm. Additionally, it has been investing heavily in both its digital and brick-and-mortar platforms, with a revamp to the website for a more frictionless checkout process and a remodel of its physical stores to offer a cleaner and more enjoyable shopping experience. The firm has attempted to rely less on its iconic blue coupons by giving consumers a good everyday value, but we surmise some discounts will persist over the long term. It also continues to rightsize by shuttering underperforming Bed Bath stores, shrinking the total store base to 995 at the end of 2021 (from 1,500 at the end of 2019). In contrast, management expects 50% sales growth at the baby label by 2023 via new markets, with the brand already delivering $1.4 billion in sales in 2021. Even so, we see total sales declining 6% in 2022 as the net footprint continues to contract (with inflation and stock outs impacting near-term demand) before returning to a low-single-digit growth rate in 2023.