Bed Bath & Beyond released a strategic update focused on changes to meet customer demand, drive growth and profitability, and improve its balance sheet and cash flows as the company reported on changes to the executive suite, a refocus on national brands, buybuy Baby’s fate, store closings and its financial guidance for the second quarter and full year.
The company revealed a series of conclusions and actions associated with its strategic review. As such, Bed Bath & Beyond has:
- Secured commitments for more than $500 million of new financing, including its expanded $1.13 billion asset-backed revolving credit facility and a $375 million first-in-last-out facility. The refinancing of the ABL Facility is led by J.P. Morgan, and Sixth Street Partners is serving as the lender and agent for the FILO facility. Although it can’t yet guarantee transaction completions, the company anticipates that the closing and funding of the loans will occur imminently.
- Filed a Form S-3 Registration Statement with the United States Securities and Exchange Commission in preparation for the potential launch of an at-the-market offering program for up to 12 million shares of common stock. Potential proceeds from the ATM can satisfy a number of corporate purposes, including repurchasing or repaying some of the company’s debt.
- Begun implementing significant, additional SG&A reductions to right-size its cost structure reflecting its immediate priorities of merchandising, inventory and traffic, which align with changes in store footprint, lower own-brand development and support, and deferral of longer-term strategic initiatives. Cost optimization plans include a reduction in force of about 20% across corporate and supply chain. The company anticipates that its actions will reduce SG&A by approximately $250 million in fiscal 2022.
- Further reduced its plan for capital spending in fiscal 2022, down to $250 million from the $400 million previously disclosed, while providing sufficient strategic investment in technology, digital capabilities and offerings, and store maintenance.
- Identified and commenced the closure of approximately 150 lower-producing namesake stores and continues to evaluate its portfolio and leases in addition to staffing to ensure alignment with customer demand and go-forward strategy.
- Begun rebalancing its assortment and improving inventory, adjusting merchandise allocations to lead with customer preference. The company is bringing back popular national brands while introducing new, emerging direct-to-consumer brands. It is working to increase national brands’ inventory where possible and increase inventory penetration by 20 percentage points over the long term. It will exit a third of its own brands by discontinuing Haven, Wild Sage and Studio 3B even as it reduces the scope of Simply Essential, Nestwell, Our Table, Squared Away, H for Happy and Everhome.
- Started collaborating with supplier and vendor partners to ensure customers have access to a strong assortment of their favorite brands across both store and digital channels. It will host a supplier event in early-Fall 2022 to build on new and strengthen existing relationships, address any issues to ensure strong support and work collaboratively to create the best experience for shared customers.
- Set plans to leverage its recently introduced, cross-banner loyalty program, Welcome Rewards, to drive traffic, sales, and customer retention.
In addition, the strategy committee of the company board of directors, with the assistance of independent strategic and financial advisors, has completed a comprehensive review of the inherent value of the buybuy Baby banner, Bed Bath & Beyond stated. The board believes that, at this time, buybuy Baby will deliver greater value for the company’s shareholders as part of the Bed Bath & Beyond portfolio. The board of directors and management team have identified several strategies to implement significant, organic changes to accelerate further growth and unlock the brand’s full potential including building on its digital and registry platforms, addressing additional age groups and expanding products and services.
Sue Gove, director and interim CEO, said in announcing the strategic review results, “We are embracing a straight-forward, back-to-basics philosophy that focuses on better serving our customers, driving growth and delivering business returns. In a short period of time, we have made significant changes and instituted enablers across our entire enterprise to regain our dominance as a preferred shopping destination for our customers’ favorite brands and exciting products. We command a special presence in the home and baby markets, and we intend to fulfill our opportunity to be the category retailer of choice.”
Gove added Bed Bath & Beyond is “working swiftly and diligently to strengthen our liquidity and secure our path for the future. We have taken a thorough look at our business, and today, we are announcing immediate actions aimed to increase customer engagement, drive traffic, and recapture market share. This includes changing our merchandising and inventory strategy, which will be rooted in national brands. Additionally, we are focused on driving digital and foot traffic, as well as optimizing our store fleet. We believe these changes will have a widespread positive impact across customer experience, inventory assortment, supply chain execution and cost structure. The customer underpins our decisions, and we are committed to delivering what they want while driving growth, profitability and financial returns.”
To accomplish its goals, the company noted, Bed Bath & Beyond has realigned its executive leadership team, appointing Mara Sirhal executive vice president and brand president of Bed Bath & Beyond; and naming Patty Wu executive vice president and brand president of buybuy BABY. The newly created brand president roles will include responsibility for each banner’s merchandising, planning and allocation, brand marketing and stores, and will report directly to Gove. Sirhal most recently served as executive vice president and chief merchandising officer for the Bed Bath & Beyond banner. Wu has served as the senior vice president and general manager of buybuy BABY. Meanwhile, the company has eliminated the COO and chief stores officer roles in its executive suite shakeup.
In regards to the company’s CEO search, Harriet Edelman, independent chair of the Bed Bath & Beyond board, said, “It is clear from the focused work to date, evidenced by the breadth of today’s announcements, that Sue (Gove) has quickly formulated and executed important changes to customer-facing strategy, operations, management team, cost structure and liquidity. On behalf of the entire board, we are very pleased and confident that Sue’s dedicated leadership will continue to have a significant, positive impact on company performance. Regarding our search for the company’s next chief executive officer, the company’s board of directors previously announced that it retained nationally recognized firm, Russell Reynolds. We are in the earliest phase of the search process and will provide an update when appropriate.”
In addition to the strategic update, Bed Bath & Beyond provided an interim financial update for the second quarter that ended August 27 including net sales of approximately $1.45 billion, a year-over-year comparable sales decline of approximately 26%, free cash flow usage of approximately $325 million. For the full fiscal year, the company said it expects a comp decline in the 20% range driven by improvements in the second half of fiscal 2022 as compared to the first half of fiscal 2022 as well as adjusted SG&A expense of approximately $250 million below last year reflecting cost optimization actions occurring in the second half of fiscal 2022 and capital expenditures of approximately $250 million versus the company’s original plans of approximately $400 million.
Bed Bath & Beyond has not yet completed its second quarter financial close and plans to provide its full financial results for the period on Thursday, September 29, it maintained.
