Bed Bath and Beyond has become a literal mess
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Bed Bath and Beyond has always been a little messy, and that was the point.
You walked in for a new set of sheets and walked out with a closet organizer, an As Seen On TV tummy roller, and a 12-pack of clear glass food storage containers that would fit ULTIMATELY up your fridge game. And later, sipping a homemade cappuccino from your comically oversized porcelain mug — all courtesy of the BBBY — you’ll remember you never got those sheets.
But these days, the store is kind of a hot mess, literally, and that’s got analysts and investors nervous ahead of BBBY’s earnings report tomorrow.
Here’s the thing: a new report from Bank of America says some stores cut air conditioning and other utilities to quickly cut spending and offset a slump in sales – a charge BBBY HQ denies. (A rep told my colleague Nicole Goodkind that no store was “ordered to adjust its air conditioning and there had been no change in company policy regarding utility use.”)
The heat is not BofA’s only concern. Analysts visited stores to find out what was happening on the ground. Doesn’t look great.
- Working hours and store opening hours have been reduced, analysts said.
- Renovation projects have been cancelled.
- Customer rewards programs have been reduced or replaced.
- Foot traffic was down 30% from a year ago, though rivals such as Walmart and Target held steady.
- Also: It’s not like investors forgot about the last earnings report, when sales fell 22% from a year earlier. Bank of America analysts expect sales to fall another 20% over the past three months.
- Key quote: “The company has underperformed the industry and we believe consensus estimates [of an 18% drop in sales] may be optimistic,” the analysts wrote.
BofA analysts expect Bed Bath & Beyond management to soon announce further store closures and halt openings of its Buy Buy Baby stores.
But all is not gloomy. Bed Bath & Beyond CEO Mark Tritton, who was previously Chief Commercial Officer of Target, set in motion a massive turnaround plan when he took over the reins in the fall of 2019, which included plans to close stores, clean up the C-suite, and renovate around 450 stores to make in-store shopping less chaotic. (If you ask me, that takes all the fun out of getting lost in the stuff-filled maze-like alleys.)
Of course, Tritton barely had time to order a new nameplate for his office door before the pandemic upended the world — including the vast supply chains his business relies on.
“The turnaround is taking longer than expected,” analysts at Riley Securities wrote, but “we believe Bed, Bath & Beyond is headed in the right direction.”
Ernst & Young has been hit with a record fine after regulators discovered that not only did some of its auditors cheat on their licensing exams, but that the company knew it for years and did nothing to stop it.
According to the SEC, a “significant number” of EY auditors cheated on the ethics part (LOL) of the Certified Public Accountant test and other courses. The $100 million fine is the largest ever imposed on an audit firm.
“This action involves breaches of trust by gatekeepers within the gatekeeper responsible for auditing many of our nation’s public companies,” Gurbir Grewal, director of the SEC’s enforcement division, said in a press release. . “It’s just outrageous that the very professionals tasked with catching cheating by clients cheated on ethics reviews, of all things.”
True story: Last spring, while preparing for my first beach vacation in years, I ordered five swimsuits online with the intention of saving one or two. I was busy, and who has the emotional energy to go to a real store to try on the most dreaded piece of clothing money can buy?
Anyway, a few days later the costumes arrived and I prepared to send the rejects back. I ordered a return label online, but instead I received a message saying, more or less: Keep it! The store told me they would refund me for the items, but please don’t send them back to us. (They of course remain in their packets in my closet, next to another bag of donations whose management I have postponed).
Here’s the thing: My story isn’t unique or new, but it’s becoming more common, according to my colleague Parija Kavilanz.
Some of the biggest retailers, including Target, Walmart, Gap, American Eagle Outfitters, recently said – and I’m paraphrasing here – that they just had too much bullshit. Stocks are full of workout clothes, jackets, hoodies, garden furniture, children’s toys and more. And it costs these stores tons of money to stock everything. Returns are just another mess literally piling up on those overcrowded shelves.
Why the glut?
Stop me if you’ve heard this one: supply chains are a mess. Still.
Retailers who rushed to restock high-demand items may have found that demand had cooled by the time the items actually arrived. Consumer behavior is also changing: we are spending less overall – thanks to inflation – and we are spending less on goods than we did in the pre-pandemic vaccine era.
It’s just too expensive to manage returns, Burt Flickinger, managing director of retail consultancy Strategic Resource Group, told Parija.
“For every dollar in sales, a retailer’s net profit is between one cent and five cents. With returns, for every dollar of returned merchandise, it costs a retailer between 15 cents and 30 cents to handle it.
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