Bed Bath & Beyond tanks after unveiling a plan to raise cash, featuring store closures and layoffs
Missing the coupon catalog... It's back-to-school season, but dorm staple Bed Bath & Beyond's already flunked the semester. Shares of the struggling home goods retailer sank 21% yesterday after it revealed its plan to cut costs and raise cash. BB&B is:
- Closing 150 of its namesake stores: As of May, it had 955 stores, including Buybuy Baby. Total sales plunged 26% last quarter — even worse than other recent quarterly drops.
- Slashing 20% of its workforce: The cost-cutting attempt comes as BB&B burns through its cash reserves: it ended May with just $100M on hand vs. $1.1B a year earlier.
- Raising $500M in financing: BB&B said it secured the $$ to brace its business after going through $325M last quarter. It also filed to sell an undisclosed # of its shares.
Fitted sheet on a twin XL mattress… Bed Bath has bigger problems. In April it said it lost out on $175M in sales due to out-of-stock items. In June, BB&B ousted its ex-CEO for failing to fix its misfortunes. And last month, activist investor Ryan Cohen sold his entire BB&B stake.
- Pivot: As part of an unsuccessful turnaround effort, BB&B aggressively expanded into private-label brands, launching nine since last spring.
- Fail: BB&B thought exclusive brands could help it gain a competitive edge, but it led to some shoppers struggling to find the recognizable national brands they actually wanted.
Private labels can hurt public love… Private labels like Costco’s Kirkland and Walmart’s Great Value brands can boost affordability for consumers and fatten profit margins for companies. But they can also alienate consumers if not done right: BB&B says it’ll quit three of its house brands including Haven and slash inventory on others to refocus on brand names like Cuisinart and Oxo.