3 Key Mistakes That Doomed Bed Bath & Beyond
Bed Bath & Beyond was once a leading retail company and a one-stop shop for Americans in the home furnishings market. But the big-box chain now finds itself on the doorstep of bankruptcy, another in a long line of once-dominant retailers that have not kept up with the times.
The company’s revenue has plummeted, its share price has fallen nearly 70% year over year, and management has scramble to cut costs by closing dozens of stores nationwide. Things have gotten so rough that executives said last week there were “significant doubts” that Bed Bath & Beyond could continue in its current form.
A spokesman for Bed Bath & Beyond told CBS MoneyWatch that the company has “a team with proven experience that helps companies succeed in difficult situations and grow stronger.” Still, the company said it was considering bankruptcy among other strategic options.
Experts point to three main reasons for the retailer’s steady decline over the years.
Slow to accept the internet
Bed Bath & Beyond opened as a private company in 1971 and went public in 1992. As the US economy boomed, the company posted a 15-year winning streak that met or exceeded Wall Street expectations. Back then, Bed Bath & Beyond was one of the hottest stocks an investor could own, said KeyBanc analyst Bradley Thomas.
But momentum slowed as online shopping picked up steam. E-commerce was on the rise as early as the early 2000s, and consumers embraced online shopping for home goods from around 2010, said Professor Charles Lindsey of the University of Buffalo. When products got to their doorsteps instantly and it became easier to return items bought online, customers were sold, added Lindsey, a consumer behavior expert.
During its heyday, Bed Bath & Beyond was led by former CEO Steven Temares, whom Wedbush analyst Seth Basham described as an “old-school retail clerk” whose business model came down to “stack it high and let it fly.” By the early 2000s, it had opened hundreds of stores across the United States, including many large-area branches that required a constant flow of customers and shaped how many Americans loved to shop at the time.
“He thought that was all they had to do and he wasn’t willing to conform,” Basham said of Temares. “So it was too late to catch up quickly once retail started going online.”
Bed Bath & Beyond finally jumped on the e-tailing bandwagon after Mark Tritton, a former top executive at Target, was named CEO in 2019. By then, however, the company was nearly a decade behind the leaders in the field, Basham said.
“They stuck with the brick-and-mortar model and didn’t roll out a website fast enough,” he said.
Main financial misstep
According to experts, Tritton’s tenure at Bed Bath & Beyond was marked by two notable steps. He redesigned the look of stores while reducing the amount of goods on the shelves. Under Tritton’s leadership, Bed Bath & Beyond also spent $625 million on a stock buyback in 2021, which later proved costly, Basham said.
The big share buyback sent a worrying message to suppliers that deliver goods to stores, as sellers feared the company would not have enough cash on hand to pay for them, Basham said. Many scaled back their Bed Bath & Beyond business, resulting in fewer products on the shelves and unhappy customers.
Remarkably, that came at perhaps the worst possible time — the two years before the coronavirus pandemic. In 2018 and 2019, consumers relied more on companies like Amazon, Target, Walmart and Wayfair for home goods, Lindsey said.
And when the pandemic hit, clients started thinking about how to jazz up their home office.
“When shopping online, Bed Bath & Beyond wasn’t really the first thought for most customers,” he said. “They weren’t as strong as other online retailers.”
Private label fail
A few years ago, Bed Bath & Beyond tried to emulate Target’s success in selling private label products, Thomas said. Under Tritton, store managers began stocking shelves with products from at least 10 company-owned brands.
But the experiment failed because the products were low quality, made worse by a lackluster marketing push, Basham said. Bed Bath & Beyond announced last August that it would discontinue three of its own brands — Haven, Studio 3B, and Wild Sage. Ultimately, that was “a misreading of the demand for their products,” Basham said.
Can Bed Bath & Beyond step back from the abyss? Unlikely, experts told CBS MoneyWatch.
“Ultimately, Bed Bath & Beyond hasn’t done enough from an e-commerce merchandising and distribution perspective,” said Thomas. “They didn’t develop fast enough.”
Christopher J Brooks