Bed Bath & Beyond decluttered its stores and ended up frustrating shoppers
Those moves, led by CEO Mark Tritton, ended up leaving the housewares chain vulnerable to supply chain issues that have plagued many retailers, according to former employees, executives and industry analysts.
The reduction in product selection left customers with fewer choices when looking for substitutes for out-of-stock items, former employees said. Swapping national labels for new private label — aimed at boosting profits and sales — can be disruptive even in normal times, but it’s created even bigger challenges during the pandemic, suppliers and former employees said.
For part of the critical holiday season, the chain ran out of its 200 best-selling items, from kitchen appliances and electronics to bed linens and bath towels, resulting in lost sales of $100 million. dollars for the last quarter, Mr. Tritton told analysts earlier this month. .
Shares of the company, which rose at the start of the pandemic as people stocked up on items for their homes, have lost more than half their value in the past year. The shares have been subject to strong price swings as the preferred stock transaction among individual investors.
Some analysts who initially backed Mr. Tritton’s strategy are now questioning its viability.
“The market share losses the company has suffered in recent quarters not only point to company-specific supply chain issues, but an erosion of their core customer base,” said Seth Basham, analyst at Wedbush Securities.
Mr. Tritton declined to comment. He told analysts in early January that his channel overhaul strategy was on track. He said private labels are resonating with shoppers and the company’s market share, after seeing declines, is stabilizing.
“Our #1 priority is to continue to modify our current systems and processes to release inventory faster and more efficiently to meet demand,” he said.
During the pandemic, retailers have struggled to keep items in stock amid factory closures, shipping delays, port congestion and a shortage of truckers. Some channels weathered the storm better than others. The HomeGoods chain of TJX Cos. recorded a 34% increase in same-store sales in the last quarter compared to the same period a year earlier. Target Body
Home Office sales posted a double-digit percentage increase.
At Bed Bath & Beyond, same-store sales fell 10% in its eponymous chain for the three months ended November 27. Figures adjust for changes in store count and divestments.
Some shoppers who have relied on Bed Bath & Beyond as a go-to for everything from toothbrush holders to roasting pans have recently left stores empty-handed.
Marcos Martinez said he couldn’t find a handheld vacuum and blanket during his recent trips to the Bed Bath & Beyond store near his home in New York’s Queens borough and bought the items at Target and Amazon.com. Inc.
“Bed Bath & Beyond would normally be my first stop for these things,” the 36-year-old parole officer said. “But now I’ll probably go somewhere else.”
Mr. Tritton, a former Target and Nordstrom executive who helped develop private label products at both chains, was brought in to fix Bed Bath & Beyond in November 2019 after an activist investor toppled senior management and reconfigured its board of directors.
The new CEO changed management, sold several businesses, including Christmas Tree Shops, and proceeded to close approximately 200 stores. The company owns approximately 800 Bed Bath and Beyond stores as well as the Buybuy Baby and Harmon chain stores.
It has also moved to address physical store concerns. Merchandise was crammed into Bed Bath & Beyond locations, and the overcrowding led to “shopping paralysis,” Mr. Tritton said in a 2020 interview. Holding less inventory frees up cash and helps the business to operate more efficiently.
Many changes were needed after years of underinvestment by previous management in supply chain systems and technology, the company said. Some former employees said it was too much change too soon.
“If they used to have six or seven types of a product, now it’s two or three,” said Wedbush’s Mr Basham.
Mr. Tritton told analysts earlier this month that “the company’s inventory position remained healthier with greater relevance compared to last year.”
When Liza Amlani was looking for a pizza stone this month, her first stop was Bed Bath & Beyond. “I went there first because they have everything,” says the 46-year-old former retail trader, who now runs a strategy firm. The store near her home in Toronto was sold out, so she ended up buying the item from a local retailer. “The assumption that Bed Bath & Beyond would have a wide range of products is no longer true,” she said.
In March, Bed Bath & Beyond unveiled what it called “the biggest change in its product assortment in a generation.” By November, it had launched eight private labels comprising 800 new products. Private label products under brands such as Nestwell and Haven accounted for around a quarter of sales in the last quarter, down from 10% in October 2020, according to the company.
Private label products are generally more profitable than branded products because they eliminate wholesalers. Items that are exclusive to a chain store can also act as an attraction for customers. The push helped Bed Bath & Beyond offset rising costs, but contributed to its supply chain issues, according to the company and people familiar with the matter. It also created confusion among suppliers, with some being told their branded products would be discontinued, only for the items to be reordered weeks later, one of the people said.
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The Bed Bath & Beyond spokesperson said the company was trying to be “nimble at all times”.
Until recently, Bed Bath & Beyond’s distribution centers only fulfilled e-commerce orders. Store shelves were replenished by moving cargo from truck to truck with minimal or no storage, a less efficient system. The result was twice the replenishment compared to the industry average, the people said.
Bed Bath & Beyond announced plans to invest $250 million over three years to improve its supply chain, including building dedicated distribution centers to restock physical stores. The investments, which also include new technologies, will help reduce replenishment times from 35 days to 10 days, according to the company.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com
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