Bed Bath & Beyond

Bed, Bath & Beyond is a big box retail store specializing in the sale of bed and bath products but it does go beyond that, it's a fitting name. Look I t In terms of size, they peaked in 2018 with over 1500 locations across the United States that were generating sales of over 12 billion dollars a year making them a Fortune 500 company. I know I can't be the only one that always that movie by the way was released in 2006 when the chain was obviously already huge but still not even half of the size that it would eventually become. In fact, there was a point, maybe about a decade ago, where Bed, Bath & Beyond was widely considered to be among the most impressive retail success stories w They have not been doing well for many years now. There have been times where they make some promising changes that do show little signs of hope here and there but overall it has not been good. In 2014, Bed, Bath & Beyond had a market value of 17 billion dollars that has since fallen to well under half a billion as of the making of there have been multiple announcements of store closings over the past few years, the most recent one saying that 87 more of them are shutting down. In September of 2022, sadly, their CFO took The following month, Moody's downgraded their credit rating due to a high There has been extensive bankruptcy talks stemming from official statements made by the company essentially saying that they can't really afford to pay their debts. Their sales graph over the past few years is not what you want to see. Yeah, they've been mostly just circling down the drain for multiple years now and I hate to say it but unless something big happens, it's looking T So Leonard Feinstein and Warren Eisenberg were two managers at a failing department store called RLens. In 1971, they reported $19 million in losses and would soon file for bankruptcy. So that year, the two of them quit their jobs to start their own business. Based on their experience, they felt that department stores were on their way out and specialty stores were the way of the future. It motivated them to open a store that only sold bed and bath products, appropriately called Bed in Bath. It was not But it was a start and it turns out that they were right about the potential of specialty stores. By 1985, it had grown to 17 locations mostly still in the northeast but by t Most notably, Linnons & They were the owners of multiple retail chains including KB Toys and CVS so they had the resources to expand Linnons & T In an attempt to separate themselves from Linnons & T All of that is leading me to my first reason be See, the idea to open these superstores was not an original one. It was heavily influenced by a trend that was happening in retail at the time where a specialty store would scale their operations by opening large locations that were cost efficient enough to offer the customer an incredible variety of products at low enough prices. All becoming huge throughout the 1980s and 1990s to a point where t Such an aggressive name but it was appropriate because they were putting many of the smaller stores out of business. In the case of Bed Bath & Beyond, they were selling Bed in Bath products in just about every form imaginable. Seriously, if you were looking for a towel in a specific shape or size or color, you would And I know that doesn't sound all that impressive today, but 30 plus years ago, that was unbelievable. The company was also really successful with their marketing. Very little money was ever spent on advertising. You would hardly ever see a commercial for them. They would instead put that money toward their service or the in-store experience in some way and trust that the customers would have a pleasant enough time to want to tell other people about it. Also the coupons. They eventually became known for their blue and w The founders felt that traditional sales or promotions would restrict the customer to certain items. W Alright, I'm gonna start moving quicker through some of these. The layout has always been important. Specifically, their really tall display, stacking merchandise, sometimes all the way up to the ceiling. It allows the customer to see the different sections from far away. They are big stores after all, but it also helps show the sheer vol Another factor was their decentralized approach as far as inventory and management, saving money by having everyt They allowed the managers to use their own judgment of the area to make adjustments to the prices or even the product selection. Finally, for t What I mean by that is they didn't buy any other companies until 2002 and even then, they were all on a comparatively small scale. That first acquisition was for Harman, a chain of 27 stores. The following year, they bought a 23 store chain called Christmas Tree Shops. In 2007, they bought Buy, Buy, Baby, which sounds In 2012, they made their biggest acquisition when they paid almost $500 million for 250 locations of Cost Plus World Market, though I still argue they did very little to impact their core operations and was mostly more of a side project. So given all these factors, I t But clearly, t So now, t All three of these have been incredibly harmful, but the root of the trouble started with competition. Remember, in the 1980s and to the 1990s, Bed, Bath and Beyond became a category killer by offering an unbeatable variety at reasonable prices. Well, as it turns out, most of the companies using that model, competing based on variety, have been especially vulnerable to e-commerce. Obviously, Amazon and other internet retailers have been able to beat that level of variety and in a more convenient way. So it's not just Bed, Bath and Beyond, almost all of the category killers that grew to dominate their market back then have been forced to either readjust their strategy or shut down altogether. I realize I'm probably just stating the obvious here, but Bed, Bath and Beyond probably should have made a heavy investment in e-commerce many years ago, but that is not what they did. As recent as 2012, their website only accounted for 3% of their total sales. They did try to improve on that by acquiring multiple internet retailers, but again, it was on a comparatively small scale and none of them did all that much to have an impact on the core operations. So now, their excessive in-store selection quickly turned into a bad t It was no longer luring in the customers in the same way it once did. It even became overwhelming to many of them, but they were still paying to maintain it. They had to resort to other means to attract customers, and for that, they relied more heavily on their famous coupon promotions. Really, it seemed I find it interesting that from 2013 to 2018, a six-year span, their sales continued rising w So even though 2018 was technically their biggest year, it's hard to deny that major troubles were already starting years before that. My second reason be Now, it's a little tricky, but in 2019, some investors didn't approve of how the company was being handled. Honestly, it seems So, they pressured the CEO to step down, w In short, it was a complete shakeup that brought in a bunch of new people to run t Notably, Mark Tritton became the new CEO. He had previously been the c Those are the store brands that tend to have much This plan, for Bed, Bath & Beyond, was to essentially introduce eight or nine private labels to be sold exclusively in their stores, sell off most of those unrelated companies that they had acquired, and reinvest that money into the core operations for things Just t Store brands are more profitable, and they give the customer a reason to shop at your store over other internet retailers, It all seemed very promising, but it didn't work. Mostly because they were impatient. Right away, they took many of the name brands off the shelves and replaced them with the new store brands that no one had ever heard of before. They should have slowly introduced them, giving the customer time to get to know them and compare them to the ones that they already know. Plus, the pandemic happened right in the middle of all of t In the end, the plan made t I mean, t In 2022, they got rid of Mark Tritton, discontinued many of the store brands, reintroduced many of the name brands that the customers had been missing, and started distributing more coupons again. Essentially taking a step back in many ways from the turnaround plan, but it's not There'so much more that could be said about t My final reason be A company may buy back their own stock if they feel it's undervalued or as an effort to reduce outstanding shares and manipulate the price of it. Well, Bed, Bath & Beyond has been buying their own shares off the stock market fairly consistently for almost 20 years now. Notably, in 2014, they issued $1. 5 billion of bonds and used that money to buy back their own stock. They were completely debt-free before that. Using what we all know now, I can assure you that borrowing money to buy Bed, Bath & Beyond stock in 2014 was a bad decision. They also spent an additional billion dollars buying it back during that big turnaround plan that showed confidence, but clearly turned out to be another waste of money. Over those past 20 years, they actually spent almost $12 billion to buy back their own stock at an average price of $44 per share, whereas right now it's trading in single digits. If they hadn't done all t Let me know in the comments, what do you t Do you go there regularly or only when you have a coupon or do you avoid them altogether because you prefer one of their competitors? Either way, if you're interested in Bed, Bath & Beyond in any way, I recommend you play it safe and take a trip over there soon because it's unclear how long they're going to be there. What do you see for their future? Is it too late? Will there be a revival? And any other thoughts you have about Bed, Bath & Beyond, leave them in the comments. I'd