Bed Bath & Beyond, facing a late-summer crisis as sales fell and suppliers revolted, insisted its white-collar workers return to the office four days a week.
According to six former managers and employees who attended the meeting, Interim Chief Executive Officer Sue Gove told employees at the company’s headquarters in Union, New Jersey, that Face Time would help them quickly address growing problems facing the retailer.
To the staff, however, it felt like just another example of how executives were framed in small things as a chain leading to bankruptcy. Most of the employees had returned to office three days earlier in the week. One employee spoke up and said that one extra day would not turn around the struggling company. According to former managers and employees, many in the room nodded or applauded.
When other well-known stores have run into trouble in recent years, the Internet has often taken the blame. But Bed Bath & Beyond’s case is more complicated. While the chain was hurt by online rivals such as Amazon.com Inc., its undoing is also a tale of how the decision to rip it up and start again can leave a company in tatters.
Layoffs, management changes, boardroom shake-ups, stock buybacks and strategic overhauls are maneuvers for the modern business, and Bed Bath & Beyond tried them all. At nearly every recent juncture, the company has taken steps that have driven it deeper into the financial quagmire.
A few weeks after ordering his return to office, Gove said the company would lay off about a fifth of its corporate and supply-chain workforce and close 150 of its roughly 770 Bed Bath & Beyond brand stores in the US. The retailer had secured new funding, Gove said, and was starting a turnaround plan to prepare for the holiday shopping season.
The relief did not last. Bed Bath & Beyond has indicated that it is preparing for a possible bankruptcy filing. It has defaulted on payments to banks and bondholders, and former employees say they have not been paid. If the company reorganizes in bankruptcy by closing more stores, it could emerge as a smaller version of its former self. However, Bed Bath & Beyond’s financial situation is so dire that it’s even possible the retailer could sell off its assets and cease operating, Bloomberg News previously reported.
In a surprise move, and in a last-ditch effort to avoid that fate, Bed Bath & Beyond said Monday evening that it would issue securities to raise more than $1 billion. The retailer said it plans to use the proceeds to repay missed payments to banks and bondholders and to stock its empty store shelves with products. But the crisis-hit company warned that it would not be able to raise the amount it had planned. Even if it does, suppliers are likely to be wary about shipping their products. Meanwhile, many shoppers have already turned their backs on the brand after years of decline.
A Bed Bath & Beyond spokeswoman did not respond to requests for comment on this article.
At its peak in 2017, Bed Bath & Beyond had 1,560 stores with 65,000 employees, generating $12.3 billion in revenue. But in the nine months to November 2022, it posted sales of just $4.2 billion, and its workforce dwindled to less than 30,000.
Shares of Bed Bath & Beyond closed up 92% on Monday at $5.86. Riding a wave of enthusiasm among so-called meme-stock investors, the stock has more than quadrupled in value over the past month.
blind spot
Warren Eisenberg and Leonard Feinstein founded Bed Bath & Beyond in 1971. As it grew, the company abandoned retail stereotypes, giving managers wide discretion in stocking shelves rather than relying on mandates from headquarters. It carries most cans, stacking can openers, coffee pots and bathmats almost to the ceiling in its stores.
“Everything we did was for the customer,” Arthur Stark, Bed Bath & Beyond’s longtime president who left in 2018, said in an interview. “If it meant carrying a lot of inventory into the store, that was okay. If customers made the commitment to come to our store, we would have it in stock.
Bed Bath & Beyond also pleased shareholders. Under longtime CEO Steve Temeris, it poured billions into repurchasing stock, and acquired Christmas Tree Shops, Cost Plus World Market and BuyBuy Baby, which were founded by Feinstein’s sons.
Still, company executives had one blind spot: the Web. As Amazon.com and other online shopping sites appeared on the horizon, Bed Bath & Beyond executives prioritized their brick-and-mortar business. Eventually, it caught up with them.
Stark, who joined Bed Bath & Beyond in 2017, said same-store sales, a closely watched retail metric, doesn’t include new or recently closed stores. The company should have focused more on online retail.
Of course, we could have done better. “There’s no question.”
According to Stark, the company’s success made it reluctant to change. It had been profitable over the years and went from strength to strength, expanding into the US and Canada.
“We were faced with the challenge of maintaining our stores, maintaining our profitability, and investing in technology and digital,” he said in the interview. Stark, 67, now serves on the senior advisory boards of Jefferies Group and Vintage Investment Partners.
Bed Bath & Beyond should have considered going private, Stark said, investing in e-commerce at the temporary cost of profits. The management had considered suggestions to take the company private during his tenure, he said.
As executives struggled to invest for the long term amid short-term market pressures, one of the most famous discountings in US retail history was compounding the tensions. Bed Bath & Beyond’s 20%-off coupons, sent to millions of homes over the years, attracted shoppers and boosted sales. But they also reduced profits.
“Like any form of publicity, it becomes a drug,” Stark said. Over the years, attempts to pull back on the mailings or reduce the discount failed. “Once you get used to it and your customer gets used to it, it’s a very difficult thing to wean them off.”
In early 2019, activist investors began agitating for change. Ancora Advisors, Mayselm Capital Management and Legion Partners Asset Management wanted Tamares gone. All three urged asset sales, more investment in private-label brands and online commerce, and more buybacks.
Making their case in a 168-page document, the investors noted that the first time Bed Bath & Beyond executives said the word “Amazon” on a conference call on Dec. 21, 2016, was a sign that they were looking for “industry change.” were not hugging.” ,
Within months, Temaraes dropped out.
“We’ve always been well aware of our competitors, respected them and studied what they did so we could do better,” Tamares wrote in a statement in response to questions from Bloomberg.
“I could not be more proud of the colleagues I have worked with, the quality of people they are and the dedication they have demonstrated,” he said. “That was then. Ultimately, as we see again and again, arrogance and ineptitude are fatal.”
In October 2019 the board named former Target executive Mark Tritton CEO, with four new members elected as part of a settlement with the workers. Discount huge.
Triton and his team, which included former senior executives from TrueValue, Walgreens and Macy’s, acted quickly to address the declining profitability and revenue he inherited. They wanted a third of Bed Bath & Beyond products to be private-label, up from 10%, within three years.
Triton also said it planned to get rid of underperforming labels and double down on well-known brands like KitchenAid and Oxo. But that effort faltered as major brands faced post-pandemic supply chain problems and the company’s worsening cash crunch left it unable to pay for premium products, according to former managers.
According to some former managers and employees, before Bed Bath & Beyond’s finances collapsed, Triton and his team showcased their new private-label goods in redesigned stores and downsized national brands.
In a presentation to investors a year after taking the reins, Triton compared its reform to remodeling a house. “Our home is dear to many, but a home that relies on positive memories of the past cannot weather any storm,” he said.
share buyback
In the first five months of 2021, Triton is focused on introducing six new private-label product lines — ambitious by retail standards. The degree of difficulty was exacerbated by the effort of designing, ordering and manufacturing thousands of new items, as the pandemic caused a decline in production and shipments from China. Once the private-label brands hit stores, most were new to shoppers and didn’t resonate with them.
Triton also promised to use more cash to buy back stock. In October 2020, he and his team pledged to repurchase $675 million in shares over three years. By November 2021, the amount had increased and the deadline had accelerated: they would complete the $1 billion share buyback within about a year. At the time, the retailer had approximately $600 million in cash.
Some analysts thought that was aggressive. Executives appeared highly optimistic that the affiliate would bear strong spending by consumers in 2020 and 2021. Dennis Cantalupo, CEO of credit-rating and consulting firm Pulse Ratings, said the company could have survived at least six months if it had not repurchased shares.
“Instead of taking that money and putting it in the bank and assuming that the tailwinds were going to subside or normalize for the industry, they launched a buyback campaign,” Cantalupo said.
Fitch Ratings analysts David Silverman and Monica Agarwal wrote in an email: “Given the simultaneous sharp decline in the company’s topline and cash flows and the company’s need to invest faster in its business, the timing and magnitude of the buyback stand out.” Came.”
Triton’s private-label push defeats the purpose of some activist shareholders, according to people familiar with his thinking.
However, some former Bed Bath & Beyond executives say the pandemic and supply-chain problems have made it nearly impossible for Triton to turn around the ailing company.
In March 2022, Triton and his team welcomed employees to the company’s renovated headquarters for the first time since the start of the pandemic. The theme was “Together, Happier” for a marketing campaign launched in 2021 called “Home, Happier”.
As part of the comeback, employees participated in activities including a scavenger hunt. One of the clues led to a new mural from Bed Bath & Beyond’s history titled “Our Big Moments (So Far),” according to a photo seen by Bloomberg News. The chronology included its founding, its 1992 public listing, and its 2007 purchase of BuyByBaby.
While the timeline noted Triton’s appointment in 2019, it did not include the names of the founders or their predecessors. This struck a chord with many former managers and employees, who said it showed a disregard for the company’s history and what made it unique.
The retailer grew weaker as the years went on. Triton was ousted in June. In the three months ended August 27, sales fell 28% from the previous year. Inventory became increasingly sparse as many suppliers worried about payment, halted or restricted shipments.
This means several shoppers have left the store empty-handed, including former Bed Bath & Beyond President Stark.
About a year ago, he said, he went with his son and son’s fiancee to a store in East Hanover, New Jersey, to shop for wedding registry gifts. The couple wanted Vamsutta bed sheets, which were once a staple at the retailer. He had no luck.
“He said, ‘Let’s go to Bloomingdale’s,'” Stark said.
