Supply chain woes just cost Bed Bath & Beyond $100M in sales

Discussion
Mark Tritton, Bed Bath & Beyond CEO, opening a store, July, 2021 - Photo: Bed Bath & Beyond
Jan 07, 2022

Bed Bath & Beyond just got hit right in the supply chain. The retailer’s CEO said the company lost around $100 million in sales during its fiscal third quarter as it failed to get popular products on store shelves due to pandemic-related logistical bottlenecks.

Same-store sales for the company were down seven percent for the three months ending Nov. 27. Bed Bath & Beyond posted a net loss of 25 cents a share.

Mark Tritton, president and CEO, lamented a missed opportunity on yesterday’s earnings call.

On-shelf availability affected our top 200 items such as kitchen appliances and personal electronics, as well as our key categories such as bed and bath. The customer experience was compromised as strong demand wasn’t met with strong product availability,” he said.

The $100 million in lost sales, Mr. Tritton said, had “a mid-single-digit impact to the quarter and an even higher impact on December.” Sales for December were not included in the third quarter filing but were likely accounted for in the retailer’s decision to lower its forecast for the year.

Bed Bath & Beyond’s supply chain issues were not a surprise to the company’s management, which flagged the challenge on its second quarter earnings call in September.

Mr. Tritton said on that call that the company had “diagnosed the problems” it was facing and “developed strong plans to change our trajectory, recovering by November and delivering a strong holiday is our key focus.”

Not all the news was bad. The retailer’s buybuyBaby business posted double-digit sales growth for the quarter, and plans are underway to expand Bed Bath & Beyond’s owned brand strategy to the chain. Mr. Tritton has called buybuyBaby the cornerstone of the announced collaboration with Kroger that will see the grocer open up space in some of its stores and its website for Bed Bath & Beyond merchandise.

Mr. Tritton pointed to growth in the company’s Beyond+ loyalty program as an indicator of consumer interest. The program, which costs $29 a year, provides members with 20 percent off of every purchase they make along with free standard shipping.

“We grew from 1.8 to 2.2 million members after one of our largest new subscriber events in November leading to one of our most successful membership acquisition quarters of Beyond+ in years,” said Mr. Tritton. “We will leverage this momentum throughout 2022 as we support plans for a new loyalty program later this year.”

DISCUSSION QUESTIONS: Do you think Bed Bath & Beyond has the right plan in place to achieve long term success? What do you see as the most significant challenges facing the business and where are there opportunities for growth?

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"This isn't just about supply chain issues. This is also about the weak execution of the reinvention plans."

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15 Comments on "Supply chain woes just cost Bed Bath & Beyond $100M in sales"


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Mark Ryski
BrainTrust

Who didn’t have supply chain issues? The results shouldn’t be surprising and, notwithstanding these bumps, I’m still bullish on the direction that Mark Tritton and his team are taking the company. The pandemic threw a big wrench into the gears of the Bed Bath & Beyond turnaround story, but I expect it to get back on track as we move into the future. Also, Buy, Buy, Baby is an especially strong asset and I expect to see this brand play a larger role in the future.

Carol Spieckerman
BrainTrust

Bed Bath & Beyond has drastically improved its in-store experience and, while its ambitious launch of multiple private brands isn’t a panacea, the company has done a great job of merchandising them. Still, Bed Bath & Beyond’s narrow category focus makes it vulnerable to the Amazons, Walmarts, and Targets of the world, all of which are doubling down on home products, including private brand launches. In other words, Bed Bath & Beyond can’t afford any slip-ups, and supply chain snafus are no exception. The company might want to hedge its bet by building out the “beyond” portion of its premise to include adjacent categories and new partnerships with well-known brands that will complement its own.

Richard Hernandez
BrainTrust

I agree. I had not been in a Bed Bath & Beyond for some time and was pleasantly surprised to see a much brighter, cleaner, more organized, well-merchandised, and less overwhelming facility. While every retailer faced supply chain issues, I think you are correct in suggesting that Bed Bath & Beyond flesh out more of the “Beyond” piece. I am curious to see what surprises that would bring to customers.

Carol Spieckerman
BrainTrust

In the past (pre-Tritton), Bed Bath & Beyond seemed to be digging into food, but I didn’t see it in the new layouts that I’ve checked out. At the time, I thought it was stretch, but a retry might be warranted if Bed Bath & Beyond takes a World Market approach rather than just filling the shelves with snacks. It could also make sense to incorporate a treasure hunt aisle to compete more effectively against Home Goods (with the caveat that it must be kept pristine).

Liza Amlani
BrainTrust

Rethinking the supply chain should also have an impact on merchandising strategy where Bed Bath & Beyond needs to determine if they are buying the right product mix. If on the shelf availability impacted 200 items and led to a loss of $100 million in sales, then I’d question planners and merchants to better understand if they were buying too much or if their assortments truly reflected what customers actually wanted. Digging deeper into what defines lost sales and if it’s purely driven by supply chain disruption and stockouts vs. did Bed Bath & Beyond buy into the right assortment mix.

Gary Sankary
BrainTrust

Bed Bath & Beyond was struggling before the holidays. Supply chain issues may have been a contributing factor this year, but I question how much better they would have done even with fully stocked shelves. The reality is this company has lost so much marketshare that it’s difficult to see a way forward in the long term for the brand.

David Spear
BrainTrust

Let’s first start with the positives. The 22 percent increase in Beyond+ subscribers is fantastic news for the brand, and they can leverage these loyalists with unique offers in the future. The price point of $29/year is exceptional considering consumers can get a 20 percent discount on purchases and free shipping. Obviously, the big negative is poor product availability. They’ll have to remedy this in a speedy fashion or it won’t matter what Beyond+ accomplishes because it won’t make up for the significant losses they’re accumulating on the supply side.

Ken Morris
BrainTrust

I’m not sure we can glean their plan from the piece above, but certainly the subscription model for Bed Bath & Beyond sounds like a winner. There are literally 100 reasons for supply chain disruption and a quick fix if you are relying on offshore suppliers is a long shot. To be fair, BB&B probably has a much larger number of SKUs sitting on container ships compared to many other retailers, simply because of their assortment. Shifting to a real-time inventory visibility model across the supply chain, and a shift to near or on-shore alternative suppliers are not easy tasks to accomplish. It will be some time before this disruption is under control and I would plan accordingly.

Neil Saunders
BrainTrust

This isn’t just about supply chain issues. This is also about the weak execution of the reinvention plans. For example, while the new brands look good in theory, in-store they are messy and badly merchandised. Too many shops are not properly configured and services, like the wedding registry, have been left to fester and fail. There are a whole raft of operational issues that Bed Bath & Beyond has not addressed and which are impacting performance.

Oliver Guy
BrainTrust

Without a doubt, mastering inventory and supply chain visibility is critical to retail success in 2022 and beyond. Events of the past two years have highlighted just how exposed many supply chains are – in many respects inventory has been like a high water-level covering supply chain and operational issues.

The need to meet customer demands across multiple channels means that inventory needs to be near the point of acquisition rather than the point of purchase and these two are becoming more diverged. This simply adds to the complexity and difficulty.

Retailers must reduce inventory in order to free working capital that can be used to invest in the business. Visibility across the supply chain is key to this – it seems Bed Bath & Beyond understand this.

Gene Detroyer
BrainTrust

Bed Bath & Beyond was already facing woes before the supply chain woes. It seems to me that supply chain is a convenient excuse for not doing well. One wonders if the results would be much different if they had everything in-stock. Hmmm, Buy, Buy, Baby did well?

Rich Kizer
BrainTrust

Right now I’m tipping my hat to Mr. Tritton. The Beyond+ loyalty program as an indicator of consumer interest is spot-on, and providing members with 20 percent off of every purchase they make along with free standard shipping, has captured my wife’s attention.

Andrew Blatherwick
BrainTrust

Why is it still a surprise to some retailers that if you get the supply chain wrong it costs you millions of dollars? Yes, there have been difficulties with COVID-19 and supply but the vast majority of that could be managed out by good inventory management and supply chain practices. Yet companies still see supply chain solutions as a lower priority to online channel development, website or other vanity projects. Get the core business sorted and running well, and then you can generate the revenue to look at the other stuff. Get the core wrong and you are lost.

Craig Sundstrom
Guest

Taking the $100M figure, or more precisely the “mid single digit impact,” with a grain of salt — i.e. let’s make it 3-4% — and comparing it to the 7% decline, my thought is what about the rest?

Brandon Rael
BrainTrust

The global supply chain disruptions have impacted every retailer and have required companies to shift their strategies and pivot around the bottlenecks. BBBY has been on an almost two-year transformation journey. While the company had made some early strides with its digital-first approach, there is much to be done. With increased penetration of private labels, driving assortment optimization, making the necessary capital investments in the stores, modernizing their branding, and other improvements, the execution remains the most crucial step to ensure that their transformation is successful.

All business transformations are challenging and require patience, resilience, and endurance to turn around a troubled business model. However, under Mark Triton’s leadership, BBBY is essentially following the Target strategy as the retailer attempts to pivot to a digital and customer-first operating model. BBBY will need to keep a laser focus on its brand value proposition and drive outstanding customer experiences to compete in this disrupted market effectively.

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Braintrust
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