Bed Bath & Beyond warns of ‘short-term’ pain in Q4 update

Bed Bath & Beyond had little to cheer about in its fourth quarter update amid declining store traffic and inventory issues.

In preliminary results for the first two months (December and January) of the quarter, the embattled home goods retailer reported a 5.4% decline in comparable sales driven primarily by store traffic declines combined with inventory management issues and increased promotional activity and markdowns. (The company will report its full results on Wednesday, April 15, 2020.)

In other challenges, Bed Bath & Beyond said that inventory within certain key categories in its assortment was too low or out-of-stock leading into the holiday period. The company said it is “immediately reforming its internal planning and inventory management procedures to master the fundamentals.”

Bed Bath & Beyond said it provided the update “to provide visibility into the current pressures on the business, which the company's new management has been reviewing to ascertain insights and key learnings.”

“We are experiencing short-term pain in our efforts to stabilize the business, including the pressures of store traffic trends coupled with our own executional challenges,” said Mark J. Tritton, who took the reins of Bed Bath & Beyond in November and has wasted no time in cleaning house, announcing a leadership shakeup in December. 

On a directional basis, comparable sales from stores in November and December were down nearly 11%. Comparable sales from digital channels grew approximately 20%.  

The company's gross margin during the first two months of the fourth quarter declined around 300 basis points primarily due to an unfavorable impact on merchandise margin from promotional activity during the period. The retailer said the increased penetration of digital sales within its mix of total sales during the period unfavorably impacted gross margin.

“As we take steps to position Bed Bath & Beyond to deliver long-term sustainable growth, we are fast tracking our efforts to rebalance our portfolio, reset our cost structure, and enhance our leadership and talent,” Tritton said.