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Bed Bath & Beyond to close about 40 locations; ‘lab stores’ generating higher sales

Bed Bath & Beyond reported mixed fourth-quarter results amid ongoing efforts to transform its business.

The home goods retailer posted adjusted earnings per share of $1.20 topping the $1.10 per share that analysts had expected. Revenue totaled $3.31 billion. The Street had forecast $3.33 billion. Same-store sales decreased 1.4%, more than expected.

Bed Bath & Beyond is working to reinvent its business for a digital age, including transforming its physical stores. Last year, the company opened 21 “next generation” Bed Bath & Beyond “lab stores” in which it is testing new merchandising assortments and visual merchandising to reimagine and enhance the in-store shopping experience.

Some of the changes include a greater emphasis on home decor, food and beverage, and health and beauty care along with improved sight lines, cross-merchandising, queue lines and lifestyle merchandising. On the company’s quarterly earnings call, CEO Steven Temares said the results from the lab stores have been positive, with sales up 2.2% over the past month versus comparable Bed Bath & Beyond stores.

“Transactions are higher by about 3.7%, product margin dollars are higher by 3.6%, and the product margin rate is slightly higher by 50 basis points,” he added. “For the same period, these lab stores are also achieving inventory reductions approximately 7% better than the inventory reductions already being achieved by comparable stores.”

Temares said that learnings from lab stores will be refined and scaled into additional stores to accelerate sales and enhance margins.

“We have already started rolling out some of the learnings to additional stores, such as queue lines and increasing sight lines, which can be done fairly quickly and at a relatively low cost,” he said.

Bed Bath & Beyond will open about 15 new stores in fiscal 2019, which will be offset by a minimum of approximately 40 stores it expects to close. Most of the planned closures are for the Bed Bath & Beyond banner, said CFO Robyn D'Elia on the quarterly call. (Bed Bath & Beyond’s other store banners include Christmas Tree Shops, World Market, buy buy Baby, Cost Plus World Market, Harmon Face Values and more.)

“This number will grow unless we are able to negotiate more favorable lease terms with our landlords,” D'Elia added.

In reporting its results, Bed Bath & Bath also announced that its board is undertaking a comprehensive review of its "composition, governance structure and compensation practices." The board is also accelerating its board refreshment program, which already has resulted in the addition of three new directors over the past two years.

“Our strategy, business transformation and execution are a critical component of our future success, and we also recognize that the right board governance structure and incentives are necessary to ensure that we achieve our objectives," said Patrick Gaston, who has been appointed lead independent director of Bed Bath & Beyond. "The board is committed to acting in the best interest of our shareholders, is working hard to accelerate the rate of change in the company's governance, greatly appreciates investor input received to date, and looks forward to continued constructive engagement with our shareholders on these and related efforts."

As of March 2, 2019, the company had a total of 1,533 stores, including 994 Bed Bath & Beyond stores in all 50 states, the District of Columbia, Puerto Rico and Canada, 277 stores under the names of World Market, Cost Plus World Market or Cost Plus, 124 buy buy Baby stores, 81 stores under the names Christmas Tree Shops, Christmas Tree Shops andThat! or andThat!, 55 stores under the names Harmon, Harmon Face Values or Face Values, and two retail stores under the name One Kings Lane.
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