Low inventory takes big bite out of Bed Bath & Beyond Q4 earnings, sales

Marianne Wilson
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Bed Bath & Beyond swung to a fourth-quarter loss amid a lack of in-stock availability.

Bed Bath & Beyond swung to a surprise fourth-quarter loss amid supply chain bottlenecks that led to inventory challenges during the crucial holiday period.

The home goods retailer estimated that a lack of in-stock availability at its Bed Bath & Beyond banner resulted in a miss of approximately $175 million in fourth-quarter sales, or a high-single digit deficit. (During the third quarter, the company said supply chain challenges cost it about $100 million.)

Macroeconomic factors, such as the disruption of the global supply chain, the Omicron variant, as well as the geopolitical turbulence weighing on consumer confidence, have uncovered more vulnerabilities than we could have foreseen at this stage of our transformation, as we completely rebuild the foundation of our business,” stated Bed Bath & Beyond president and CEO Mark Tritton.

Despite the challenges, some of which have carried over into the current quarter, Tritton expressed confidence that the retailer’s transformation, which includes an emphasis on owned brands, remodeled stores and digital investments, is making progress.

"Fiscal 2021 was a year of rebuilding in the face of substantial industry and operational headwinds during the first year of our transformation,” he said. “While our operational execution may have thwarted our near-term efforts, our focus also remains on our long-term strategy and transformation.”

Most recently, the company entered into a “cooperation agreement” with activist Ryan Cohen, founder of Chewy and chairman of Game Stop, whose investment firm RC Ventures has a 9.8% stake in Bed Bath & Beyond. Three of RC Ventures’ director designees will join the Bed Bath & Beyond board and the company will explore alternatives for its Buybuy Baby business.

The home goods retailer posted a net loss of $159.1 million, or $1.79 per share, in the quarter ended Feb. 26, compared to net income of $9.1 million, or $0.08 per share, in the year-ago period. The adjusted loss per share was $0.92, missing analysts’ estimates of $0.03 per share.

Sales fell 22% to $2.051 billion from $2.619 billion last year, missing estimates $2.075 billion.  Digital sales fell 18% compared with the year-ago period, which partially reflected the shift back to stores and normalizing e-commerce levels.

Comparable sales decreased 12%, impacted by supply chain disruptions and inventory challenges, the company said.  Same-store sales declined 15% for the company’s Bed Bath & Beyond banner and grew by low single-digits for the BuyBuy Baby brand.

“The lack of available inventory to sell proved to be a continuing impediment to sales through the remainder of the fourth quarter and into the early part of fiscal 2022,” stated Tritton.  “Specifically, despite our overall inventory levels, product in transit, not available for sale or held at port remained abnormally high, particularly in key items.”

The company’s Buybuy Baby banner reached $1.4 billion in sales for the year, experiencing double-digit growth. The company expects sequential comp sales growth in the second half of fiscal 2022 as supply chain conditions improve.

“Our Buybuy Baby and Harmon banners demonstrate our ability to achieve stabilization and growth when there is strength in the face of macroeconomic factors given its domestic supply chain, as well as different key product demand such as apparel and gear versus our Bed Bath banner,” Tritton added.

[Read More: Kroger, Bed Bath & Beyond officially launch e-commerce partnership]

Bed Bath is undertaking a complete overhaul of its supply chain so it can better manage its imported merchandise and move the goods to distribution centers and stores

“As we progress through 2022, the investments we are making in our supply chain and technological foundation are designed to greatly improve our proficiencies, enabling us to overcome the types of challenges we are facing currently,” said Tritton.

As of November 27, 2021, the company had a total of 995 stores, including 809 Bed Bath & Beyond stores in all 50 states, the District of ColumbiaPuerto Rico and Canada, 133 Buybuy Baby stores and 53 stores under the names Harmon, Harmon Face Values or Face Values. The company is a partner in a joint venture that operates 10 stores in Mexico under Bed Bath & Beyond banner.