Bed Bath plans to expand well Beyond competition

MORRISTOWN, N.J. Retailing Today. He said that the soft economic environment currently prevailing provides an important opportunity for the retailer to increase its influence in the market. —The goal of Bed Bath & Beyond’s expansion plans is to increasingly command the specialty home sector in North America, ceo Steven Temares told

Temares said Bed Bath & Beyond would aggressively pursue market share gains over its immediate competition in the United States while establishing a powerful presence in the Mexican and Canadian home specialty sectors that it entered over the past year. “We intend to be more dominant than ever,” he said. “We intend to be dominant nationally and internationally. We think that, in trying times, we want to distance ourselves from our competition.”

In the most recent quarterly results, Bed Bath & Beyond gave evidence that it was investing in market share gains. The retailer posted a 6.1% net sales gain to $1.65 billion and a 0.8% comparable-store sales advance as net earnings slipped to $76.8 million, or 30 cents per diluted share, from $104.6 million, or 38 cents per diluted share, in last year’s quarter. Promotional activity was a significant factor in the difference between sales and earnings direction, observers noted.

Oppenheimer analyst Vivian Ma was among those ascribing the slip in earnings to promotions, but she emphasized that the gain in market share was particularly significant given the weakness in the home specialty sector. She said Bed Bath & Beyond continues to navigate macro-economic challenges well and has done a superior job aligning store-level operations to meet consumer priorities. “They continue to do the same things they’ve been doing, only better. They are not cutting their customer service or doing anything that will hamper that customer experience even in this current consumer environment,” she said.

While the new Mexican and Canadian initiatives are too recent to have had an impact on the company’s results, Temares conceded that the new national operations already are commanding a significant commitment of senior management resources. Although the markets are relatively familiar, he said, differences in taste, regulations, logistics and a range of other operational factors have to be addressed. Initiatives that prove successful in the United States may fizzle in as similar a market as Canada, he said. Bed Bath & Beyond is working to understand the nuances of each market it has entered, just as it has done with new retail sectors as it acquired Harmon, Christmas Tree Shops and, most recently, buybuy Baby.

Yet, Temares asserted, Bed Bath & Beyond’s culture is particularly suited to developing international operations. The company’s diffused management, which provides unit managers with decision-making authority over many critical store-level decisions, should help the company adapt its strengths to the Canadian and Mexican markets. “We develop our own people through the stores,” Temares said. “Our organization is designed to empower people.”

Bed Bath & Beyond finished fiscal 2007 with 881 namesake stores, 41 Christmas Tree Shops, 40 Harmon units and nine buybuy Baby stores. Since December, the retailer has been operating one store in Canada, located near Toronto as part of the suburban Richmond Hill community, and it is developing additional locations.

In May, Bed Bath & Beyond announced it would form a joint venture with Home & More, S.A. de C.V., a privately-held home products retailer operating two stores in Mexico City under the Home & More name.

In fiscal 2007, Bed Bath & Beyond posted net sales of $7.05 billion, versus $6.62 billion in the fiscal year earlier. Net earnings were $562.8 million, or $2.10 a share, compared with $594.2 million, or $2.09 a share, in fiscal 2006. Comps increased by 1% in fiscal 2007.