PC: Pehal News
Bed Bath & Beyond has had two significant problems lately. First, its core private brand products have experienced declines in sales in recent quarters, and the company’s other private brand lines are not growing fast enough to make up for the loss of those sales. Second, Bed Bath & Beyond failed to keep up with its consumers’ shift to online shopping, and its store traffic has suffered as a result. The company hopes that it can eliminate some of these problems by getting rid of one of its poorly performing private brands.
Bed Bath & Beyond is ditching one of its own brands, Wild Sage, after launching an aggressive turnaround strategy, centered around private brands, about a year ago.
The representative of the home goods retailer confirms that the brand is being discontinued.
As Bed Bath and Beyond tries to reverse declining sales and appease activist investors, this move is likely to be just the start of bigger changes. Over the past few years, the retailer has faced inventory and warehouse problems, missing millions of dollars in sales due to out-of-stock items and, most recently, a glut of unwanted products lingering in warehouses and on store shelves.
Last month, Bed Bath announced that the board decided to make changes after CEO Mark Tritton and Chief Merchandising Officer Joe Hartsig had departed, which had a large effect on the company. Additionally, Bed Bath lost its chief accounting officer in June.
“Own brands” – that is, private labels – are “part of our assortment,” Bed Bath & Beyond said.
“Customer response has been positive, and we are very pleased with the strength of several owned brands, such as Simply Essential, which delivers opening price points,” the company said. “At the same time, we recognize our customers want a better balance of owned and national brands, and are making necessary changes to the assortment to improve the customer experience and drive sales and traffic.”
Bed Bath & Beyond provided updates to its business strategy this month, though its spokeswoman didn’t give details about what will happen to its other private brands.
Bed Bath’s stores became dominated by private labels under Tritton’s vision. Tritton, a Target veteran, joined Bed Bath in 2019 and implemented a similar plan as the one used by the cheap chic retailer. Under his direction, these stores began getting rid of all the excess products, debuting bedding, cooking ware, and home décor, and being the first place to offer these products.
Bed Bath started nine private labels in the spring of 2021. One was Wild Sage, described as stylish, eclectic, free-spirited bedding, decor, furniture, bath products and table linens created for young adults (and the young at heart). In June 2021, the first batch of their garments launched to ready them for back-to-college season.
The new brand names, however, confused some shoppers, making them less appealing. There were no displays of big-name national brands. Instead, they saw bedding, furniture, and platterware under names that they didn’t recognize.
Bed Bath & Beyond’s same-store sales fell 27% in the most recent quarter, which ended May 28.
Fast change, alienated customers
Following the most recent earnings report at the end of June, Board Member and Interim CEO Sue Gove announced that the company’s results are not as good as we had hoped.
According to Bank of America Securities retail analyst Jason Haas, by moving too quickly, Walmart alienated its customers. Furthermore, they ended popular 20%-off coupons which they have since reinstated.
“If they rolled out those brands at a more measured pace and layered them in [with national brands] and the customer got a little more familiar with seeing them on the shelf, it would have been more successful,” he said.
On top of that, he said, Bed Bath & Beyond contributed to the escalation of Covid’s pandemic-related supply chain issues. Almost every retailer had to deal with congested ports and trucking shortages, but private-label merchandise tends to require longer lead times since it is produced overseas. Most brands typically have a high turnover, so they often store inventory at their warehouses to ensure they can offer items quickly at their U.S. outlets.
On Bed Bath and Beyond’s website, there are indications of the end of Wild Sage. Merchandise is available at discounted prices, including a tie-dye robe for $7, which has been reduced from $35, and a 16-piece terracotta dinnerware set for $16, reduced from $80. Many Wild Sage items are currently out of stock after having been reduced by as much as 90%.
Though as Bed Bath pivots to more national brands, it may run into a different type of problem. Vendors may be reluctant to work with the retailer or request advance payments as the company’s finances dry up.
Though this is not an all-time low, Bed Bath reported $108 million in cash and equivalents in its fiscal first quarter, down from $1.1 billion the year before. Its net losses grew to $358 million from $51 million in the same period in 2021.
For now, the company is still able to tap into its existing $1 billion asset-based revolving credit facility from JPMorgan Chase, according to a quarterly filing with the Securities and Exchange Commission.
The company reported on May 28 that they had $200 million in borrowings outstanding.
However, analysts believe the home goods retailer needs more cash to weather its transformation.
Still, we feel like we have sufficient liquidity, Bed Bath and Beyond’s chief financial officer Gustavo Arnal said in a June conference call. The company enlisted consultants from Berkeley Research Group and financial advisors to look for capital.
“There are avenues that we’re exploring to even increase further our liquidity and navigate through the working capital cycle, particularly in the next two quarters, given the seasonality of our business,” he said on the call.