The appointment of a permanent chief — especially one with a resume highlighting retail turnarounds — may be a signal that brighter days are ahead for the troubled Bed Bath & Beyond.
For the past several months, the home goods retailer has been working to right a number of missteps. An activist group in March nominated 16 independent candidates for election to its board, which would overturn the retailer's 12-person board at the time. A month later, Bed Bath & Beyond announced the transformed board would consist of 10 members, rather than 12, nine of whom would be independent members.
Additionally, the company's co-founders Warren Eisenberg and Leonard Feinstein announced their retirements from the board. However, this proved to not be enough for the group of investors, who called for the resignation of then-CEO Steven Temares. Temares exited his role in May and was replaced by Mary Winston in the interim.
Now, five months later, the retailer announced Mark Tritton will take the helm, much to the delight of the activist investors, including Legion Partners Managing Director Chris Kiper. "We believe Mark Tritton has the skills to return BBBY to greatness," he said.
But, he has his work cut out for him in executing and accelerating the company's four-part turnaround plan.
The man for the job?
This isn't Tritton's first retail transformation. The former Target chief merchant helped build a retail model that ensured long-term relevancy among consumers and profitability growth. Tritton also brings private label expertise to the table — something Bed Bath & Beyond has fairly little penetration in right now.
Bed Bath & Beyond has launched two of its six planned store brands (One Kings Lane is expected to debut in its stores in spring 2020), but private labels account for just 10% of the retailer's total sales. Comparatively, Target's private labels account for one-third of sales, according to Cristina Fernández, director and senior analyst at Telsey Advisory Group.
While at Target, Tritton oversaw the launch of more than 30 private label brands in two and a half years. And prior to joining Target in 2016, he spent seven years at Nordstrom Product Group where he managed more than 50 private label brands across both physical and digital channels.
"Mark has a lot of the skills that are actually lacking or needed to be changed at Bed Bath & Beyond: things like merchandising, shop floor standards, the creation of great owned brands," GlobalData Retail Managing Director Neil Saunders told Retail Dive in an interview.
For Bed Bath & Beyond, a private label may be crucial for a turnaround. "Bed Bath doesn't have a lot of private label products, which in this day, retailers need to differentiate themselves," Fernández told Retail Dive in an interview. Additionally, private labels can help the retailer improve its margins because it doesn't have price competition from others in the market.
Private labels and exclusive merchandise might also lead to increased store traffic, which is a key differentiator between Bed Bath & Beyond and Target's turnarounds. While the mass merchant had relatively strong traffic levels, the troubled home goods retailer is currently inflicted with declining store traffic, which poses a challenge in its turnaround efforts.
Ethan Chernofsky, Placer.ai marketing vice president, said in a blog post that between January 2017 and July 2019, weekly foot traffic at Bed Bath & Beyond almost always fell 30% or more below the baseline. Comparatively, weekly foot traffic at competitor HomeGoods steadily increased during that period.
"You don't have the same level or mix of consumables at Bed Bath & Beyond that you have at a Target," Wedbush analyst Seth Basham told Retail Dive in an interview, noting that leads to more frequent visits. But other than adding more consumables to its stores, which Basham noted the retailer attempted in the past, Bed Bath & Beyond can also add more merchandise that sparks a "treasure hunt" feel.
A turnaround will take time
Analysts have expressed disappointment in the pace at which changes at Bed Bath & Beyond are coming to fruition, but Fernández noted that while a turnaround is likely gradual, there's "a lot of areas for improvement, particularly when it comes to merchandise, store presentation and omnichannel."
While Bed Bath & Beyond has inked a partnership with Happy Returns, the retailer hasn't made significant investments in its cross-channel fulfillment capabilities, at a time when many other players are doubling down on buy online, pickup in-store. Bed Bath & Beyond also hasn't indicated many changes are coming regarding a store remodel program. "The presentation looks pretty similar to what it was like in the '90s," Fernández added.
The cluttered stores negatively impact the consumer shopping experience, according to Saunders. "If you go into a Bed, Bath & Beyond, it's very much a jumble of product," he said. "What customers want is more of an edited range of interesting products, products that help them solve problems that they may have in the kitchen or other rooms in the home, and a lot of inspiration."
Additionally, Bed Bath & Beyond indicated that a near-term goal is improving the company's cost structure. "Right now, Bed Bath & Beyond prices appear to be too high to many consumers, unless they're using 20% off coupons," Basham said. "Once you apply those coupons, oftentimes, the prices are going to be better than almost anybody else out there. They have to make the customer realize that."
The retailer can take a page from department stores and other retailers' playbooks, he added, by clearly displaying the amount consumers pay after discounts next to the product price.
"Temares had tinkered with a number of things, here and there. We never really saw many fruits of his labor. We never saw any ideas come to fruition across the entire chain that had any effect."
Seth Basham
Analyst with Wedbush
The retailer is also in the process of reviewing outside interest in its asset base. The group of activist investors in April urged the company to sell its Cost Plus World Market, PersonalizationMall and Christmas Tree Shops banners, which could ultimately end up boosting the retailer's cash flow.
Basham said in a September note emailed to Retail Dive that the company's real estate and non-core assets are worth $1.7 billion, with Cost Plus World Market valuing approximately $250 million. Last week, Winston told analysts that the company now expects to close 60 stores by the end of the fiscal year — 50% more than the initial 40 it announced. In all, the company intends to close 40 Bed Bath & Beyond locations and 20 locations from its other banners, though the company didn't specify which brands that includes.
Basham expects Tritton to build out his team in the coming months and display more of an "aggressive push forward to change," compared to that from Temares. "Temares had tinkered with a number of things, here and there," Basham added. "We never really saw many fruits of his labor. We never saw any ideas come to fruition across the entire chain that had any effect."
On the evening of Tritton's appointment, stocks surged more than 20% in after-market trading, indicating a sense of hopefulness from investors, at least to an extent.
"This gives them a much better chance of success than where the company was one day ago, one month ago, one year ago," Basham said. "He has the wherewithal, basically business experience, to potentially turn this around."