The image makeover that was supposed to save Bed Bath & Beyond (NASDAQ:BBBY) instead seems to be keeping customers away. The home furnishings retailer reported its 10th consecutive quarter of falling same-store sales even though first-quarter earnings beat analyst expectations, and revenues were largely in line with forecasts.

Its once ubiquitous blue-and-white 20%-off coupons no longer hold the same power to draw in customers as they once did, with the retailer noting that although the value of the coupons increased in the period, their volume was down. People who did use them were using them to purchase more goods, but fewer customers were redeeming them.

CFO Robyn D'Elia did point out that more people were joining its Beyond+ member loyalty program, which would cause fewer people to need to use coupons since those members get 20% off purchases automatically, online and in store. However, fewer customers are visiting its stores, and they were making fewer purchases as the number of transactions declined.

Woman looking at bedding display

Image source: Getty Images.

Failure on display

Bed Bath & Beyond had the idea that if it carried less stuff that you could actually buy in its stores but made the stores more of a display showcase for what you could buy online, it would entice customers to visit the website and make purchases there. Although there is some indication that could be happening -- the retailer said its "customer-facing digital channels" saw strong sales -- the overall anemic growth in total sales of just 0.4% indicates the reinvention of the stores is not having the intended effect.

The problem is Bed Bath & Beyond is under assault from competitors all around it, like Walmart and Target in the brick-and-mortar realm, and and Wayfair in the digital. The pricing pressure it's under to maintain a competitive position to its rivals is taking a toll on margins, which contracted again in the quarter.

This also comes as it has invested considerable sums in upgrading its online presence after years of neglect, but it may not have the financial resources available to continue fending off the inroads its competition is making.

The future of online shopping

Earlier this year, Walmart acquired augmented reality start-up Spatialand for an undisclosed sum to help reimagine at-home shopping, which followed William-Sonoma's purchase last November of 3D imaging and AR specialist Outward for $112 million to develop visual merchandising of its products.

Bed Bath & Beyond says it is in the furniture business and is working to convey that message to customers, but if it's going to keep pace with the next phase of where retailing may be heading, it's going to require more substantial investment on the retailer's part.

That suggests the 2020 timeline the home furnishings store has for turning itself around is likely going to be pushed even further out into the future. Simply putting more pillowcases on display in its store isn't going to push the envelope far enough.

Not a good value

Although Bed Bath & Beyond trades at a significant discount, there's no indication that its plan for correcting course will actually work. It's certainly not having an impact now -- earnings beat analysts' expectations by $0.02, but they were still down 40% year over year. And they only were able to beat Wall Street's numbers, because the retailer continues to buy back significant amounts of its own stock. Had the share count been left alone, earnings would have merely been in line and down by an even greater percentage from last year.

Bed Bath & Beyond does need to meet the changing ways consumers shop but having waited so long to make those investments, it's likely lost the chance to benefit from the bankruptcy of direct rivals like Linens N Things so many years ago.

Now, mass-merchandisers like Walmart have filled the gap, as have other rivals. There isn't enough incentive in paying $29 a year to get that 20% off coupon you used to get in your mailbox for free to generate enough sales to make Bed Bath & Beyond's turnaround a reality.

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