A little over a year ago, home goods retailer Bed Bath & Beyond (BBBY) unveiled a five-pronged turnaround plan. These five pillars addressed the core retailing concepts of product, price, promise (its relationship with customers), place, and people. They sounded fine on the surface, but like too many corporate initiatives, the tenets ultimately felt like little more than a collection of buzzwords.
Then, the pandemic took hold, adding to the company's struggle.
Now, one year since the revitalization plan took root, these broad ideas have taken more defined forms that investors can latch onto. Here's a rundown of the biggest and most important actions that put Bed Bath & Beyond on a solid, investment-worthy footing.
1. Meaningfully upgrading back-office technology
Bed Bath & Beyond shoppers should soon see a subtle but important change in stores' product assortment and availability. The retailer announced just last week it's partnering with RELEX Solutions to tackle "automated forecasting, replenishment, and allocation planning."
The move mostly checks off the "product" box on the list of five pillars, although it touches on the "place" aspect of the turnaround plan too. Part of the "place" evolution includes ensuring the right products are at stores in sufficient quantities to meet the needs of in-store and localized online shoppers.
It's no small matter. Each store carries thousands of SKUs at any given time. Many can be managed by observant insiders, but not all of them can be competitively optimized without the artificial intelligence RELEX brings to the table.
In a similar vein, a few weeks ago, Bed Bath & Beyond announced it had tapped Oracle to replace its aging supply chain data infrastructure that didn't offer any real market insight or planning tools.
2. Hiring the right people
A key aspect of Bed Bath & Beyond's evolution is the creation of what it describes as an "omni-always" organization. More than mere omnichannel, which seamlessly integrates the online and in-store consumer experience, omni-always philosophically means consumers view this company as the go-to place for home goods regardless of what those consumers want or how they shop.
Such an initiative requires the right people though, and the retailer is finding them.
Case in point: On March 29, Bed Bath & Beyond announced Wayfair's merchandising chief Jill Pavlovich would be taking over as senior vice president of digital commerce. And on the same day, the company announced Jake Griffith, a former Walmart and Amazon executive, would become vice president of product management. Other retail executives hired within the past year have experience at names like Macy's, J.C. Penney, Michael's, Crate & Barrel, Kate Spade, and more. These outsiders not only bring fresh ideas to the table, but most of them helped their former employers build true omnichannel enterprises.
These newcomers clearly fall under the "people" portion of Bed Bath & Beyond's five-pillar plan. Indirectly, though, they also assist with the other four initiatives.
3. Filling gaps with new products at the right price point
Finally, what CEO Mark Tritton meant a year ago when talking about a new product and pricing paradigm is now much clearer. Aside from rethinking everything it sells in its stores (crowded and untidy stores were a frequent complaint), the company is also considering what's not yet offered in stores but should be. The end result is what's going to eventually be a sizable lineup of its own private-label products. Eight new owned brands will launch before the end of the year. One of them -- Nestwell bedding and bath goods -- hit store shelves earlier this month.
The upside of private-label goods is twofold.
First, these items are typically more profitable for the retailer, which also acts as its own wholesaler. Margins on these owned brands can be twice those of national brands or more.
Second, by optimizing its merchandise mix with exclusives, the retailer is better positioned to draw consumers to its stores or website -- where those shoppers may make additional purchases.
This is just a sampling of the initiatives the home goods retailer has launched since laying out a relatively vague turnaround plan in January of last year. But they're also the most important initiatives in rebuilding the company into the omni-always operation Tritton envisions.
More important than the actual, clear-cut initiatives, however, is the fact that they're already gaining traction. Same-store sales for the quarter ended in November were up for the second period in a row, to the tune of 2%. That's not a lot, but for this company, amid a pandemic, it's respectable progress. Digital sales grew a whopping 77%, suggesting the retailer's new digital-first bent is working too. That's the key to a successful omni-always enterprise.
Yes, there's still work to be done. While profits are projected to recover this year, sales are expected to fall again as the company further streamlines while the work-from-home/stay-at-home trend cools off. Bed Bath & Beyond's turnaround seems to have real teeth now, and investors can still get in at the early stages of this effort.