This Retailer Potentially Lost $100 Million in Sales Because of Supply Chain Challenges

Investors recently received updates from retail companies Bed Bath & Beyond (BBBY), Macy's (M -2.12%), and Dick's Sporting Goods (DKS -2.27%). None of these are immune to supply chain challenges. However, Bed Bath & Beyond is feeling it more than the other two, saying it potentially lost $100 million in sales due to supply chain issues.

In this clip from Motley Fool Backstage Pass, recorded on Jan. 6, Fool contributors Jon Quast, Charlene Rhinehart, and Travis Hoium discuss what's going on with these companies right now.

Jon Quast: Let's go ahead and get started with the first topic of the day. We are talking about the retailers that have gone ahead and given some financial updates. Charlene, you noticed that Macy's, I believe that they gave an update to shareholders this morning.

Charlene Rhinehart: Yes. Macy's gave an update. Let's go back to 2020. Macy's said that they would to close some of their stores because they wanted to be more targeted in what areas they were in. They wanted to get out of weaker shopping malls. In 2020, Macy's announced that they would close 125 stores by 2023. This year, they announced that dozens of stores are slated to close as part of that plan. Why? Like I said, they want to move away from underperforming malls and focus on opening in small-format stores in strip centers. The CEO believes that this will take the organization through significant structural changes that will lower the cost and reduce duplicative work that they may see.

Quast: Let me cut you off real quick because I thought it was interesting when I read the headline. It almost made it sound like Macy's was struggling right now and so they're making the choice to close these stores, but actually this is a multiyear plan.

Rhinehart: It is. By 2023, they are on point to close 125 department stores.

Quast: Wow. So what was the next thing that you were going to say there?

Rhinehart: Yes. The CEO is just hoping that this structural change will help the company be able to compete in today's retail environment. People have been talking about the retail apocalypse, and every month, we hear news about stores closing. So let's see how companies are able to improve their operations with these store closures. Will it increase the bottom line, will it allow them to compete, and will they be more innovative and be able to leverage the digital technologies that are available to them?

Quast: Yeah. Very interesting. Of course, Macy's is developing into quite an e-commerce presence on its own. So I'm sure that that's playing into a strategy as well as closing these underperforming stores.

Travis, we also heard from Bed Bath & Beyond today, and it wasn't a pretty quarter for that company.

Travis Hoium: Not a lot going right for Bed Bath & Beyond right now. I wanted to share. I don't follow Bed Bath & Beyond real closely, but it's one of those companies that pops up every once in a while. They didn't have a great quarter. Sales were down 28% from last year. They had this interesting spike in demand last year during the pandemic. But if you look at their revenue over the past five years, it's just in a steady decline. This is a business that they can use all the excuses that they want. They talked about missing out on $100 million in sales because of the supply chain issues.

That might be true, but generally, this is a company that outside of, look at that single quarter, they've had negative quarter-on-quarter growth ever since 2019 began. So struggling company, you don't want to see negative comps in the retail space because that puts pressure. This is a higher operating cost business. Then if you just take a zoom out, their margins are declining long term, they're losing money, so not a great quarter. But this is really a theme that's been happening with Bed Bath & Beyond, specifically. I think they're just stuck in a weird spot in the market right now.

Quast: Yeah. I think that you bring up a really good point. Like you just highlighted, they brought out, this is a bad quarter and we potentially lost $100 million in revenue because of the supply chain. Obviously, struggling very hard to manage those challenges. It's obviously an issue. It's an issue for all companies, but I think Macy's is doing a better job at managing that.

Another company that is apparently doing very well, surprisingly, considering that other brick-and-mortar retailers are struggling, is Dick's Sporting Goods. Dick's Sporting Goods, it made sense for a little while, maybe in the early days of the pandemic, that all of a sudden the surge of sales as people are trying to take on more outdoor activities, trying to be a little bit more healthier while they're working from home, that sort of thing. But it's really maintained and it continues to go in 2021. Today, they're coming out and raising their guidance, essentially, if you read between the lines, for the holiday quarter. Basically, it was a very merry Christmas for Dick's Sporting Goods.

I just want to point this out. It's been an ongoing trend. Maybe I should get rid of some of these things, and we'll look at them in turn. Over the last five years, for Dick's Sporting Goods, revenue up sharply. Let's normalize that because I don't know the percentage, over 50% revenue growth. Net income also growing sharply, especially, during the early days of the pandemic until now. They've been putting that capital to work, rewarding shareholders. They paid out a special dividend, but the regular dividend is ongoing and shares outstanding, reducing the share count for shareholders to boost their earnings per share. Overall, Dick's Sporting Goods is not really feeling the struggles that other retailers are facing.