Bed Bath & Beyond is a "hot mess" as CEO exits

Bed Bath & Beyond is facing an identity crisis that threatens to plunge the retailer closer to obsolescence.

Why it matters: Once a staple in the American shopping landscape — known for its towers of towels, wedding registries and a useful array of home goods — Bed Bath & Beyond still has some 32,000 employees and 955 stores throughout the country, including its buybuy Baby and Harmon locations.

Driving the news: The retailer's stock plummeted to a 26-year low Wednesday, after the company reported same store sales dropped 24% from a year ago and the exit of two key executives — CEO Mark Tritton and chief merchandising officer Joe Hartsig.

• "Even during these periods of industry-wide challenge, our shareholders, associates, customers and partners all expect more from us, and I couldn't agree more," newly appointed interim CEO Sue Gove said on an earnings call.

Flashback: In July 2020, Bed Bath announced it would close 200 of its namesake stores over two years. The retailer also operates 135 buybuy Baby stores and 51 stores under the names Harmon, Harmon Face Values or Face Values.

• The retailer also rolled out new store-owned brands as part of its transformation plan.

The impact: The company reported a net loss of $358 million in its latest quarter, more than 7 times worse than a year ago.

• Former Target executive Tritton's reinvention efforts, such as briefly limiting coupons and decluttering stores, have led the company into in a "hot mess," GlobalData retail analyst Neil Saunders wrote Wednesday.
• "The truth is that Bed Bath & Beyond’s transformation strategy has not worked," Saunders said. He described the company's new brands as "mediocre" and said it completely neglected services like wedding registries while dropping the ball on operations.

The big picture: The company is also swimming in excess inventory, a problem that has plagued other retailers who overcorrected for supply chain issues.

• During its latest fiscal quarter, Bed Bath's stockpiles ended 15% higher than last year, even as sales fell 25% — a difference that zapped $500 million in cash, CFO Gustavo Arnal told analysts.

• Earlier in the year, the company disclosed that $175 million in revenue was lost because shipments didn't arrive on time.

State of play: Last week, Bank of America analysts said they discovered Bed Bath stores lowering air conditioning to cut costs.

• The retailer told Axios that wasn't a corporate directive.

What to watch: Grove did not rule out a potential sale of Bed Bath's buybuy Baby business, which could raise money to help the company chart yet another turnaround plan.

• But that might only deliver "short term relief," Saunders said. "It is really akin to sticking some Band-Aids over holes in the main Bed Bath & Beyond business. In other words, it is not a solution."
• For now, expect to see more merchandise markdowns, Arnal said, and a pause on store renovations as the retailer tries to regain its footing.

Additional reporting by Hope King