With some encouraging news for its fourth quarter and year-end results — but still struggling in some areas — Bed Bath & Beyond remains a work in progress…that is progressing.
In reporting its third straight quarter of comp store increases and profitability for its ongoing businesses, the big box home furnishings retailer continued to ride its stellar growth in e-commerce with digital sales up 86% for the period. For the year they accounted for about a third of its overall revenue, a significant increase given its history of underperforming online. This was accompanied by modest gains in its margins and EBIDTA and double digit increases in its core merchandising categories.
The good news however was countered by another loss for the fiscal year of $150.7 million, or $1.24 per share, which did mark a major improvement over its year-ago loss of $613.8 million, or $4.94 a share. Its top line showed an approximate 8% decline to $9.23 billion, an expected result given its divestiture over the year of five of its operating divisions and virtually all its stores being closed for almost three months during the early stages of the pandemic last year. In-store comp sales numbers were off 27% for the year as a result. It just missed analysts’ consensus forecast for revenue, missed by a larger margin on earnings but did beat the comp store projection.
And even as the entire home furnishings sector has been on a run over the past year and consumers turned their spending to repairing, remodeling and redecorating their homes, CEO Mark Tritton, in announcing the results, said it’s not just a matter of being in the right place at the right time that is driving its turnaround. “Our performance has been built by our transformation,” he said in an interview. “We’re seeing consistent growth as that transformation progresses.”
Tritton was particularly up about how the digital efforts the company has been working on have paid off over the past few quarters. With online accounting for 40% of its sales over the fourth quarter, the company saw several milestones, including 3 million new digital customers, 3 million downloads of the app and a 30 percent improvement in its conversion rate signifying the number of shoppers who made a purchase after going on the BBB BBBY site. In its efforts to promote its omnichannel integrated merchandising, the retailer said 41% of its online sales were fulfilled by its stores, including 17% through BOPIS (buy online, pick-up in store).
“They’re new, they’re stickier and they’re big,” Tritton said of the retailer’s online shoppers.
The company also pointed to meaningful improvements in its BuyBuyBaby subsidiary, which had also struggled in the past. It said the brand returned to positive comp store sales and saw 52% growth in its digital revenue in the fourth quarter. “We met the customer where they are,” Tritton said, pointing to improvements in its assortment and in-stock position.
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Tritton was cautious on forecasting too many details on what to expect next for the company, pointing to its initiatives in developing private label brands, narrowing its store base and returning more to its shareholders through increased stock buybacks. He said the first quarter of the new fiscal year would show enormous increases in sales, obviously because of the shutdowns a year ago but he said the company is using its 2019 results as the baseline to measure its performance for the short term. He still was optimistic on the continuing progress of the turnaround as more stores are remodeled and the merchandising mix shifts to more proprietary product. He said the current supply jam logjam that is impacting all consumer products was a situation that would continue to impact its business but that the company had made an effort “to get out ahead of the curve” as it developed its owned brands programs.
He said BBB would continue to benefit from the surge in home business, something that he doesn’t necessarily see as going away even as Americans begin to travel again and spend more time outside their homes. “We really think there’s a trend that people are falling in love with their homes and are valuing them” more than they used to due to the pandemic. “It’s here and it’s not going to go away for a while.”