Bed Bath & Beyond sets turnaround plan

Bed Bath & Beyond Inc. is selling its business amid efforts to slim down, renew focus on its core home-furnishings business and reverse years of stagnant sales.
(AP/Paul Sakuma)
Bed Bath & Beyond Inc. is selling its business amid efforts to slim down, renew focus on its core home-furnishings business and reverse years of stagnant sales. (AP/Paul Sakuma)

Shares of Bed Bath & Beyond moved sharply higher Wednesday after executives rolled out a raft of initiatives intended to turn the struggling chain around.

Six weeks after using the company's dismal quarterly results as motivation for change, new Chief Executive Officer Mark Tritton said late Tuesday that the company would spend $1 billion this year for reinvestment in stores, upgrades in technology, and debt reduction and share buybacks.

Part of the funding for those maneuvers will come from the $252 million sale of Bed Bath & Beyond's business, the company announced Tuesday. The website will continue to provide products and services to Bed Bath & Beyond and its Buybuy Baby unit after the deal closes, which is expected in its fiscal 2020 first quarter.

"The financial strength of our business allows us to take the important steps needed to return capital to our shareholders and reduce our debt, while at the same time also investing in our customer," said Tritton, who was brought aboard in November to redirect the company's operations.

Shares jumped 7% on Wednesday.

The Union, N.J.-based company withdrew its annual guidance last month after reporting a $38.6 million third-quarter loss. Shares tumbled 8% on that day and have fallen 32% this year.

"Our performance in the third quarter was unsatisfactory and underscores the imperative for change and strengthens our sense of priorities and purpose," Tritton said at the time.

But same-store sales at Bed Bath & Beyond, a crucial barometer of a retailer's health, have been negative since May 2017.

The announcement late Tuesday marks the first major initiative under Tritton, the former chief merchandise officer at Target Corp. When industry analysts talk about the successful campaign to reinvigorate sales at Target, Tritton's name is usually mentioned.

Tritton already restructured the company's leadership in December.

Bed Bath & Beyond Inc. will devote $600 million on share repurchases, dividends and debt reduction, with a heavier weighting toward the share repurchases.

Another $350 million to $400 million is being marked for investments in stores, technology and supply-chain infrastructure.

The company is also jettisoning inventory and, Tritton said, making wiser choices about what remains on store shelves. The company last week reported that comparable store sales, an important gauge of retail success, fell 5.4% in December and January. It attributed this to lower store traffic and "inventory management issues."

"We're closing at the moment with about 15% less inventory," Tritton said in a conference call. "So we're operating leaner and getting better terms; we just need to course correct in terms of the mix of merchandise and our focus."

Bed Bath & Beyond said in a statement that it will continue to "optimize the company's portfolio of retail concepts and owned real estate."

Information for this article was contributed by staff members of The Associated Press and by Sally Bakewell of Bloomberg News.

Business on 02/20/2020

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