BB&B plans to close 150 stores this year out of its nearly 770 BB&B stores in the US, and laying off 20% of its workers with the goal of saving $250M in this fiscal year, USA Today reported. BB&B has missed payments to banks and bondholders, and former employees say they have not been paid severance as promised.  The company said it would switch its focus back to selling national brands instead of its own house brands and obtained $500 million in new financing.

At its peak in 2017, BB&B had 1560 stores with 65,000 employees, bringing in $12.3billion in revenue. But in the 9 months through November 2022 it posted sales of just $4.2 billion and its headcount was fewer than 30,000. 

A September report from CNBC said the company faces a variety of issues to overcome, including a lack of permanent corporate leadership, debt, and a “tense relationship with vendors”.  Neil Saunders, managing director at GlobalData Retail, told CNN that to survive, BB&B must work with those vendors to fill the shelves with unique items that make the store a destination. “If Bed Bath & Beyond simply stocks the same sort of things as can be found at Target, Walmart, or Amazon, then it will struggle to differentiate and will find margins compressed as it needs to match on price,” he said.

When other well-known stores spiraled into distress in recent years, the internet was often blamed. But in the case of BB&B, it is more complicated. While the chain was hurt by online rivals like Amazon.com, its undoing is also a story of how deciding to rip it up and start again can leave a company in tatters.  Call it “throwing out the baby with the bath water”.

Arthur Stark, BB&B’s longtime president who left in 2018 said in an interview, “Everything that we did was for the customer. If it meant carrying too much inventory in the store, it was OK. If customers made the commitment to come to our store, we would have it in stock”.  The company’s executives, however, had a blind spot: the web.  As Amazon.com and other online shopping sites geared up, BB&B’s executives prioritized their brick-and-mortar business.  Eventually that caught up with them. According to Stark, the company’s success made it reluctant to change.  This is a very important lesson for us all. It had been profitable for years and seemed to go from strength to strength, expanding across the US and Canada.

Due to short-term market pressures, one of the best-known discounts in US retail history was added to the strain.  BB&B’s 20% off coupons, sent to tens of millions of households for years, lured shoppers and boosted sales. But they also eroded profits greatly. “Like any form of promotion, it becomes a drug,” Stark said. All attempts to pull back on the mailings or reduce the discount backfired.

Entered Mark Tritton. The board, with 4 new members selected as part of an accord with activists, named former Target executive Mark Tritton CEO in October 2019. As Targets Chief Merchandising Officer, Tritton had overseen a private-label overhaul credited with helping speed up growth at the discount giant. Tritton and his team moved fast to tackle the falling profitability and revenue they inherited. They wanted a third of BB&B products to be private label, up from 10% within 3 years.  It has been said that Tritton directed this without an in-depth analysis of what the BB&B customers cherished, desired, and shopped for. Tritton also said he planned to get rid of poorly performing labels and double down on well-known brands such as Kitchen Aid and Oxo. This turned out to be a very poor plan as major brands faced pandemic-supply chain problems and the company’s worsening cash crunch left it unable to pay for premium products, according to former managers.

In the first 5 months of 2021 Tritton pushed hard to introduce six new private label product lines, a very ambitious task by any retail standards. Once the private label brands eventually arrived in stores most were new to shoppers and did not resonate with them. At the same time, executives appeared overly optimistic that strong spending by cooped-up consumers in 2020 and 2021 would endure.  The retailer atrophied as the year went on. Tritton was ousted in June. Sales in the 3 months ended August 27 fell 28% from the previous year. Inventories became increasingly sparse as many suppliers who were worried about getting paid, halted or restricted shipments. That meant consumers left the stores empty handed. This has happened to me personally as I shopped for towels I previously loved getting from BB&B. To my utter surprise there was not a white bath towel to be found in the entire store!

To put it mildly, BB&B has a lot to rectify really, really fast. And the purpose of these case studies is for all of us in the business to learn from other people’s mistakes.

LATE BREAKING NEWS: as of February 15, BB&B’s stock fell 65% as it announced it reached a financing deal with Hudson Bay Capital Management, leaving its current investors wondering is bankruptcy is off the table. (From The Wall Street Journal)