Challenge ahead: In addition to fixing its supply chain issues, Bed Bath & Beyond needs to cut costs and improve its balance sheet.
- The retailer’s gross profit shrunk from 32.4% in FY Q1 last year to 23.9% in FY Q1 2022.
- It also faces pressure from activist investor Ryan Cohen to improve performance and explore the sale of its buybuy BABY chain.
- “We must deliver improved results,” Gove said in a statement. “Our shareholders, associates, customers, and partners all expect more.”
Knowing what people want: The retailer’s supply chain challenges drove it to order inventory earlier than usual. That left it vulnerable to shifts in consumer demand, which will force it to discount excess inventoryas Target and other retailers have had to do.
- A mismatch between inventory and consumer demand led Bed Bath & Beyond to carry approximately 15% more inventory than last year. At the same time, its sales were 25% lower. That delta of almost 40 percentage points between sales and inventory was worth more than $500 million in cash in Q1, said Gustavo Arnalchief financial officer.
The big takeaway: Tritton’s timing was terrible: He arrived just before the global pandemic upended the retail landscape. That left him attempting to execute a challenging shakeup plan amid a swirl of headwinds, including a dip in demand for home goods in Q1. While there’s clearly more work to be done—starting with its supply chain challenges—Tritton’s initiatives provide Gove with a head start at turning around the retailer’s business.