Despite wild price swings in its equity, the underlying operation behind Bed Bath & Beyond (NASDAQ: BBBY) is evidently struggling to the point that it needs to embark on strategic changes to keep the company afloat.
“We are embracing a straight-forward, back-to-basics philosophy that focuses on better serving our customers, driving growth, and delivering business returns. We have taken a thorough look at our business, and today, we are announcing immediate actions aimed to increase customer engagement, drive traffic, and recapture market share,” said interim CEO Sue Gove.
The company outlined a number of changes to its operational strategy this morning, beginning with a 20% cut to its workforce across both corporate operations as well as its supply chain. The firm expects to reduce its SG&A expenditures by $250 million throughout the current fiscal year. Capital spending plans have also been cut back significantly, falling from $400 million to $250 million.
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BBBY is said to now be focused on the priorities of merchandising, inventory, and traffic, while focusing its sales efforts on national brands versus that of owned brands. Capital expenditures meanwhile will focus on technology, digital capabilities, and store maintenance.
On branding, the company has indicated it will discontinue one third of its owned brands, being Haven, Wild Sage, and Studio 3B, while the remaining brands will be reduced to 20% of inventory. National brands meanwhile will make up for that inventory reduction, with such brands to increase by 20% in terms of inventory penetration. The firm aims to “bring back” popular brands, while focusing on emerging brands at the same time.
The company also indicated this morning that it will be closing 150 of its lower-producing Bed Bath & Beyond banner stores, to better align with customer demand.
READ: Bed Bath & Beyond Reportedly Taps Kirkland & Ellis To Solve The Highly Leveraged Balance Sheet
In terms of management, the Chief Operating Officer and Chief Stores Officer roles have been eliminated from the firms C-suite. The firm meanwhile continues to look for a permanent replacement for the CEO role, having previously retained Russell Reynolds, a recruitment firm, to conduct the search.
Lastly, the company provided an interim update for the second quarter, reporting net sales of $1.45 billion, with comparable sales declines of 26% on a year over year basis, with free cash flow of negative $325 million.
In terms of liquidity, the company has secured $500 million in new financing, via a $375 million “first-in-last-out” facility and an expanded asset-backed revolving credit facility. The firm has also filed to conduct an at-the-market financing of up to 12 million common shares, which at current prices would equate to roughly $108 million in gross proceeds.
Bed Bath & Beyond last traded at $9.18 on the Nasdaq.
Information for this briefing was found via Bloomberg and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
