Specialist
Former senior executive at Bed, Bath & Beyond Inc
Agenda
- Bed Bath & Beyond's (NASDAQ: BBBY) product segment performance and operational improvement strategies to address declining margins and shares
- Competitive landscape and positioning relative to peers such as Amazon (NASDAQ: AMZN) and Walmart (NYSE: WMT)
- Inflationary and supply chain headwinds, highlighting Bed Bath & Beyond’s possible pricing plays
- Medium-to-long-term outlook
Questions
1.
Why has digital transformation lagged for Bed Bath & Beyond? How would you rate the company’s sales penetration and how does it compare to peers’?
2.
Bed Bath & Beyond’s management feels the turnaround strategy – of which digital transformation and supply chain considerations are a part – has been seriously lagging. Could you characterise what the turnaround strategy has been? What do you think would be an optimal strategic shift?
3.
Bed Bath & Beyond’s leadership noted in its Q4 2021 earnings that products not available for sale stayed at increased levels despite overall inventory levels being high. This is probably due to supply chain issues, but is the company very bloated within certain categories and SKUs given the high inventory levels? Is that systemic of its lack of consumer intelligence and understanding of what’s driving trends or what consumers want?
4.
Could you give an overview of Bed Bath & Beyond’s supply chain ecosystem and the driving factors behind continuing bottlenecks? What’s unique to the company here vs the broader retail industry?
5.
According to the solutions Bed Bath & Beyond has publicly stated, it focused on opening a few distribution centres in FY21, one in the northeast and one on the West Coast, which I believe is still under construction. It’s targeting a store replenishment metric of about 10 days. What is your outlook for the impact of those expansions and how long could it be until those potential cost savings are reflected in P&L?
6.
Can you summarise Bed Bath & Beyond’s supply chain issues? If expanding its distribution centres isn’t necessarily the answer, what do you think would be the proper pivot? How much time and money might be needed to address this if the company gets on the right path eventually?
7.
Could you discuss the labour market for transportation and logistics workers over the next 12-18 months and the implications it could have for Bed Bath & Beyond?
8.
Bed Bath & Beyond rolled out eight different private label brands in the past year, and you seem quite bearish on this. What’s a good path forward for the company here? What can it do from a consumer engagement standpoint to support these brands better now that they’ve arrived?
9.
In terms of Bed Bath & Beyond’s digital infrastructure, ecosystem and marketplaces, how do you assess the partnership with Kroger and Bed Bath & Beyond’s plan to utilise its digital platform and even its bricks-and-mortar channels?
10.
Could you give an overview of Bed Bath & Beyond’s omnichannel network? Where has the company been particularly strong and how would you characterise its consumer engagement strategy and steps?
11.
How would you characterise the relationship between Bed Bath & Beyond’s management and the board considering the issues with leadership you mentioned? What direction do they want to go in? There have been discussions of BuyBuy Baby possibly making sense as a standalone entity. What are your thoughts on that business’s strength and its outperformance of Bed Bath & Beyond?
12.
Do you think BuyBuy Baby has the necessary infrastructure, possible leadership and culture to succeed alone?
13.
Could you identify 2-3 trends in the broader home furnishings industry that might be particularly relevant to Bed Bath & Beyond? There are obvious points around inflation and supply chain, but what are you seeing in regards to products and consumer trends?
14.
How do you assess the differentiation of product and the opportunity for Bed Bath & Beyond there? We discussed private label, but what’s the optimal pricing play? Considering the inflationary environment, some retail observers and experts have highlighted that some consumers are getting away from the middle, meaning they’re either trending towards extreme cost savings and the lower end of products and services or wanting to invest in something premium. Companies are playing that in regards to maintaining markets, so it’s either on the premium or very low-end side and away from the middle. How do you see that playing out in regards to Bed Bath & Beyond’s possible pricing plays?
15.
What do you think is the safest pricing play for Bed Bath & Beyond, based on what the business has invested in so far with private label?
16.
Do you think Bed Bath & Beyond can lead on promotions to drive profits or should it utilise other levers to fix the issues there? In terms of coupons driving store traffic and increased coupon activity, is there a zero-sum problem between sales and gross margins that makes it difficult to grow absolute gross margin dollars?
17.
What’s Bed Bath & Beyond’s approach to store fleet optimisation? Which geographies have been struggle points for the company and in which regions does it excel?
18.
Bed Bath & Beyond’s store remodelling was also significant. Do you think that was particularly impactful or significant or was it very necessary? Could you characterise the state of many of the company’s stores vs its addressing of the need to remodel that now?
19.
You mentioned the typical age demographic of a Bed Bath & Beyond consumer. Could you revisit that? How would you characterise a brand identity that would work most optimally?
20.
The sterilisation of the stores gives Bed Bath & Beyond a lot less to leverage around digital marketing strategy – there’s simply a lot less differentiation to work with. That brings up what the company can do from a product sub-category standpoint across bedding, bath and kitchen. It’s in the negatives across the board in terms of growth, so it’s difficult to evaluate where the opportunity is and what it’s particularly good at. However, what SKUs or product sub-categories do you think it was particularly strong in relative to peers, at least historically?
21.
What do you think is the most pragmatic comparison to draw for Bed Bath & Beyond in terms of its home furnishings peers? What are the most realistic strategies the company could roll out in the next 12-18 months, modelled after successful peers?
22.
Could Bed Bath & Beyond possibly look towards premiumisation as an answer, though perhaps not necessarily within home furnishings? Other companies have tried to lean into that to maintain margins. Do you think that would make sense as a medium-to-long-term strategy, even though it would be difficult to pull off?
23.
What’s been on-trend in the home furnishings industry in regards to product and consumer engagement strategy and considering the inflationary environment? Where do you think consumer discretionary spending could be trending and what are the key points to consider in merchandising over the next 12-18 months?
24.
What are your thoughts on consumers’ sentiment or confidence shifting more towards experiential spending vs spending on traditional goods? What would be the implications for home furnishings?
25.
Do you see the cooling in the housing market posing significant risks to home furnishings? People moving in or buying new homes less frequently than before is probably capping the amount of new consumer acquisition that can really occur in the short term.
26.
Would you like to highlight any other factors around Bed Bath & Beyond and the home furnishing sector over the next 12-18 months? Should we monitor any specific performance indicators that might be crucial considering the inflationary environment?
27.
What’s your outlook for Bed Bath & Beyond’s top-line sales and margin contributions if we project a worst-case scenario in the next 12-18 months? We discussed its performance and issues. Do you think recovery is feasible?
