Bed Bath & Beyond's spiral toward bankruptcy is the result of four big missteps, Bloomberg reports.
The company missed out on the e-commerce boom and made its customers dependent on coupons.
But it also bet too big on private-label brands and initiated a too-ambitious stock buyback program.
Bed Bath & Beyond is spiraling toward bankruptcy, and it's the result of years of missteps and bad bets, according to a new Bloomberg article.
The housewares retailer recently missed payments on roughly $1 billion worth of bonds and is closing nearly 300 stores nationwide as it barrels toward a likely bankruptcy filing. But its challenges began years ago, with four key decisions leading to its financial woes, company insiders told Bloomberg.
Bed Bath & Beyond did not immediately respond to Insider's request for comment.
Here are Bed Bath & Beyond's biggest missteps over the years:
Missing out on the online shopping boom
One of the company's founders admitted as much during a recent interview with The Wall Street Journal.
"We missed the boat on the internet," cofounder Warren Eisenberg told the Journal, later adding: "We didn't realize fast enough how the internet would have such a major effect on retail."
Getting customers 'addicted' to coupons
Bed Bath & Beyond is famous for its "big blue" coupons, which are sent to millions of households and offer shoppers 20% off their purchases. And while those discounts drew customers into the stores and lifted profits in the short-term, they were a bad long-term strategy, the company's former president, Arthur Stark, told Bloomberg.
Stark likened the promotions to a drug and said that the company wasn't able to reduce its couponing programs without blowback from customers.
"Once you're addicted to it and your customer is addicted to it, it's a very difficult thing to wean them off of," he said.
Betting big on private-label brands and cutting back on name brands
The company announced in 2020 that it would launch ten private-label brands as part of a three-year "transformation strategy" under then-CEO Mark Tritton. The goal was to have a third of its product assortment be private-label products within three years — Tritton wanted to launch six new private-label brands in the first five months of 2021 alone, Bloomberg reported.
But the new brands didn't resonate with customers, and supply chain snarls made producing the products a challenge. At the same time, Bed Bath & Beyond was low on cash and struggling to pay the vendors who supplied name-brand products, resulting in bare shelves.
By October, 40% of the company's inventory was out of stock.
The company announced in August 2022 that it would axe a third of its owned brands and reduce the amount of private-label products in its inventory by 20%. During a financial-update call at the time, the company said it would liquidate the remainder of its private-label products through sales and promotions, handing them off to third-party sellers, and canceling orders altogether.
"Our customer has communicated clearly that national brands are a really important part of their shopping experience with us," Mara Sirhal, Bed Bath & Beyond's brand president, said during a financial-update call.
Repurchasing too many shares
Beginning in October 2022, Tritton pledged to use company cash on stock buybacks, eventually to the tune of $1 billion shares within roughly a year.
But according to analysts who spoke with Bloomberg, the repurchasing program was too aggressive and was based on a faulty assumption that strong pandemic-era spending on housewares would continue long term.
Dennis Cantalupo, CEO of consulting firm Pulse Ratings, told Bloomberg that putting the money in the bank rather than initiating the buybacks would have allowed the company to survive for another six months at least.
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