The Big Bed Bath & Beyond Reveal: More Money and Less Stores, Staff, Spending & Owned Brands

Bed Bath & Beyond laid out its latest Plan B this morning, a multi-faceted approach that will see expanded financing including more than $500 million in loans but serious cutbacks in virtually everything else: stores, staff, spending and a third of its ill-fated owned brands.

It will also issue 12 million new stock shares “as soon as possible” to raise additional capital, taking advantage of its relatively high-flying stock price…although that price took a 24% drop in Wednesday’s opening.

BBB also said it will hang on to its BuyBuyBaby brand rather than selling it off, an option that had been raised previously. It said it would work to “unlock the brand’s full-growth potential.”

It’s all part of the company’s efforts to turn around its troubled retail business without resorting to a chapter 11 filing in the midst of a drastic downturn in its financial performance. And those numbers are not going to get better: in preliminary guidance on its second quarter, which just ended but for which it has not issued formal results, it said comp store sales were off 26% and it anticipates a 20% drop in those sales for its full fiscal year.

Sue Gove, the interim CEO who took over following the exit of Mark Tritton after the disastrous quarterly results in late June, told analysts on an early morning call today “in a short period of time we’ve made significant changes” and “we intend to fulfill our opportunity to be the category retailer of choice.”

To that end, its key initiatives include:

• New financing, including a $375 million “first-in-last-out” facility from J.P. Morgan and Sixth Street Lenders and an expanded asset-based revolving credit line of $1.13 billion. The stock offering could raise as much as $1.44 billion in additional capital based on the stock’s closing price yesterday but it could be significantly less as this is rolled out over the next several quarters.

• Closing 150 Bed Bath stores, starting with 50-60 over the upcoming quarter with the balance over the next several quarters. This will take the banner down to about 600 locations, from its peak of about 1,000 three years ago.

• A “step back to national brands,” including some for this holiday season accompanied by the elimination of three of its nine “owned brands” – Haven, Studio 3B and, as previously announced Wild Sage – and a reduction in inventory in the six remaining labels of 20% over the long term. It also plans to bring in new direct-to-consumer brands, although it didn’t specify which ones and when.

• A new marketing campaign this fall – details scarce – built around the “Welcome Home, Welcome Back” theme and its Welcome Rewards program, which the company says now has 5 million members.

• Retaining the BuyBuyBaby banner and building on it, though again few specifics other than an expanded informational presence on social media. There had been speculation that the brand would be sold, but also that it was the collateral for the new loans. The company refuted the first and did not address the second of those two points.

• While the search for a new CEO is still on it appears the company is not close to hiring a permanent leader and that Gove will continue in the interim role. Mara Sirhal, who was named interim chief merchant in last shake-up, has been promoted to executive vice president and brand president of Bed Bath. Patty Wu was promoted to the same roles at BuyBuy Baby. Chief operating officer John Hartmann and chief stores officer Gregg Melnick are both leaving the company with the elimination of their positions, continuing the exits of Tritton’s former management group.

• Addressing the complaints from its suppliers that they are not being paid on time, the company said it is “working closely” with vendors and has been in touch personally with its largest ones. A random check of several larger BBB suppliers did not confirm any one-on-one conversations prior to today’s call. Bed Bath will hold a ”supplier event” in early fall, it said, and there appears to be a call set for later today with vendors, according to one company that does business with the retailer. This has not been publicly announced as of yet.

• Finally, in addition to the store closings, there are expected to be cuts in SG&A spending and capital expenditures of a combined $400 million for the fiscal year. That will be accompanied by a 20% reduction in its workforce, “across corporate and supply chain” areas.

Gove called the strategy “a straight-forward, back-to-basics philosophy” that will work “to regain our dominance as a preferred shopping destination…and we intend to fulfill our opportunity to be the category retailer of choice.”

With its new financing giving it some breathing room, Bed Bath will at least have some time to make that happen. It will still be a difficult task for a retailer that has fallen so far, so quickly.

The Big Bed Bath & Beyond Reveal: More Money and Less Stores, Staff, Spending & Owned Brands

Bed Bath & Beyond laid out its latest Plan B this morning, a multi-faceted approach that will see expanded financing including more than $500 million in loans but serious cutbacks in virtually everything else: stores, staff, spending and a third of its ill-fated owned brands.

It will also issue new 12 million new stock shares “as soon as possible” to raise additional capital, taking advantage of its relatively high-flying stock price…although that price took a 24% drop in Wednesday’s opening.

BBB also said it will hang on to its BuyBuyBaby brand rather than selling it off, an option that had been raised previously. It said it would work to “unlock the brand’s full-growth potential.”

It’s all part of the company’s efforts to turn around its troubled retail business without resorting to a chapter 11 filing in the midst of a drastic downturn in its financial performance. And those numbers are not going to get better: in preliminary guidance on its second quarter, which just ended but for which it has not issues formal results, it said comp store sales were off 26% and it anticipates a 20% drop in those sales for its full fiscal year.

Sue Gove, the interim CEO who took over following the exit of Mark Tritton after the disastrous quarterly results in late June, told analysts on an early morning call today “in a short period of time we’ve made significant changes” and “we intend to fulfill our opportunity to be the category retailer of choice.”

To that end, its key initiatives include:

• New financing, including a $375 million “first-in-last-out” facility from J.P. Morgan and Sixth Street Lenders and an expanded asset-based revolving credit line of $1.13 billion. The stock offering could raise as much $1.44 billion in additional capital based on the stock’s closing price yesterday but it could be significantly less as this is rolled out over the next several quarters.

• Closing 150 Bed Bath stores, starting with 50-60 over the upcoming quarter with the balance over the next several quarters. This will take the banner down to about 600 locations, from its peak of about 1,000 three years ago.

• A “step back to national brands,” including some for this holiday season accompanied by the elimination of three of its nine “owned brands” – Haven, Studio 3B and, as previously announced Wild Sage – and a reduction in inventory in the six remaining labels of 20% over the long term. It also plans to bring in new direct-to-consumer brands, although it didn’t specify which ones and when.

• A new marketing campaign this fall – details scarce – built around the “Welcome Home, Welcome Back” theme and its Welcome Rewards program, which the company says now has 5 million members.

• Retaining the BuyBuyBaby banner and building on it, though again few specifics other than an expanded informational presence on social media. There had been speculation that the brand would be sold, but also that it was the collateral for the new loans. The company refuted the first and did not address the second of those two points.

• While the search for a new CEO is still on it appears the company is not close to hiring a permanent leader and that Gove will continue in the interim role. Mara Sirhal, who was named interim chief merchant in last shake-up, has been promoted to executive vice president and brand president of Bed Bath. Patty Wu was promoted to the same roles at BuyBuy Baby. Chief operating officer John Hartmann and chief stores officer Gregg Melnick are both leaving the company with the elimination of their positions.

• Addressing the complaints from its suppliers that they are not being paid on time, the company said it is “working closely” with vendors and has been in touch personally with its largest ones. A random check of several larger BBB suppliers did not confirm any one-on-one conversations prior to today’s call. Bed Bath will hold a ”supplier event” in early fall, it said, and there appears to be a call set for later today with vendors, according to one company that does business with the retailer. This has not been publicly announced as of yet.

• Finally, in addition to the store closings, there are expected to be cuts in SG&A spending and capital expenditures of a combined $400 million for the fiscal year. That will be accompanied by a 20% reduction in its workforce, “across corporate and supply chain” areas.

Gove called the strategy “a straight-forward, back-to-basics philosophy” that will work “to regain our dominance as a preferred shopping destination.”

With its new financing giving it some breathing room, Bed Bath will at least have some time to make that happen. But it will still be a difficult task for a retailer that has fallen so far, so quickly.