Bed Bath & Beyond announced the closing of 40 of its stores and may close more stores if it cannot negotiate more favorable lease terms with its landlords.
“Most of these planned closures are for Bed Bath & Beyond stores,” said Robyn D’Elia, CFO and Treasurer in its fourth quarter earnings call.
D’Elia said the company expects to open approximately 15 new stores in fiscal 2019.
Bed Bath & Beyond is currently testing Next Generation Lab stores, which include a variety of in-store experiences and visual merchandising, resulting in front-end optimization that supports better customer experience across its digital channels.
“We believe these initiatives lay the foundation for long-term revenue growth in the low-single-digit percentage range,” said Steve Temares, CEO of Bed Bath & Beyond.
In 2018, the company initiated 21 next-generation lab stores, which the company is testing new and different assortments and visual merchandising to re-imagine the in-store experience.
Some of these lab stores included scarcity product, a greater emphasis on home décor, food and beverage and health and beauty care. The lab stores provided improved sight lines, collection displays, cross-merchandising, lifestyle merchandising, queue lines and reduced inventory that matched other Bed Bath & Beyond stores.
“For these lab stores that have a different combination of these experiences and that have been open for at least four weeks, our recent results show that they are outperforming similar stores in sales, transactions, margins and margin dollars,” said Temares.
Sales from these lab stores are about 2.2% higher than comparable Bed Bath & Beyond stores. Transactions are higher by about 3.7%, product margin dollars are higher by 3.6% and the product margin rate is slightly higher by 50 basis points.
“For the same period, these lab stores are also achieving inventory reductions approximately 7% better than the inventory reductions already being achieved by comparable stores,” said Temares. “We’re excited about our next generation lab store initiatives.”
Net sales for the fourth quarter 2018 were approximately $3.3 billion, a decrease of 11% compared to the fourth quarter 2017. The decrease is the result of two factors: Having one less week in the quarter and a shift in the calendar moving the post-Thanksgiving holiday sales a week out of the fourth quarter in 2018.
D’Elia told analysts the company will continue to manage its business with a bias toward driving profitability improvement over near-term sales growth. This approach includes reducing some marketing, raising the Bed Bath & Beyond free shipping threshold, eliminating less profitable SKUs from the assortment and excluding coupons from certain SKUs.
Comp sales for the quarter declined approximately 1.4% and reflected a decrease in the number of transactions in stores, partially offset by an increase in the average transaction amount.
“On a directional basis for the quarter, comp sales growth from our customer-facing digital channels continue to be strong while comp sales from our stores declined in the mid-single-digit percentage range,” said D’Elia.