Bed Bath & Beyond will close about 200 stores, or about 21% of its fleet, over the next two years as it invests in its digital transformation.
With these closures, the retailer intends to optimize its footprint to better align with local market sales demands, while also testing new store formats and locations to grow market share.
“Our immediate goal is to right-size our store network in such a way that reduces redundant stores and supports a digital-first platform, with the appropriate number of stores in the right locations, to serve customer demand and accelerate growth,” said John Hartmann, chief operating officer, who joined the company in May.
The retailer reported net sales of $1.3 billion in its fiscal fourth quarter, down 49% vs. the prior-year period. While sales from digital channels grew 82%, store sales dropped 77%. Like many retailers, Bed Bath & Beyond closed most stores during the spring to help slow the spread of the coronavirus — deemed essential, its Buybuy BABY stores remained open — and it converted 25% of its total fleet into regional fulfillment centers, nearly doubling its fulfillment capacity to handle the elevated demand.
Leveraging buy-online-pickup-in-store (BOPIS) and curbside pickup was a “game-change,” CEO Mark Tritton said in an earnings call, and the chain offered the services at nearly 60% of stores at quarter’s end in May. The efforts helped enable digital sales growth of more than 100% during April and May, with digital sales representing nearly two-thirds of total quarterly net sales.
Nearly 40% of online orders were placed by customers who were new to ordering online, and more than 10% were also new to Bed Bath & Beyond.
The retailer has now opened nearly all stores. Net sales from its digital channels grew more than 80% year over year in June, though store sales dropped about 25%, leading to overall net sales declining 7% year over year.
"It is still early in the reopening process, and the virus and its impact are still unpredictable, but we're encouraged by our customer support and response so far," said Tritton.
Seizing on its digital momentum, Bed Bath & Beyond refreshed its website during the quarter to display new branding and incorporate customer behavior learnings from partner Pinterest.
The company had more than 200 million visits across its digital properties, up over 35% year over year. Mobile app downloads were up 134% vs. the prior year period, with more than 500,000 Apple and Google Play downloads. The retailer added the ability to place BOPIS and curbside orders from the app last month, and stores are now also offering Apple Pay.
With roughly 97% of Buybuy BABY stores open during the quarter, the company used this opportunity to lead its BOPIS and curbside pickup pilot. It also enhanced its baby registry program to include a new phone consultation service with a registry advisor, and launched Design Squad — an online interior design service that pairs customers with professional decorators — developed in partnership with sister brand Decorist.
Bed Bath & Beyond is undergoing a multi-year transformation of its supply chain and tech infrastructure to enhance its fulfillment and omnichannel capabilities, including improving store-ordering lead time and reducing store inventory requirements.
“We also plan to drastically reduce, by the millions, the number of annual vendor purchase orders we create — which our vendors will love,” noted Hartmann.
The company also intends to further optimize its fulfillment network routing to increase one-day deliveries from its stores and distribution centers. Updates will be powered by a more modern tech stack, and the retailer is currently planning for the migration of its data and computing to the cloud.