Bed Bath & Beyond earlier this week released preliminary earnings results for December and January sales. During the two months, the retailer's comparable sales fell some 5.4% as it faced steep declines in store traffic and inventory management problems.
While comp sales from stores fell nearly 11% during the period, its e-commerce business was a bright spot. Comps from Bed Bath & Beyond's digital business grew about 20% during the period, which this year included Cyber Monday sales.
The retailer's selling, general and administrative expenses grew 390 basis points, while its gross margin declined approximately 300 basis points.
Well ahead of its fourth quarter earnings release date, the struggling home goods retailer warned investors of another disappointing quarter to come, causing its stock to plummet more than 25%.
With Target's former chief merchant, Mark Tritton, at the helm, the retailer has been undergoing extensive changes as part of a turnaround effort. Late last year, Tritton announced six senior executives, including the chief merchandising officer, chief marketing officer and chief digital officer, would be exiting the company. While at the time Tritton said refreshing his suite of execs was necessary in Bed Bath & Beyond's transformation, it resulted in a $10.7 million expense, which drove to disappointing SG&A.
The retailer last month also entered into a sale-leaseback agreement with private equity firm Oak Street Real Estate Capital for about 2.1 million square feet of its real estate portfolio. The move resulted in a one-time $32.5 million expense, also negatively impacting SG&A.
"As we take steps to position Bed Bath & Beyond to deliver long-term sustainable growth, we are fast tracking our efforts to rebalance our portfolio, reset our cost structure, and enhance our leadership and talent," Tritton said in a statement.
The disappointing results caused S&P Global ratings on Thursday to place the retailer on "CreditWatch negative," which indicates there's at least a 50% chance the firm lowers the retailer's ratings, including its current issuer credit rating of BB, by at least one notch.
Bed Bath & Beyond's store traffic has been an ongoing issue for the retailer. According to foot traffic analytics firm Placer.ai, the retailer saw "clear" declines in store visits between November 2017 and November 2019, due in part to store closings, but also from "other challenges impacting the brand."
"Target-style concepts like focused merchandising and multi-format stores should enable the brand to get closer to their ideal audiences in the most efficient way," Ethan Chernofsky, vice president of marketing at Placer.ai, said in emailed comments to Retail Dive. "Unfortunately, these tactics are very unlikely to drive a quick change. Instead, the most important element to be following is the type of changes taking place and the patience being shown by leadership."