Bed Bath & Beyond Inc. on Tuesday said that it's trimming corporate staff at its Union, New Jersey, headquarters and elsewhere, including vice presidents, directors, managers and professional staff, by about 7% after a review of its corporate-office cost structure, according to a company press release. Each employee was offered severance pay and other job transition support.
A prominent casualty of the effort is President and Chief Operating Officer Eugene Castagna, who left the day of the announcement, with the role eliminated. He had been with the retailer since 1994, and COO since 2014, according to a previous release. His base salary was $2 million, according to a note from Telsey Advisory Group.
The retailer estimates the changes will generate annual pre-tax net savings of about $30.7 million, about $18.9 million for the remainder of fiscal 2019, according to the release. The company also expects to incur pre-tax cash restructuring charges, mostly severance and related costs from the staff reduction, of about $12 million in fiscal 2019, all to be expensed in the second quarter.
After some staunch pushback against activist investors advocating for his ouster as CEO earlier this year, Steven Temares was sent packing from the struggling retailer in May.
That super-charged a process of upending Bed Bath & Beyond's longstanding executive team and board, which all renders Castagna's departure unsurprising, according to Telsey Advisory Group analyst Cristina Fernández. "Mr. Castagna had been an integral member of the management team that failed to adapt Bed Bath & Beyond to compete in the current retail landscape," she said in comments emailed to Retail Dive.
The executive shuffle and the savings do little to meet the company's fundamental challenges in the near term, however. Bed Bath & Beyond once attracted shoppers with a wide home goods assortment and its ubiquitous blue coupons. But the merchandise is now found easily at retailers like Amazon or Target, coupons have undermined margins, and the retailer still runs a large physical footprint.
Bed Bath & Beyond has also been slow to develop private labels, e-commerce or omnichannel, although digital sales growth did help store comps in its most recent quarter, though they still fell by 1.4%. In that period, net sales fell about 11% to $3.3 billion as the company swung to a loss of $253.8 million from a profit of $194 million in the year-ago quarter.
In a statement on the staff cuts, interim CEO Mary Winston said the new management is "confident in the underlying business and our ability to leverage the strength of the Bed Bath & Beyond brand and our lasting connection with customers to deliver on our near-term priorities and transform the Company."
But Fernández provided a wait-and-see analysis. "Overall, we believe Bed Bath & Beyond is making some necessary and difficult decisions to address its longstanding problems. A new strategic plan and greater focus on a few key initiatives should help," she said, but noted that "visibility into the turnaround remains very limited given the company's poor track record in recent years, lack of a permanent CEO, and an essentially new board (except one member)."
In its release, the company more or less reiterated its 2019 guidance, saying it "expects to see a gradual, sequential improvement in its quarterly net earnings per diluted share, with the vast majority of its net earnings per diluted share to be earned in the second half of the fiscal year."
But that's optimistic, according to the Telsey Group analysts, "given meaningful market share losses to the likes of Home Goods, Wayfair, Target, and Walmart, which offer a better customer experience."