Bed Bath & Beyond on Tuesday laid out a $1 billion capital allocation strategy, which includes stock buybacks, debt reduction and reinvestment in core business operations, according to a company press release.
The company plans to spend up to $400 million on store remodels, supply chain improvements, and IT and digital projects, on top of about $600 million on share repurchases and reduction of debt.
- Earlier on Tuesday, the home goods retailer announced it sold its personalized gift e-retailer PersonalizationMall.com to 1-800-Flowers.com for $252 million in cash.
After sales declines and inventory misses, the troubled retailer is placing the focus back on stores and its finances.
Bed Bath & Beyond has suffered from store traffic declines in recent years. According to foot traffic analytics firm Placer.ai, the home goods retailer's store visits this year were down 23.6% below the baseline compared to 10.9% below the baseline in January 2019.
Last week, the company released disappointing preliminary Q4 earnings results with comparable sales down 5.4% in December and January due to store traffic declines and inventory management problems. Comps from stores alone fell nearly 11% during the period.
"CEO Mark Tritton is moving quickly to fix fundamental issues at [Bed Bath & Beyond] while also applying a test-and-learn strategy to significant in-store changes," Wedbush analysts led by Seth Basham said in emailed comments. Those store changes include improving visibility through wider aisles, rightsizing inventory and reducing clutter, and creating new in-store marketing to provide clarity on pricing. Basham noted that material improvements could be seen as soon as the second half of this year.
The debt reduction, coupled with the sale of one of its non-core assets in PersonalizationMall.com, buy Bed Bath & Beyond some breathing room in its turnaround effort. The company 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, which is anticipated to bring in more than $250 million.
"The financial strength of our business allows us to take the important steps needed to return capital to our shareholders and reduce our debt, while at the same time also investing in our customer," Tritton said in a statement. "This balanced approach to the use of our capital is expected to enhance shareholder value, improve the in-store and online experience and position our Company to achieve our long-term objectives to deliver sustainable growth."
Tritton on an analyst call also said the company is continuing to evaluate its assets and did not dismiss future sales of those. Wedbush analysts specifically pointed to its Cost Plus World Market banner and Buy Buy Baby, the latter which it projects could be sold for more than $700 million, though not as near-term due to its close integration into the company's core business.
"We do see recovery as being staged and we're in phase one of it. There's no like, ‘Hey, mission accomplished,' by next third and fourth quarter by any means," Tritton said. "But we do see elements of the financial and sales and product plans that give us a chance to grab stability and rectify some of our wounds from third and fourth quarter."