Bed Bath & Beyond Inc. (NASDAQ: BBBY) has named a new chief executive officer. Traders pushed shares up sharply on the news. The fact of the matter is that the company is in such a bad way that it is no different from putting a new CEO into place at J.C. Penney or Gap. Bed Bath & Beyond is too far gone for any management to rescue it.
Mark J. Tritton was named the new president and CEO. His credentials are impressive. He was formerly an executive vice president and the chief merchandising officer at Target. What he faces is managing a company that recently announced it would shutter 60 stores, and it has had a full 10 quarters in a row of declining same-store sales. Comparable sales in the most recently reported quarter dropped by 6.7%.
In the latest quarter, revenue dropped to $2.72 billion from $2.94 billion in the same period the year before. Bed Bath & Beyond lost $182 million in the period.
The drop in Bed Bath & Beyond shares matches that in J.C. Penney’s over the past five years. Both are down about 84%. In reality, investors trade them as if they will become the next Sears, so badly beaten that they will barely be able to stay in business.
The factors that make Bed Bath & Beyond a terrible turnaround candidate are the same as for most national, medium-sized niche retailers. Very little of what it sells is unique. Most items are similar to those sold at larger retailers: relatively inexpensive housewares for kitchens, bedrooms, baths and dining rooms. Some highlighted products sell for as much as 50% below regular prices — not a sign of strength.
The other problem is one all modest-sized retailers have, and it is little different from similar hurdles at Walmart and Target. Amazon.com sells most of what Bed Bath & Beyond does. Its Prime membership loyalty subscription ties over 100 million customers to its shopping system. Much of what its sells is not just available to be shipped in a day. Customers can get many items in a few hours.
The future of Bed Bath & Beyond is already in place. It will cut more and more stores and people in the hope of retrenching to its profitable stores. And those stores will become less and less profitable.
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