Here’s the deal: Shares fell more than 20% on Wednesday after the company announced layoffs and store closings in its latest effort to right the ship. It is laying off about 20% of its staff. It will close around 150 of its approximately 950 physical stores. And to keep the lights on, Bed Bath & Beyond has secured a $500 million financial lifeline – a sizable loan it hopes will buy it time and prevent sellers from rushing outings.
Here’s what the interim CEO had to say: “We embrace a simple, back-to-basics philosophy that focuses on better service to our customers, business growth and profitability.”
Coupons are out of fashion.
- Bed Bath & Beyond was a discount shopper’s dream in the 90s. It had a million different brands and gained a loyal consumer base through its coupon strategy that often rewarded shoppers with 20% off or more.
- Now those discounts are easily found online, and Bed Bath & Beyond was way behind the e-commerce curve compared to competitors like Target and Amazon.
The volume is exhausted; healing is in progress.
- Walking into a physical Bed Bath & Beyond store in the 90s was the adult equivalent of visiting the Wonka Factory. You could get lost in mountains of bath mats and cutlery and GoodGrips and all the As Seen On TV appliances your little 30-something heart could want. It was the online store before the Internet. A bit of everything, everywhere, all at once.
- The problem with abundance is that it is overwhelming. No one wants to sort through 300 shower curtains to find the one they love. Come on, shop, do the work for me and give me, like, a dozen tops.
The discount has its limits.
- Bed Bath & Beyond has long been a destination for high-end brands, which don’t like to be sullied by red line discounts.
- According to our analyst: “If you’re Dyson and Keurig trying to maintain a halo on your brand, the last thing you want is a discount.”
Same stock mess.
- Shares of Bed Bath & Beyond got a big boost this spring when Chewy.com co-founder Ryan Cohen took a majority stake. Among non-professional online investors, Cohen carries a brand of credibility as the vanguard of the GameStop rally from early 2021.
- His followers piled into the stock, thinking their hero would work his magic and use his shareholder power to force change at the company.
- Just five months later, Cohen bailed out, selling his entire stake and making a profit of $60 million.
- Why? Cohen says nothing. Leaving others to speculate that he felt the business couldn’t be saved or wasn’t worth it.
And after?
First of all, a lot of pain for the employees. Sellers will likely be reassured by the cash injection, but at the end of the day, the company still has a lot of debt. And it’s a tough time — with inflation eating away at demand for home goods and supply chains still unraveling — for any retailer to undergo the kind of extreme makeover Bed Bath & Beyond needs.
NUMBER OF THE DAY: 132,000
“We could be at an inflection point, from superpowered job gains to something more normal,” said Nela Richardson, chief economist for ADP, which tracks private sector hiring. “What I take away from these numbers is that companies are slowing down their additional headcount.”
Warning: The ADP report has historically come out on the Wednesday before the government’s official monthly jobs report, and has generally been seen as a preview of what’s to come. But in recent years, the ADP figure has lost some credibility, often deviating from the official tally. This prompted the company to revise its methodology, and this is the first report it has published since completing this transition. Tune in Friday to see how this compares to the official Bureau of Labor Statistics report…
FROM BOTTOM TO TOP
At Nightcap, we love smooth finishes, so let’s end on some sweeter news:
Brown-Forman, owner of Jack Daniels, reported earnings that far exceeded forecasts.
- Sales rose 11% to $1 billion, beating estimates of $978 million.
- Earnings jumped 30% to $249 million, or 52 cents per share. (Analysts predicted earnings would be 47 cents per share.)
Inflation index? Even as costs rise everywhere else, consumers seem ready to splurge on more expensive bourbon, like Woodford Reserve and Old Forester (also owned by Brown-Forman). Sales of these premium spirits are up 35% from a year ago.
The reason: 2022 may be marked by anxiety about recessions and soaring prices, but there’s a degree to which America says, YOLO let’s get drunk.
Brown-Forman noted that strong demand for alcohol at airports and on cruise ships has helped boost sales. Also popular: his cocktail-in-a-can innovation that ultimately made Jack and Coke a portable powerful drinking.
Shares of Brown-Forman edged higher on Wednesday and the stock has gained about 10% over the past three months even as the broader market fell. Notably, beer stocks such as Anheuser-Busch and Molson Coors lagged.