Shares of Bed Bath & Beyond Inc. BBBY have rallied 39.9% in the past three months, outperforming the industry’s growth of 14%. The stock's bullish run on the bourses can be attributable to a solid online show, driven by its strong omnichannel capabilities. Also, efforts to reduce costs through store optimization and restructuring programs bode well.
That said, let’s delve deeper into the factors that are aiding this Zacks Rank #3 (Hold) stock.
Factors Narrating Bed Bath & Beyond’s Growth Story
Bed Bath & Beyond has been gaining from continued momentum in digital sales. Notably, digital sales rose roughly 75% in the third quarter of fiscal 2020, driven by several omnichannel services, such as Buy-Online-Pick-Up-In-Store (BOPIS) and Curbside Pickup. This also led to new customer acquisition to the tune of more than 2 million in the said quarter. During the five-day holiday sales period from Thanksgiving to Cyber Monday, the company witnessed digital comps growth of roughly 69% year over year. Management anticipated positive sales momentum to continue in the digital platform in the fiscal fourth quarter.
Encouragingly, the company introduced same-day delivery services on bedbathbeyond.com and buybuybaby.com during the fiscal third quarter. Further, Bed Bath & Beyond upgraded and re-launched its buybuy BABY app in November 2020, driven by the fact that almost two-thirds of baby customers shopped online. Also, it partnered with Shipt and Instacart to provide same-day delivery services to customers of Bed Bath & Beyond and buybuy BABY banners.
Apart from these, it remains on track with store optimization plans by shutting down underperforming stores. The company exited four Bed Bath & Beyond stores in third-quarter fiscal 2020 and 75 additional stores in December. By the end of fiscal 2021, roughly 200 underperforming Bed Bath & Beyond stores will be closed.
As part of its streamlining efforts, the company has divested many businesses in the past year, including the conclusion of the sale of PersonalizationMall.com, the One Kings Lane home décor unit, the Christmas Tree Shops retail banner, its institutional Linen Holdings business, and a distribution center in Florence, NJ. Further, in January 2021, it completed the sale of Cost Plus World Market. These strategic actions are part of the company’s three-year transformation plan, which is likely to generate annual SG&A savings of $85 million. Savings are likely to be re-invested in omnichannel transformation and boost shareholder return.
Further, management is focused on its restructuring program in a bid to achieve improved profits over the next two-three years. In this regard, adjusted EBITDA is anticipated to be $250-$350 million. Additionally, management intends to reinvest roughly $150-$200 million of the total cost savings in future initiatives.
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