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01/10/2022

Bed Bath & Beyond has eyes on a baby private brand

The retailer reported a decline for the third quarter but positive growth in the baby sector and its private brand strategy overall expects to give way to a baby private brand this year.
Dan Ochwat
Executive Editor
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Despite a struggling third quarter in overall sales, Bed Bath & Beyond reported its private brand strategy has been driving a positive impact for the company, announcing it will be expanding into the baby category for its buybuy Baby locations and more, which delivered double-digit growth, according to Mark Tritton, president and CEO, Bed Bath & Beyond, during its financial call.

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Mark Tritton

Tritton said the owned brands strategy it began last year, including a wide range of brand-new private label brands, has been producing higher merchandise margins at increased penetration rates. For the quarter ending Nov. 27, 2021, the retailer reported its gross margin performance was 35.9%, reflecting a 320 basis point increase in merchandise margins compared to last year.  The expansion was primarily related to a more favorable product mix from the owned brands and the implementation of new pricing strategies in response to on-going inflationary pressures and global supply chain challenges.

“During a quarter where our sales momentum was not where we wanted it to be with sales of $1.9 billion and a 7% comp decline, improved momentum in November and strong gross margins demonstrated progress in our transformation,” Tritton said. “After our previously announced slower start to sales in September and October, we drove a change in trends by November with our comp decline improving, particularly in stores. However, overall sales were pressured despite customer demand due to the lack of availability with replenishment inventory and supply chain stresses that had an estimated $100 million, or mid-single digit, impact on the quarter and an even higher impact in December.”

As for the growth into the baby category, the owned brand could also be sold at Bed Bath & Beyond stores and leveraged as part of the retailer’s new partnership with Kroger. The buybuy Baby stores are on track to achieve approximately $1.3 billion in sales in the first year of the company’s retail transformation, ahead of its investor day goals, per Tritton.

“We now intend to expand the Owned Brands strategy to BABY in 2022 as we look at margin enhancing strategies, given sales results in this business have stabilized as a result of our targeted efforts to improve this banner. We are identifying exciting new opportunities to drive sales and BABY is an important cornerstone of our plans, including our recently announced collaboration with Kroger and our own digital marketplace,” said Tritton.

For the quarter, net sales declined $1,878 million or 28%, year over year, and part of its transformation plan Bed Bath & Beyond will close 37 stores in 2022.