Last quarter, after four years of declining sales, Bed Bath & Beyond busted out some good news. The company posted positive comparable sales of 6% and a net profit of $217.9 million.
On Thursday, fiscal third quarter earnings results for the company were a bit more mixed.
On one hand, comparative sales grew 5% and digital sales nearly doubled for the brand. But the specialty retailer also reported another drop in total company net sales year-over-year, this time down 5% to $2.62 billion, causing shares to tumble early on Thursday.
In its forward-looking statement, Bed Bath & Beyond estimated that company net sales in its fiscal fourth quarter are "estimated to be lower by a double-digit percentage range" because of "non-core banner divestitures and store closings."
CEO Mark Tritton, who's overseen the company's ongoing transformation since 2019, told Insider in an interview that everything is still on track for the retailer to make its full comeback. In fact, the dip in net sales points to a necessary fat-trimming exercise on the part of Bed Bath & Beyond, he said, alluding to the company's emphasis on closing underperforming stores and shedding debt.
"It's the cumulative piece that we're really excited about — a second quarter of growth after four years of declines," Tritton told Insider. "That excites us incredibly because it's not only just achieving in these very difficult circumstances, but that's what we believe will kind of carry forward into 2021 and beyond."
Tritton said that COVID-19 has been a "major disruptor" to the company's ongoing transformation, although it did accelerate a number of key changes like further investing in e-commerce. The executive team at Bed Bath & Beyond has also prioritized establishing a "stable balance sheet" and "a high level of liquidity" to better invest in the business going forward.
Bed Bath & Beyond sold five of its subsidiaries in 2020 — Christmas Tree Shops, Linen Holdings, PersonalizationMall.com, One Kings Lane, and Cost Plus World Market. The likes of Buy Buy Baby and Harmon Face Values remain. Collectively, the brands — along with Bed Bath & Beyond — helped contribute to 2% comp sales growth and an increase of 77% in digital sales for the company in the most recent quarter.
All in all, Tritton estimates that his company has reduced its debt by around 25% through the shedding of brands and closing stores, or $1 billion in total, since 2019, and bolstered its liquidity to $2.2 billion.
"We feel like we're well-positioned," he said. "That was one of the things we did very early on was to take a strong balance sheet and strengthen it even further to be able to ride out any storm."
Shuttering underperforming stores has also long been at the heart of the company's turnaround plan, even if it impacts short-term sales. In July of 2020, the company announced its intent to shutter 200 stores over the next two years. With its remaining stores, Bed Bath & Beyond is doubling down on digital capabilities, especially buy-online-pickup-in-store.
"Retail stores aren't dead — they're the lifeblood of the business," Tritton said. "At the moment, we have a customer who can buy online and pickup in store and we have about a two-hour promise on that. On average, our customer gets that order fulfilled in a pickup within 30 minutes."
Categories that are bolstering the boost in comparative sales at Bed Bath & Beyond include home organization, which saw 16% year-over-year growth, kitchen food preparation products, which grew 14% and bedding, up 10%. Home spending has spiked during the coronavirus pandemic, but Tritton told Insider that he doesn't believe the trend is going anywhere after vaccines become widely available.
"We've done a lot of research that shows that the zeitgeist of investing in the home — cocooning and creating comfort and joy in your own home — is not a fleeting moment," he said. "We believe that this will be a substantial, sustainable trend. Sure people are going to go out and leave their homes and adventure more, but the home got sort of re-recognized as part of your core and as part of who you are and where you are the safest and most comfortable."