Bed Bath & Beyond Reviews Real Estate Portfolio With 1,500 Stores

Bed Bath & Beyond, in addition to cutting costs by renegotiating leases, is evaluating stores and various retail chains it owns to determine which to keep, close, or sell.

The company's interim chief executive, Mary Winston, laid out that strategy by the Union, New Jersey-based firm during its fiscal first-quarter earnings call, the first such discussion since a group of dissident shareholders succeeded in getting members named to the retailer's board following a spirited proxy fight. Those activists wanted Bed Bath & Beyond, a home goods seller, to divest its noncore companies.

Winston, who was appointed to Bed Bath & Beyond's board in May and was later named interim chief executive when incumbent Steve Temares was ousted, outlined the company's four short-term priorities. Two of them involve real estate: resetting its cost structure, and reviewing and optimizing the business' asset base, which includes its portfolio of retail banners. In addition to Bed Bath & Beyond, the company owns Christmas Tree Shops, Harmon Face Values and Buy Buy Baby, with more than 1,500 stores across all those brands.

Under its old management, Bed Bath & Beyond had started trying to jump-start its sagging sales and boost its ailing stock price, but several groups of insurgent shareholders – Legion Partners Holdings, Macellum Advisors and Ancora Advisors – argued the transformation was being poorly executed with poor results. Bed Bath & Beyond, known for its 20%-off coupons, was suffering in the wake of competition from rivals such as Target, Walmart and Amazon. And it didn't have a strong online presence, critics said.

While Winston, a veteran of Family Dollar stores, described Bed Bath & Beyond as "an iconic brand with tremendous opportunity," she added, "It is also clear that the company has not kept pace with how the customer has evolved and how consumers shop today. We need to give our customers a reason to keep shopping in our brick-and-mortar stores, and in order to do that we must update and enhance the store experience."

On the call, Winston said six months ago Bed Bath & Beyond started "a comprehensive real estate optimization effort" with the help of a third-party consultant who is leading the renegotiation of its leases.

"Occupancy savings from this effort will benefit fiscal 2019 and far beyond," Winston said.

As part of the review of its assets, the retailer is undertaking a "fleet optimization project for all Bed Bath & Beyond stores to understand how best to position our store locations in various markets across the country and Canada," according to Winston.

Armed with that information, the company will evaluate potential store closings or relocations, Winston said.

"These decisions will be based on a combination of each store’s performance, profitability, its geographic location and the customer demographics," she said. "Our ultimate objective is to find the right balance between our physical and digital presence within the markets we serve and to deliver the shopping experience our customers want."

Earlier this year, on a fourth-quarter earnings call, Temares said Bed Bath & Beyond was looking to close at least 40 stores this year, partially offset by 15 store openings.

The dissidents had called for Bed Bath & Beyond to shed its noncore retail assets, such as Christmas Tree Shops. A special committee, as well as the company's board, are reviewing possible strategies going forward, according to Winston.

"The board and I are also in the process of evaluating the various retail banners we operate to better understand their strategic and financial contributions to the portfolio," she said. "Following this review we will determine the appropriate next steps."

As of June 1, the company had 1,536 stores, including: 995 Bed Bath & Beyond stores in all 50 states, Washington, D.C., Puerto Rico and Canada; 277 stores under the names of World Market, Cost Plus World Market or Cost Plus; 126 Buy Buy Baby stores; 81 stores under the Christmas Tree Shops banner; 55 stores under the names Harmon, Harmon Face Values or Face Values; and two retail stores under the name One Kings Lane.

During the fiscal first quarter, Bed Bath & Beyond reported it opened three locations, including one Bed Bath & Beyond store and two Buy Buy Baby stores.

Bed Bath & Beyond reached a settlement with the activist investors in May. The company, working with an executive search firm, is still seeking a permanent CEO, according to Winston.