Out-of-stocks cost Bed Bath & Beyond millions of dollars

Bed Bath & Beyond, the retail group, revealed that product availability issues cost its eponymous chain some $175 million in the last quarter, demonstrating how supply-chain issues can hurt brand sales.

The hard numbers

Comparable sales at Bed Bath & Beyond’s namesake banner fell by 15% year-on-year in its latest trading quarter, a result attributed in no small part to a lack of available inventory. In calculating the impact of the lack of “in-store and available to sell merchandise”, the firm reached the total of $175 million.

Extraordinary times

Mark Tritton, Bed Bath & Beyond’s CEO, said on an earnings call that several “extraordinary macroeconomic factors” – including the “derailing of global supply chains”, on-going disruption due to COVID-19, rising inflation and interest rates, as well as geopolitical strife – contributed to this situation and damaged consumer confidence.

The marketing response

From an advertising perspective, he noted that some “major items” featured in Bed Bath & Beyond’s circular – a key “traffic-generating” resource for the chain – were ultimately out of stock, and thus unavailable for consumers to buy.

Alongside greater efficiency in its pricing and promotional strategies, Bed Bath & Beyond will respond by adapting its communications to fit with evolving marketplace realities. “We will continue to align marketing resources with in-stock availability, and redirect our strategies to other avenues, such as postcards and doorbuster events, which have seen relative success,” said Tritton.

Private label is critical

A wider transformation of the company’s operations features greater investment in digital channels and numerous store remodels. By the end of the last quarter, which marked the close of the company’s fiscal year, Bed Bath & Beyond also saw own-label penetration hit a run rate – that is, a projected future total based on current performance – of 25%, beating its 20% target on this metric.

“Through our [private-label] brands, we introduced a new suite of products to differentiate Bed Bath & Beyond, while also creating new opening pricepoints to remain competitive, especially now in light of inflation pressures,” said Tritton.

Sourced from The Motley Fool