Bed Bath & Beyond to cut $1B in inventory, hundreds of millions in cost as more stores close

Dive Brief:

Bed Bath and Beyond will work with outside sourcing firms as part of an effort to cut hundreds of millions of dollars from its cost of goods, executives said on the company's second-quarter earnings call Wednesday.
Retooling the way the chain's private label line is sourced will play a significant role in this cost-cutting, said interim CEO Mary Winston. The line is largely indirectly sourced, she said, leaving "significant opportunity for margin improvement" as the retailer cuts out intermediary tiers of suppliers.
The company will also reduce overall store inventory by $1 billion over the next 18 months. To that end, the retailer reported a $194 million write-down in the second quarter.

Dive Insight:

After raising its number of expected store closures from 40 to 60, cost-cutting is the order of the day at Bed Bath & Beyond. In addition to staffing cuts and sourcing changes, the retailer is looking to rid itself of excess inventory fast through markdowns, clearance sales and liquidation avenues.

Winston said $350 million of store inventory should be clear before the 2019 holiday season. To optimize this inventory off-load the company is employing "markdown optimization software" to speed the process.

"We believe this aggressive disposition of inventory will enable us to more quickly reset inventory levels in both our Bed Bath & Beyond stores and distribution centers to allow for a faster refresh of our assortment, as well as to enable us to refocus store labor activity to better support our customers and drive sales," Winston said, adding that the chain will be mindful not to cannibalize crucial holiday sales with markdowns.

Tariffs are not to blame for Bed Bath & Beyond's current woes, which ironically may be indicative of the company's indirect buying habits. Winston said most of the chain's products are sourced in the U.S. — though tariff pass-through from vendors is still a possibility.

CFO Robyn D'Elia said a new practice of directly importing some products has gleaned supply chain efficiencies for the organization, on top of vendor negotiations.