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New York (CNN Business)Stop me if you’ve heard this one before: Bed Bath & Beyond is in deep trouble. Maybe it seems like you’ve read that headline 100 times. Because you have. And it remains true.
Here’s the deal: Shares tumbled more than 20% Wednesday after the company announced layoffs and store closures in its latest effort to right the ship. It’s laying off around 20% of its staff. It’ll close about 150 of its roughly 950 brick-and-mortar stores. And to keep the lights on, Bed Bath & Beyond secured a financial lifeline of $500 million — a sizable loan it hopes will buy it time and keep vendors from rushing the exits.
Here’s what the interim CEO had to say: “We are embracing a straight-forward, back-to-basics philosophy that focuses on better serving our customers, driving growth and delivering business returns.”
Not everyone shares her optimism. One analyst called the turnaround plan the “prototypical rearranging deck chairs on the Titanic,” my colleagues Jordan Valinsky and Nathaniel Meyersohn report.
So what happened to the BB-n-B? Here are a few thoughts:
Coupons went out of fashion.
- Bed Bath & Beyond was a discount shopper’s dream in the 90s. It had a million different brands and won a loyal consumer base with its coupon strategy that often rewarded shoppers with 20% off or more.
- Now, those discounts are readily found online, and Bed Bath & Beyond was far behind the e-commerce curve compared to rivals like Target and Amazon.
Volume is out; curation is in.
- Going into a physical Bed Bath & Beyond store in the 90s was the adult equivalent of touring the Wonka factory. You could get lost in mountains of bathmats and cutlery and GoodGrips and every As Seen On TV device your little 30-something heart could desire. It was the internet store before the internet. A bit everything, everywhere, all at once.
- The problem with abundance is it’s overwhelming. No one wants to sort through 300 shower curtains to find the one they like. Come on, store, just do the work for me and give me, like, a dozen max.
Discounting has its limits.
- Bed Bath & Beyond has long been a destination for premium brands, which don’t like being sullied by red-line discounts.
- Per our analyst: “If you’re Dyson and Keurig and you’re trying to maintain a halo over your brand, the last thing you want is discounting.”
Meme stock mess.
- Bed Bath & Beyond shares got a big boost this spring when Ryan Cohen, the co-founder of Chewy.com, took a controlling stake. Among non-professional online investors, Cohen carries a mark of credibility as a vanguard of the GameStop rally from early 2021.
- His followers piled into the stock, thinking their hero would work his magic and use his shareholder power to force change at the company.
- Just five months later, Cohen bailed, selling his entire stake and netting a $60 million profit.
- Why? Cohen’s not saying. Leaving others to speculate that he felt the company either couldn’t be saved or wasn’t worth the effort.
First, a lot of pain for employees. Vendors will likely be reassured by the cash infusion, but at the end of the day, the company still has a lot of debt. And it’s a difficult time — with inflation eating into demand for home goods and supply chains still untangling themselves — for any retailer to undergo the kind of extreme makeover Bed Bath & Beyond needs.
NUMBER OF THE DAY: 132,000
The private sector added 132,000 jobs in August, ADP reported Wednesday — far fewer than the 268,000 jobs added in July — indicating the white-hot pace of US hiring could be slowing, according to payroll data. Economist had forecast the August figure would be around 225,000.
“We could be at an inflection point, from super-charged job gains to something more normal,” said Nela Richardson, chief economist for ADP, which tracks private sector hiring. “My takeaway from these numbers is that companies are slowing their additional headcount.”
Heads up: The ADP report has historically come out on the Wednesday before the government’s official monthly jobs report, and has typically been seen as a preview of what’s to come. But in recent years the ADP figure lost some credibility, often coming in wildly off from the official tally. That prompted the company to revamp its methodology, and this is the first report it’s released since completing that transition. Tune in Friday to see how it stacks up against the official report from the Bureau of Labor Statistics…
Here at Nightcap, we love a smooth finish, so let’s end on some slightly sweeter news:
The bourbon boom has been going strong, and earnings this week suggest Wall Street is still wild about whiskey, my colleague Paul R. La Monica writes.
Brown-Forman, which owns Jack Daniels, reported earnings that handily topped forecasts.
- Sales were up 11%, to $1 billion, surpassing estimates of $978 million.
- Profits surged 30% to $249 million, or 52 cents a share. (Analysts were predicting earnings to come in at 47 cents a share.)
Inflation inshmaytion? Even though costs are going up everywhere else, consumers seem willing to splurge on higher-priced bourbon, such as Woodford Reserve and Old Forester (also owned by Brown-Forman). Sales of those premium spirits were up 35% from a year ago.
The reason: 2022 may be marked by anxiety about recessions and surging prices, but there’s some extent to which America’s saying, YOLO let’s get drunk.
Brown-Forman noted that strong demand for booze at airports and on cruise ships helped lift sales. Also popular: its cocktail-in-a-can innovation that finally made Jack and Coke into a portable potent potable.
Shares of Brown-Forman rose slightly Wednesday, and the stock has gained about 10% in the past three months, even as the broader market has tumbled. Notably, beer stocks such as Anheuser-Busch and Molson Coors, have lagged.
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