Bed Bath & Beyond (BBB) has everything you need to play "house" for real. It's the nation's #1 superstore domestics retailer with more than 1,000 BBB stores throughout the US, Puerto Rico, and Canada. The stores' floor-to-ceiling shelves stock better-quality (brand-name and private-label) goods in two main categories: domestics (bed linens, bathroom and kitchen items) and home furnishings (cookware and cutlery, small household appliances, picture frames, and more). BBB also operates three smaller specialty chains: about 75 Christmas Tree Shops; 90 buybuy BABY stores; and 50 Harmon discount health and beauty shops. The home goods retailer bought its smaller rival Cost Plus for $495 million in cash in 2012.
Beyond the US, the domestics retailer is growing in Canada and Mexico. BBB opened its first international store in Richmond Hill, Ontario, in 2007 and now has some 40 stores in more than half a dozen Canadian provinces. It also has a joint venture with Mexican retailer Home & More. BBB anticipates the joint venture will be a springboard for future growth in Mexico, where it currently operates four stores under the BBB banner.
Sales & Marketing
In fiscal 2014 (ended February) BBB's advertising costs totaled $280.5 million, a sizable jump compared with $250 million the prior year, and $192.5 million the year before that. The chain relies exclusively on circulars, mailings, and word-of-mouth for advertising.
Beyond its main BBB chain of about 1,015 stores, the company operates 265 stores under the names World Market, Cost Plus World Market, and World Market Stores banners. It also operates about 90 buybuy BABY shops, 75 Christmas Tree Shops, and 50 stores under the names Harmon and Harmon Face Values.
In fiscal 2014 (ended February) BBB rang up $11.5 billion in sales, a 5% increase versus the prior year's $10.9 billion. The prime movers were the twin acquisitions of Cost Plus and Linen Holdings (both acquired in 2012), which accounted for about 62% of the increase in sales. Sales also got a boost from rising same-store sales and the addition of new stores. Despite the rise in sales, net income dipped to $1.02 billion in fiscal 2014 from $1.04 billion in 2013 on higher expenses and cost of sales.
BBB has logged steady sales growth over the past decade. Indeed, sales have more than doubled, thanks to acquisitions and positive same-store sales comparisons. However, same-store sales growth has slowed in recent years from about 8% in fiscal 2011 to just 2.4% in fiscal 2014.
The company has no long-term debt and is looking to make strategic acquisitions.
BBB is reaping the benefits from its former archrival Linens 'n Things' demise and the sustained strong rebound in demand for home goods following the recent deep recession. To capitalize, BBB is growing organically -- adding stores in both new and existing markets -- and through acquisitions. Also, the retailer's decentralized structure allows store managers to have more control than their peers at other retailers (and the company has less manager turnover). BBB cuts costs by locating its stores in strip shopping centers, freestanding buildings, and off-price malls, rather than in pricier regional malls. To cut costs further, its vendors ship merchandise directly to the stores, eliminating the expense of a central distribution center and reducing warehousing costs.
After adding 33 new stores in fiscal 2014, the company expects to open approximately 30 additional locations company-wide in the coming year. BBB is also looking to enhance its omnichannel capabilities, through such initiatives as adding new functionality to its e-commerce and mobile sites, and the opening of a new distribution center for both direct to consumer and store fulfillment.
Mergers and Acquisitions
In June 2012 the company bought Cost Plus, which operates nearly 260 stores in 30 states under the World Market, Cost Plus World Market, and Cost Plus Imports banners via a successful tender offer. The acquisition followed an 18-month partnership between the two chains, during which specialty food departments were added to some BBB stores. BBB is looking to boost foot traffic and fend off online and discount retail competitors, by adding food and drink to its merchandise menu. (About 40% of Cost Plus sales come from food and drink.) The tender offer for the shares of Cost Plus was completed in late June. Also in June, the retailer acquired New Jersey-based Linen Holdings, a privately-held distributor of bath, bed, and table linens, for about $105 million. Linen Holdings' customers include hotels, cruise lines, food service establishments, and health care operators.