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Bed Bath & Beyond Makes Organizational Changes to Fight Woes

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Bed Bath & Beyond Inc. (BBBY - Free Report) is one of the many companies, which are leaving no stone unturned to recover from the coronavirus crisis that has badly hit the global economy. In this context, it has come up with a new restructuring plan that is likely to generate pre-tax cost savings of nearly $150 million on an annual basis. This includes part of the potential savings from its earlier realignment action (February 2020), which is anticipated to generate SG&A savings of $85 million along with annual EBITDA of roughly $250-$350 million in the next two-three years.

The latest cost-cutting move will enable the company to strengthen its financial position, simplify operations and aid growth initiatives such as in-store and online shopping experience, launch of new customer-inspired brands in 2021 and supply-chain transformation.

Further, management has decided to significantly reduce headcount as part of the plan. Notably, the company is slashing roughly 2,800 jobs with immediate effect across its corporate headquarters and retail stores. In doing so, it is likely to incur charges of approximately $25 million in fiscal 2020. Prior to this, the company revealed plans to cut nearly 500 positions to reduce workforce. This is a key step in its efforts to focus on the core business and initiatives to enhance customer experience, boost sales and drive long-term success.

Other notable efforts undertaken by the company in response to the COVID-19 situation includes conversion of roughly 25% of Bed Bath & Beyond and buybuy BABY stores in the United States and Canada into regional fulfillment centers, launch of Buy-Online-Pick-Up-In-Store or BOPIS and Curbside Pickup services to expedite delivery process and phased store reopening.

However, this Zacks Rank #4 (Sell) stock is reeling under lower margins stemming from consumers’ shifting preference to the online platform along with huge sales loss during temporary store closures due to the coronavirus outbreak. Also, it refrained from providing any fiscal 2020 outlook, given the growing uncertainty of the pandemic.

Wrapping Up

All said, we believe that these plans make the company well positioned to get back on track in the Home, Baby, Beauty and Wellness space, driven by the solid online show, cost-saving actions and positive customer feedback. In the past three months, shares of this company have surged 60.2%, outperforming the industry’s growth of 13.1%.

Stocks to Consider

Dollar General Corporation (DG - Free Report) has a long-term earnings growth rate of 12.5% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Best Buy (BBY - Free Report) , also a Zacks Rank #2 stock, has a long-term earnings growth rate of 8.5%.

DICKS Sporting Goods (DKS - Free Report) has an expected long-term earnings growth rate of 4.1% and a Zacks Rank #2.

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