Bed Bath & Beyond Inc. said its CEO and chief merchandising officer are stepping down immediately as the retailer reported Q1 sales that fell far short of analysts’ already modest expectations.

Online sales fell 21% year over year. That drop included a 27% decline for digital sales under the Bed Bath & Beyond banner and a mid single-digits decline for the Buybuy Baby banner, the company said.

The omnichannel retailer said Sue Gove, an independent director on the board, has stepped in as interim chief executive. She replaces Mark Tritton, who took the helm in 2019 with a mandate to turn around sales at the company. First quarter 2022 earnings show that Tritton was unable to do so.

Fiscal first quarter by the numbers

Sales fell to $1.46 billion in the quarter ended May 28, 2022. That’s down 25.12% from the $1.95 billion in sales a year earlier. Wall Street had expected sales of $1.51 billion.

Same-store sales, a key retail metric, plummeted 24% in the quarter compared with a year ago. Analysts had expected a 20.1% drop, according to StreetAccount.

“Our results are not up to our expectations,” Gove said on a call with analysts. She is the former president and CEO of Golfsmith, a now-defunct specialty retailer that filed for bankruptcy in 2016. “Nor are they reflective of our potential.”

Analysts were unforgiving about Bed Bath & Beyond’s performance.

“We are looking at a situation in which this company is probably not going to be around. But no, it’s not going to take years. We could be talking about months at this point,” Anthony Chukumba said in an interview with Yahoo Finance. Chukumba is managing director of Loop Capital and a long-time critic of the retailer. “We are in the end days.”

Also stepping down is chief merchandising officer Joe Hartsig. The company announced Mara Sirhal, general manager of its Harmon health and beauty stores, is replacing him.

Bed Bath & Beyond ranks No. 30 in the 2022 Digital Commerce 360 Top 1000.

Searching for a CEO and possibly for buyers

Bed Bath & Beyond said it has hired national search firm Russell Reynolds to look for a permanent CEO. Significantly, the retailer said it has retail advisory firm Berkeley Research Group to help it address ongoing problems with inventory management and a less-than-stellar balance sheet. Berkeley Research Group also acts as an advisor in mergers and acquisitions.

The poor earnings results led analysts to raise questions — again — about a possible sale of the Buybuy Baby business. Activist investor Ryan Cohen, who founded Chewy, earlier this year called for a sale or spinoff of the unit.

After Tritton’s departure was announced, Cohen shared his thoughts on Twitter.

I’m sick of seeing failed executives make millions in risk free compensation while shareholders are left holding the bag

— Ryan Cohen (@ryancohen) June 29, 2022

Looking ahead

In today’s earnings call, Gove did not rule out selling off Buybuy Baby.

“The Strategy Committee has done a great deal of work to date on evaluating the potential as a business,” she said. “We’re going to continue to build on that work and evaluate the options to unlocking the future potential. It’s still a work in process but, as I said, we know there’s interest.”

As it did following disappointing earnings in the fourth quarter of fiscal 2021, the retailer blamed inventory and supply-chain woes for the sales decline.

Gustavo Arnal, executive vice president and chief financial officer, told analysts that Bed Bath & Beyond would reevaluate its store count.

“We need to right-size the business according to our recent sales trends,” he said. “It’s all about not leaving any stone unturned.

“We continue to see our business as an omnichannel business. There’s complements between those stores and our digital business, and we’re happy with our digital business. We have significantly improved our capabilities in digital, and today, it’s 40% of the revenue. What we will continue doing now, even on an accelerated basis, is look at the overall profitability of the stores and look at the geographic dispersion to see where they complement buy online, pick up in store.”

Arnal also told analysts that in the present quarter, “comp sales continue to trend in the negative 20% range.” As part of the effort to improve performance, Arnal said the retailer would take “aggressive actions to align cost structure to sales” and would cut some $100 million from a previously announced capital expenditure plan of $400 million.

For the quarter ended May 28, Bed Bath & Beyond reported:

• A net loss of $357.66 million, a widening of 85.77% from the $50.87 million loss a year earlier.
• An operating loss of $339.16 million, a widening of 78.8% from the $88.13 million loss a year earlier.
• An adjusted gross margin of 23.8%, down 1,1,00 basis points from 34.9% in the year-earlier period.

Percentage changes may not align exactly with dollar figures due to rounding.

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