Home Adidas sales Analysis: Why Baby Gear May Not Alleviate Bed Bath & Beyond’s Problems

Analysis: Why Baby Gear May Not Alleviate Bed Bath & Beyond’s Problems

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Signage is seen at a Bed Bath & Beyond store in Manhattan, New York, U.S., June 29, 2022. REUTERS/Andrew Kelly

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NEW YORK, Sept 16 (Reuters) – Struggling home goods retailer Bed Bath & Beyond Inc is axing stores and jobs and revising its merchandising strategy, but its return to profitability anytime soon could depend appeal to US shoppers who currently spend $18.2 billion a year on baby items.

The company’s buybuy Baby unit is the largest specialty retailer of baby products in the United States, according to GlobalData. But other retailers – including Gap Inc’s Banana Republic (GPS.N) and drugstore retailer Rite Aid (RAD.N) – are pushing baby items, filling the void created by Babies’ parent’s 2017 bankruptcy. R’Us Toys ‘R’Us.

Keeping buybuy Baby – which Bed Bath & Beyond had put up for sale under pressure from shareholders before backtracking in August – helped the parent company secure its recent loan of $375 million, the maximum amount it could borrow, a person familiar with the matter said. Bed Bath & Beyond has also retained buybuy Baby as they believe it will continue to grow which may allow it to get a higher price later on or at least improve Bad Bath & Beyond’s finances slightly in the future. future, the source said.

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Although there are some similarities between buybuy Baby and Babies ‘R’ Us, which sold similar products as part of the Toys ‘R’ Us company that was eventually liquidated, there are key differences that could contribute to a possible buybuy Baby sale.

Bankers had considered selling Babies ‘R’ Us years ago, but found it would be too complex to separate them as the chain mainly operated in the same outlets as Toys ‘R’ Us and they were operating under a single lease at each location, a person familiar with the Bed Bath & Beyond and Toys ‘R’ Us businesses said.

By contrast, buybuy Baby mostly operates in stand-alone outlets, which makes it much easier to sell the chain eventually, the source said.

But operationally, buybuy Baby faces challenges, especially when it comes to clothing. Baby food and infant formula are showing some of the highest growth rates, with baby food sales up 15.2% and infant formula and nutritional beverage sales up 8.7% in the year to July 30, according to NielsenIQ data.

At two buybuy Baby stores in New York recently, shoppers combed through shelves filled with Adidas toddler tracksuits, Juicy Couture onesies, Calvin Klein clothes and Nike baby bags. But both stores offered few baby food options.

The limitation “weakens its stores’ status as a one-stop shop for all baby needs,” said Neil Saunders, managing director of GlobalData Retail, unlike Amazon.com (AMZN.O) and mass merchants Walmart and Target (TGT.N), which “sells all kinds of baby items under one roof.”

Still, the baby gear chain is the “crown jewel” of the parent company, said David Klink, senior equity analyst at Huntington Private Bank.

Buybuy Baby had sales of $1.4 billion in the last fiscal year, which ended February 26, 2022, or about 18% of Bed Bath & Beyond’s total sales of $7.87 billion.

Bed Bath & Beyond does not provide profitability data for buybuy Baby, but does report quarterly comparable store sales data. Buybuy Baby’s comparable sales have outperformed the Bed Bath & Beyond brand in recent quarters, although both brands saw declines in the fiscal 2022 first quarter ended May, according to company filings.

Buybuy Baby has been profitable until at least 2021, according to GlobalData, unlike its parent company. Bed Bath & Beyond recorded a loss of $150 million for the year ended February 2021 and another net loss of $559.6 million for the year ended February 2022.

After birth rates in the United States grew in 2021, the first increase in seven years, according to the National Center for Health Statistics of the Centers for Disease Control and Prevention, the potential market for baby equipment is huge. Total spending on baby care products in the United States jumped 8% in the 12 months to Aug. 27, according to NielsenIQ, which measures scanner activity in stores.

But retaining the buybuy Baby unit could be risky if its value erodes due to an ongoing association with struggling parent company Bed Bath & Beyond, which is struggling with $1.4 billion in debt.

Bed Bath & Beyond, once known as a “category killer” in homewares, faces a critical holiday season when it must show its strategy to turn around its business is reversing lost sales and bringing back sales. clients. Read more

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Reporting by Siddharth Cavale, Arriana McLymore, Michael Spector and Abigail Summervile in New York; additional reporting by Jessica DiNapoli in New York; Editing by Leslie Adler

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Ariana McLymore

Thomson Reuters

Arriana McLymore reports on the business of law, including the diversity of the profession, business practices, legal education and the career cycles of lawyers.