Bed Bath Cuts 2,800 Jobs In Reshuffle To Boost Online Sales

Bed Bath & Beyond said it will cut its workforce by 2,800 employees to generate $150 million in cost savings as the retailer focuses on online sales growth.

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Bed Bath (BBBY) said the move is part of a broader cost restructuring plan, which also includes planned store closures, and targets annualized savings of between $250 and $350 million, excluding one-time costs. The retailer added that the changes will help fund a number of growth initiatives to improve the shopping experience in store and online, building on the recent introduction of Buy-Online-Pickup-In-Store (BOPIS) and curbside pickup services.

“This component of our comprehensive restructuring program is critical to rebuild the foundation of our business, construct a modern, balanced and durable business model, and meet the structural shift in customer shopping and service preferences that we have seen accelerate as a result of COVID-19,” said Bed Bath CEO Mark Tritton. “We are encouraged by the strong customer response to new services such as BOPIS and curbside pickup, and the continued strength in our digital channels.”

The 2,800 job cuts, which will affect positions from across its corporate headquarters and retail banner stores, will take immediate effect. Bed Bath expects to incur pre-tax cash restructuring charges of approximately $25 million in fiscal 2020, primarily for severance and related costs in conjunction with these changes, all of which will be expensed in the fiscal 2020 second quarter.

Bed Bath shares have dropped 29% this year and with the average analyst price target set by analysts at $9.50, the stock is poised to decline another 23% over the coming year.

Meanwhile, Wedbush analyst Seth Basham earlier this month assigned a Buy rating on the stock with a $15 price target (22% upside potential).

“Consumer shopping habits will likely continue to migrate online, and BBBY is positioned to capture its fair share of that growth, highlighted by digital sales increasing 70% y/y in July following 80% y/y growth in June,” Basham wrote in a note to investors. “Not many companies have the capabilities to support this strong growth and leverage their store base to further enhance the value proposition. We expect enhanced services (including seamless BOPIS) and renewed merchandise to make BBBY stores more valuable in the future.”

The rest of the Street is sidelined on the stock. The Hold analyst consensus shows 6 Holds and 4 Sells versus 3 Buys. (See BBBY stock analysis on TipRanks)