Bed Bath & Beyond is beginning to test changes in stores that it eventually could roll out to hundreds of locations, if it can draw shoppers in.
The big-box retailer said Tuesday it plans to spend up to $400 million on store remodels and supply chain upgrades, along with about $600 million this fiscal year on share repurchases and debt reduction.
The company has a "track record" of spending money and not reaping any returns, CEO Mark Tritton said in an interview with CNBC. But he said he is trying to change that.
Top of mind for Tritton, who just took the reins in November after a successful stint as chief merchandising officer at Target, is fixing Bed Bath & Beyond's stores. It has roughly 1,500, including under its other banners, such as Christmas Tree Shops, World Market and buybuy Baby.
The company is currently testing, with a small batch of three Bed Bath & Beyond locations, various remodeling strategies that consist of slashing inventory by as much as 20% and adding more marketing signage. Tritton said same-store sales at those locations are up 2% to 4% compared with Bed Bath & Beyond's entire fleet.
"I want to strike ... once I get those plans finalized," he said about a broader store remodel rollout. Currently, Bed Bath & beyond is planning to remodel about 25 locations this fiscal year. And there could be more to come in 2021.
"We will continue fixing our total portfolio," Tritton said.
Bed Bath & Beyond earlier Tuesday morning announced it had agreed to sell its PersonalizationMall.com business, known for selling gifts for special occasions and holidays, to 1-800-Flowers.Com for $252 million. Its shares had closed Tuesday up more than 5% on the deal news, then climbed more than 3% in extended trading, as Bed Bath & Beyond laid out its spending plans.
Tritton said the deal with 1-800-Flowers.Com, which is expected to be completed during the first quarter of fiscal 2020, is part of Bed Bath & Beyond's broader strategy to focus more on its core home, baby and beauty businesses.
"As we look at the core business ... we really see we have more strength in baby and beauty," he said. "We will look into how we can reinforce that."
Last month, Bed Bath & Beyond said it has completed a sale-leaseback transaction with an affiliate of Oak Street Real Estate Capital, netting it $250 million in proceeds. The properties sold represented about 2.1 million square feet of commercial real estate, including stores, office space and a distribution center. After receiving the influx of cash, Bed Bath & Beyond now pays rent to Oak Street.
Bed Bath & Beyond has also said it plans to close about 40 of its namesake stores this fiscal year.
After a disappointing holiday season, Tritton knows he still has plenty of work ahead of him to turn the business around.
Last week, Bed Bath & Beyond said sales during the first two months of its fiscal fourth quarter were hurt by heightened promotions, falling store traffic and inventory management issues. Same-store sales during November and December dropped 5.4%.
The report ignited fears on Wall Street that a turnaround with Tritton is going to take longer than initially anticipated, and drove its stock down more than 30% year to date. The company has a market value of about $1.5 billion.
"We believe reinvesting transaction proceeds in stores, marketing, and supply chain will undoubtedly help, though recent December/January results reaffirm our view that the scope of the turnaround is broad and may require longer than bulls believe," Jefferies analyst Jonathan Matuszewski said Tuesday in a note to clients.
But the CEO, who was responsible for launching many of Target's popular private labels, says investors need to be patient.
"The third quarter and fourth quarter were cast ... my ability to do a lot with that was limited," Tritton said. "There are a lot of things we can rectify."
He also said the company remains "cash rich," unlike many struggling retailers.
Bed Bath & Beyond reported roughly $900 million in cash and cash equivalents as of Nov. 30.
The company is set to report its fourth-quarter and full-year earnings on April 15, after market close.