We expect Bed Bath & Beyond’s revenues to decline slightly to $12.3 billion in 2020. This suggests that the company is making substantial progress in the digital space. However, we expect this aggressive push in online initiatives to put further pressure on the company’s margins, due to increased fulfillment costs resulting from growth in digital sales. We have estimated that Bed Bath & Beyond’s e-commerce sales have almost doubled from 8% ($950 million) of its total revenues in 2014 to 16% in 2017 ($1.7 billion). The retailer is trying to remodel both its online and offline store formats at the same time – including redesigning stores, spending on its loyalty program, revamping its supply chain and increasing its shipping costs in order to catch up with other online competitors. Accordingly, the company is stepping up its online efforts in order to keep up with the changing retail industry dynamics. The company is struggling with stagnant revenues and declining comparable sales growth, mainly because the company is still very much brick-and-mortar reliant and simply faces a lot of price competition from online retailers. Much of this year’s stock decline came after its disappointing fiscal 2018 guidance. In addition, the company’s profits have also declined in recent quarters, in large part due to extensive coupon usage. Going forward, we expect the declining trend in Bed Bath & Beyond’s profitability to continue in the near term.
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