The Jury Is Still Out On Bed, Bath & Beyond’s Turnaround Plan

On the heels of reporting its first positive quarterly comparable-sales increase since late 2016 this month, Bed, Bath & Beyond
BBBY
on Wednesday hosted its first investor day to show the specialty home furnishings chain still has a unique place against larger rivals from Amazon
AMZN
to Target
TGT
. Only the proof is still in the pudding. 

The three-year plan the company detailed includes remodeling 450 stores, or 60% of its total sales, and closing 200 stores by 2021 it previously already announced. The new management team, led by new CEO Mark Tritton, also plans to roll out 10 new store brands—a category that only represents 10% of the chain’s sales so far— over the next 18 months. 

As Target’s former merchandising chief, Tritton was credited with helping to set the discount chain apart from rivals including Walmart
WMT
by introducing over 30 house brands in two and a half years. Target has repeatedly credited its growing in-house labels with helping to drive sales and profit. In August, it said sales from its “unmatched portfolio of owned and exclusive brands” outpaced national brands, a noteworthy accomplishment at a time when many consumer products categories show national labels outperforming. 

With 95% of its sales generated from within 25 miles of its over 900 store fleet, Bed, Bath & Beyond also is catching up on making stores online fulfillment centers to meet growing e-commerce demand that has picked up because of the coronavirus pandemic. This year it introduced online ordering for in-store or curbside pickup, ship from stores and recently also rolled out same-day delivery. 

E-commerce sales have grown to about one-third of total sales from one-fifth. Still, that trails behind its specialty rival Williams-Sonoma
WSM
, which said in August that digital sales rose to represent almost 76% of the company total, an all-time high. 

Bed, Bath & Beyond also is planning to reduce its reliance on the use of profit-eroding coupons partly by better pricing products to narrow the gap against other rivals. Price gap without coupons on ‘destination categories” has gone from 14% higher than that at mass retailers in June 2018 to just 1% higher in August this year, Bed, Bath & Beyond said in a 170-page presentation. 

Early this month, Bed, Bath & Beyond reported its gross margin widened partly thanks to lower coupon expense. 

Here are some of the opportunities the company saw: two-fifths of some 285,000 promotions it used were “ineffective.” Among 1.4 million new customers it attracted this year, they are on average six years younger with 20% of them less likely to use coupons. (Bed, Bath & Beyond said it has a total of 37 million customers.) 

While these initiatives make sense, time will tell if Bed, Bath & Beyond’s plan will work against many rivals that are also upping their game. In a sign of investor concern, its stock slumped 12%, worse than the broader market drop.

The retailer also faces these hurdles and consumer perceptions. For one, 35% of its customers’ shopping baskets have only one item or one category while 41% of customers abandon online transactions because of “weak valuation perception.”

When it comes to products possibly needing work, half of the chain’s more than 5,000 brands generate less than 10% of its sales. 

In other challenges, even though Bed, Bath & Beyond scored at the top when it comes to consumers’ brand “association” in home categories, it fell behind online and mass retailers when it comes to “value.” The retailer also trailed behind specialty retailers when it comes to “resonance with millennials,” according to its survey of over 15,000 consumers this year. It scored lower than even struggling department stores when it comes to the perception of “ease and convenience.” 

“We have important work to do,” the company said in the presentation Thursday. 

The turnaround is still a work in progress.

Related on Forbes: Home sales data is another sign that consumer behavior might be forever changed

Related on Forbes: P&G, Reckitt Benckiser results show coronavirus may have changed our habits for good