Bed Bath & Beyond is losing customers and money at a rapid pace, and the company will have to reverse course quickly to avoid bankruptcy.
The struggling chain announced Thursday that sales at stores open for at least a year fell 26% in the latest quarter ended Aug. 27. The company also lost $366 million in the period and profits fell as the chain discounted merchandise to clear shelves.
Shares of Bed Bath & Beyond ( BBBY ) were down 3% in early Thursday trading. The stock has lost more than half its value this year.
“Our overall results are neither acceptable nor indicative of our potential,” Sue Gove, the retailer’s interim chief executive, said in an earnings call on Thursday. Gove replaced previous CEO Mark Tritton in June.
Sales fell last quarter because Bed Bath & Beyond offered too many merchandise customers didn’t want and was out of stock on high-demand items, according to the company.
Bed Bath & Beyond is adjusting its inventory by shedding about a third of its brands and adding popular brands and new direct-to-consumer brands to the mix.
This is a reversal of the previous push implemented under Tritton to include more retailer brands in stock. That strategy was successful at Target, but turned off brand-loyal customers at Bed Bath & Beyond who wanted big-name brands.
“Over the summer, we began to realign our inventory away from proprietary brands and to repair broken stock in our national brands,” Gove said on Thursday.
The company has announced other strategies to try to win back shoppers, including a new rewards program, an improved mobile app and new in-store visual displays.
“Our customers are eager to return to our stores,” said Gove. “They want variety, they want value and they want coupons.”
Last month, Bed Bath & Beyond also announced it would close 150 stores and secured $500 million in new financing to help pay suppliers and fund other expenses.
Analysts say it may be too late for Bed Bath & Beyond to right itself and remain competitive with big retailers like Amazon ( AMZN ) and Target ( TGT ).
“Bed Bath & Beyond was slow to change with the evolving environment. They were too concerned about trying not to risk the cash cow in the stores,” said Michael Lasser, retail analyst at UBS.
Even the company’s famous blue coupons were ineffective as online shopping became more popular and customers could easily compare prices.
Target, Walmart, Costco and other chains will benefit more from Bed Bath & Beyond’s challenges and store closings. About 79 percent of Bed Bath & Beyond stores are within 10 minutes of Walmart and 77 percent of stores have a Target within 10 minutes, Lasser said.