BBB culture remains 'central' to its success
By Andrea Lillo -- Home Textiles Today, 7/9/2001 2:14:00 PM
Morristown, NJ — As Bed Bath and Beyond reported another stellar year, the company points to its decentralized set up as the key to its success.
"Our stores have changed a lot since the founding," said Warren Eisenberg, co-founder and co-ceo, at its annual shareholders meeting held here at the Headquarters Plaza Hotel. "But our culture has not."
Net sales jumped 29.0 percent to $2.397 billion for the fiscal year ended March 3, while comp store sales were at 5.0 percent and net earnings increased 31 percent to $171.9 million. In fact, this was the ninth consecutive year of record earnings since the company's initial public offering in 1992. The category killer — which remains debt free — continues to thrive while other retailers struggle in this slow economy.
This past year held the most aggressive growth plan ever, said Leonard Feinstein, co-founder and co-ceo, with 70 new stores added, including ones in new markets like Maine and Rhode Island. The total square footage increased 24.3 percent to 12.2 million.
The retailer will top that this fiscal year, as it plans to open 80 new stores, including its first entry outside the continental United States, in Bayamon, Puerto Rico, opening this fall. The company currently has 327 stores in 44 states, and Eisenberg added that the company believes the United States can support more than 800 store locations.
To serve this growing number of stores, the retailer talked about its virtual distribution center, which has been in the works for the better part of 18 months, said Steven Temares, president and coo. Using third-party suppliers, Bed Bath is building a network of both regional facilities and local distribution centers to support its stores, and it will proceed "substantially" this year. The retailer previously had goods shipped directly to the stores.
Temares added that this program is "continuing to evolve" and that more than one facility will be used in heavy-volume markets.
The retailer also continues to open smaller-format stores, which it's been doing for several years now. "There are more smaller markets than bigger markets," said Eisenberg. "We have the ability to size a store for a market," he added, while other retailers typically have a more structured planogram. "We are decentralized. We've been very successful with the smaller market."
Temares mentioned the Atlanta market, where Bed Bath placed a smaller-format store in the middle of three larger stores. "There are a lot of uses for a smaller store," he added, including when a larger piece of real estate is not available in a particular location at the time.
Eisenberg added that, though the stores carry a smaller selection, it is a better selection. Mentioning the Atlanta market again, which is a high-end market, he said the low-end product is dropped from the stores' assortment. "We tailor the merchandise to the community."
It's challenging to stock a smaller format in some ways, Temares said, since "we want to both meet customer demands and still have them awed by the store." Its bottom threshold for smaller stores is 20,000 square feet.
Though the economy is slow, Eisenberg said that the retailer's traffic remains the same. Temares added that 1.5 percent of net sales are spent on advertising, "and that's not changing. We're spending dollars more wisely without increasing" the percentage of sales.
When asked about the consolidating textiles industry, recently covered in the news, Feinstein said that he didn't "foresee a problem in that area . We have plenty of people to buy from. You have to have alternative sources."
The Nautica program, introduced this spring, is "doing nicely" said Eisenberg, though it hasn't rolled out to all of its stores yet.
After the meeting, Feinstein added that no other branded programs are in the works, though Temares said that the company is always looking. He also told HTT that bedding is the largest category in the stores, at 21 percent of sales; but after that no other category is more than 10 percent.
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