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Bed Bath & Beyond Will Invest Up To $400 Million On Store Renovations, Supply Chain

Bed Bath & Beyond revealed a new $1 billion capital allocation strategy for the 2020 fiscal year that will include approximately $600 million on share repurchases and debt reduction, and $350 to $400 million invested in stores, supply chain infrastructure, IT and digital projects.

With more than 1,500 stores under its various banners, including Bed Bath & Beyond, Christmas Tree Shops, HarmonFace Values, World Market and buybuy Baby, the retailer has plenty of ground to cover, particularly if it is seeking to overhaul its store base.

CEO Mark Tritton, who left his Chief Merchandising Officer position at Target to take the position in November, told The Wall Street Journal that the company plans to trim inventory by 10% in 2020. As part of the store remodels, changes would include wider aisles and less merchandise on display for a more appealing, less cluttered visual experience.

Currently, Bed Bath & Beyond is planning to remodel approximately 25 locations this fiscal year and close 40.

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While these changes sound like a step in the right direction for the struggling retailer, shoppers and investors alike have reason to remain skeptical, particularly since Bed Bath & Beyond spent more than $325 million on technology and shop remodels in 2018 under then-CEO Steven Temares. These plans didn’t improve the retailer’s performance and ultimately led to the departure of Temares in May 2019, followed by a house cleaning of six executives in December.

The retailer’s financial performance continued to stagger through holiday 2019. Same-store sales for December and January dropped 5.4%, even worse than the nearly 4% dip projected by Refinitiv.

“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,” wrote Jonathan Matuszewski, VP and Analyst at Jefferies, in a note to clients.

Despite the company’s continued sales losses, Bed Bath and Beyond said in a statement that is has, and expects to maintain, a strong cash position, reporting roughly $900 million in cash and cash equivalents as recently as Nov. 30. The retailer will bring in even more cash after the recent sale of its PersonalizationMall.com business to 1-800-Flowers.com for $252 million, and striking a $250 million sale-leaseback deal for half its real estate.

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