Bed Bath & Beyond’s Digital Revenues To Grow Only At 6% CAGR Over 2016-2020?

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We estimate Bed Bath & Beyond‘s (NASDAQ: BBBY) online sales to achieve a CAGR of only 6% over 2016-2020 while the U.S. Online Home Furnishing retail market is expected to grow at 28%. The outbreak of coronavirus is likely to have a negative effect on Bed Bath & Beyond’s inventory over the coming months, as it is dependent on China for its supply chain. The factory shutdowns and delays from China could threaten the company in the near-term. This also puts the company’s e-commerce business on the spot.  We further discuss BBBY’s online sales as compared to the overall home furnishing market in our interactive dashboard on How Big Can Bed Bath & Beyond Be In The Home Furnishings E-commerce Market?

The retailer’s e-commerce sales grew from $1.6 billion in 2016 to around $2.6 billion in 2018, due to the benefits of One Kings Lane acquisition. Nevertheless, we expect online sales to decline and reach $2 billion in 2020, due to ongoing weak sales and coronavirus peril. E-commerce accounts for around 19% of BBBY’s total revenue (in 2019). The retailer is still very much brick-and-mortar reliant and its investment in digital initiatives came in later than many of its competitors. We expect the company’s online contribution to its revenues to remain at a similar level by 2020.

Comparing Revenue Contribution Of Major Players In the Online Home Furnishings Retail Market

  • Wayfair and Amazon together capture 64% of the online home furnishing market (in 2019). Both of these companies operate solely online and offer a wide range of products that will be impossible to replicate in stores.
  • Walmart and Williams-Sonoma have online home furnishing revenues of ~$4.3 billion and $3.3 billion respectively. Notably, Bed Bath & Beyond is the smallest player in the group with revenues of around $2 billion.
  • In its Q3 2019 earnings report, BBBY’s comparable sales in-store were down in the high single-digit percentage range, while comparable sales through digital channels fell in the mid-single-digit percentage range. It should be noted that this was a second consecutive fall in comparable sales consummated through digital channels, which had been growing strongly until now.  BBBY is already struggling with margin pressure and declining store traffic amid competition from e-commerce and omni-channel competitors. To add to that, a decline in its digital presence will only suggest a weak prospect for the company going forward.
  • Bed Bath & Beyond is in the midst of a Hail Mary turnaround as comparable-store sales and earnings have declined in recent quarters. One of the objectives the company is looking into is in digital, with plans to shift from a reserve-online-pickup-in-store model to a buy-online-pickup-in-store model.

You can read about the impact of the coronavirus outbreak on the stock of major U.S. companies, including Netflix and Disney among others on the Trefis coronavirus topic page.

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