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What's Behind Bed Bath & Beyond CEO's Private Label Strategy?

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What's Behind Bed Bath & Beyond CEO's Private Label Strategy?

Home goods retailer Bed Bath & Beyond Inc. (NASDAQ: BBBY) announced Wednesday the launch of at least eight company-owned brands in reaction to a major "migration" among consumers towards private labels across the entire retail industry, Bed Bath & Beyond CEO Mark Tritton said on CNBC's "Squawk on the Street."

What Happened: Bed Bath & Beyond's private label announcement is part of the company's three-year transformation plan. The decision to invest in its own brands is based on growing demand among consumers to try new brands from stores they trust.

Management is guided for the sales penetration of its brands to grow from around 10% to around 30% within three years.

"The opportunity to create custom products for customers' homes at really affordable price points — good, better, best in every one of our rooms and categories," the CEO said.

Related Link: This Analyst Says Bed Bath & Beyond Has 'Many New Tools In The Basket'

Why It's Important: Private labels also offer Bed Bath & Beyond higher margins compared to national brands. While margin upside is a "fantastic" outcome, it is not the main motivation.

Bed Bath & Beyond plans on eliminating existing brands and replacing them with its own brands. This could cause confusion among customers and even store associates, especially as it comes at the same time as store remodels.

What's Next: The company's initiatives and multi-year timeline towards growth have in part attracted Wall Street analysts to take another look at the stock, the CEO said.

Many analysts are attracted to the ongoing "agile transformation" that is "very credible" that could translate to strong EBITDA performance.

(Photo: Anthony92931 via Wiki Commons)

 

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