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Our business has shifted with people wanting to gather inside the home: CEO

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Mark Tritton, Bed Bath & Beyond CEO is joined by Yahoo Finance’s Brian Sozzi and the Yahoo Finance Live panel to discuss the latest revamp plan with their New Owned Brands.

Video Transcript

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ZACK GUZMAN: Well, AMC shares are not the only meme stock catching a bid today. One of those names talked about in Reddit's Wall Street Bets, Bed Bath and Beyond seeing a 50% spike higher in today's session. But it's not just that retail enthusiasm we got to talk about today, as Bed Bath and Beyond says that it's looking to supercharge its efforts around the upcoming summer shopping season with the launch of a trio of in-house brands. The new lines, dubbed Our Table, Wild Sage, and Squared Away, will roll out in the coming weeks and focusing on important areas of life tied to back-to-college purchases. The Wild Sage and Squared Away segments, for example, include youthful new designs, and Squared Away offers new storage solutions.

And joining us now for more on all of those efforts is the CEO of Bed Bath and Beyond, Mark Tritton joining us here, alongside Yahoo Finance's Brian Sozzi as well. And Mark, a very interesting time to be having this conversation, but seems like an important turnaround here. I mean, annual sales have been down the last three years. How will this rollout help avoid a four-peat here?

MARK TRITTON: Well, we've been turning around the business, in true turnaround mode. We have our three-year plan that we articulated back in October of 2020. And we're really beginning to step into that plan and produce positive results. So quarter in, quarter out, we have been generating positive comps, inhibited by the COVID within a lot of our stores were closed. Now we're really freely operating and able to bring our strategies to life. And one of those key strategies is around creating an authority through our assortment, really led by our own brands that we introduced in the first quarter, three brands, and now three further brands in the second quarter, and as you said, in readiness for that all important back-to-college period.

BRIAN SOZZI: Mark, I promise you I have a product questions. Now you and I have talked a lot in the past. But never did I think I'd step up to the plate here and see your stock up 50% in one day. What are your thoughts on today's move?

MARK TRITTON: You know, I think regardless of the stock movement of an individual day, our role is to create sequential growth and strength by that balance sheet and our growth ratios. And we believe we're doing that. So we've embarked on a three-year plan, as I said. We feel great about our progress, which is beginning. But we're showing great signs.

I think today's activity is just a day in time, and doesn't affect us operationally. We are focused and ready.

BRIAN SOZZI: Mark, I actually think the shares are up close to 10% since you came on with us, in that short a period of time. It's fascinating to see this stuff. But you know, as the CEO of a company trying to lead a turnaround, do you get a little uneasy now that you are being looped in with companies that are not fundamentally sound, or companies like you, that have a lot of cash on your balance sheet?

MARK TRITTON: You know, it doesn't distract us, honestly, Brian. I think that while we see the gains that we can make over that one-, two-, three-year trajectory, we don't live in the day-to-day of the share price. We live in the day-to-day of the operations of our business. And we've got so much going on in this transformation, whether it's behind the scenes operationally, or where the customer sees it, in our stores, digitally, through our assortment, our services, that remains our focus.

And so I can honestly say this is not distracting us. We believe in our plan. We are ready with the execution. And that's the stuff we focus on.

AKIKO FUJITA: Having said that, Mark, a lot of retail traders excited about this name, as we see in the stock move. We were talking earlier about AMC President Adam Aron sort of saying, well, OK, if the retailers are getting in on our stock, we're going to double down. We're going to communicate with them. We're going to acknowledge it. We're going to try to create perks for them. I mean, how do you play this? Do you just stay the course on your strategy? Or at some point do you at least have to acknowledge where the trade's going?

MARK TRITTON: Look, if we take the example that we went through earlier in the year, we just stayed the course in the direction that we were going. And I think what this has actually forced people to do in that first round was go back and look at the fundamentals of our plan and the upside opportunity of this business, the reality check that we are going to deliver $850 million plus of EBITDA within a three-year period, that we have a great balance sheet, we have an incredible team, and we have a great strategy. And I think when people did that, those stocks really bounced back there very quickly and we became differentiated.

So as I said, these moments don't distract. They don't define us. But we consistently focus on that sequential growth.

ZACK GUZMAN: Yeah, it's interesting, because, you know, they don't, AMC seems like they're not really looking at a distraction either. They're looking at it as an opportunity here to get people to sign up, require them, if they're investor, to sign up for their rewards membership, AMC Stubs, to get some perks. You know, you guys cater to that back-to-college crowd. I'm sure a lot of this retail enthusiasm might be from college investors too. So it might be interesting to see some Bed Bath and Beyond partnership availabilities for investors there.

Not sure if you want to rule that out right now on this show, but alternatively to maybe accessing some of the stock moves, paying down debt as well, I mean, does that maybe factor into some of the short-term opportunities you as CEO could start to look at if share prices remain elevated?

MARK TRITTON: We constantly look at our return on capital investment. We have a really clear plan on where we're spending that. We look at our debt, which is, we've reduced incredibly over the last 18 months. We have a very balanced portfolio. We're watching these things. Again, we'll watch the machinations by day, but we have a clear plan that we're enabling, and we're staying the course.

BRIAN SOZZI: So Mark, on the own brands that you have launched, when should investors start to expect these higher margin products to show up in the business, just in terms of sales and in terms of profits?

MARK TRITTON: You know, sales are off and running, Brian, and doing incredibly well. It's great to see the reports every week that sees these new own brands feature in our top 10 items, both in sales volume dollars as well as units. And that's been pretty instant and the customers adopted these incredibly. That was in the first three. We now have three more.

The first and second quarter, really what I would categorize as transition quarters, where we're exiting key products from discretionary labels and underperforming items to then reset rooms and categories and introduce these new owned brands. And in doing so, we've got some exits and some entries. That really stabilizes within the second quarter and you see that second half of the year, as we've laid out in terms of gross margin expectations, where we see the fruit of our labor and that true gross margin benefit.

Sales are coming through now. The mix of margin will be incremental month by month and quarter by quarter.

BRIAN SOZZI: I am interested in a couple areas of your business, Mark, and see how they're performing, just based on the economy starting to reopen. How is your luggage business doing?

MARK TRITTON: You know, it's a smaller part of our business. We are starting seeing it kick back in. But for us, the shift has been to people wanting to be together. And that's inside the home, in the backyard, grilling, outdoor entertaining. That's been terrific for us. We have seen the love for the home as a place of comfort and style and support really not change. And that's really embedded, I think, as a muscle that, in people's memories, people love and value their homes and they're still investing in that in a continual way. So we're really excited about that.

Luggage for us, not a big reliant category, as we're truly a home retailer in that space.

BRIAN SOZZI: And there looks to be a summer wedding boom. And Bed Bath and Beyond really is top of mind for folks in terms of a registry. How is that part of your business doing?

MARK TRITTON: Yeah, it's starting to return. We have both the wedding registry in our Bed Bath and Beyond business and the baby registry at our buybuy Baby business, we're doubling down in those spaces. And we're seeing a tick back up into that, as we're also seeing, with our stores being open, and compared to last year, a resurgency in share growth. So we're excited about that momentum, very focused in those areas. And we believe that this is going to be a busy year for 2021 and 2022 for getting back to normal and recreating these really important life moments that we feature very highly in.

BRIAN SOZZI: You're also in the process, Mark, of remodeling a lot of stores. What's the consumer response after you do that? Do you see a sales uplift?

MARK TRITTON: We do see a sales uplift. It's preliminary at the moment, as we gradate how many stores we'll do. We'll do 150 over the full period of 2021. So we'll update you guys on a regular basis on how we're performing there. But we are seeing the lifts we anticipated. And we're very happy with that.

But to your point, Brian, the customer response has been terrific. They feel the store is actually has a wider assortment, a larger assortment, but it actually has 20% to 30% less. It's fresher. It's brighter. It's clearer, value, assortment, and differentiation all shine in a store like that. And the 360 omni experience between digital and stores is much, much clearer. So amazing initial response, good sales uplift in sales and gross margin. We're going to continue to track that and quarter by quarter update with more volume.

ZACK GUZMAN: Well, that customer excitement clearly there. But today, the investor excitement to go along with it, as shares still up more than 40%. Mark Tritton, appreciate you coming on here to chat and give us the update there. We'll have you back on hopefully soon to go through all these moves.

Mark Tritton, Bed Bath and Beyond CEO, alongside Yahoo Finance's Brian Sozzi. Thanks ag--