On this episode of Yahoo Finance Presents, Bed Bath & Beyond CEO Mark Tritton sat down with Yahoo Finance's Brian Sozzi to discuss the remodeling of their 6th Avenue store in New York City, as well as the future remodeling of all of their stores, labor supply, sales numbers, and the future of the company.
BRIAN SOZZI: Joining us for our latest "Yahoo Finance Presents" is Bed Bath Beyond CEO Mark Tritton. Mark, good to see you in person for a change.
MARK TRITTON: I know, Brian. After all this time, we're actually here in the flesh.
BRIAN SOZZI: Yeah, I can't believe you exist and, of course, I still exist.
So listen, we are sitting in your newly remodeled 92,000 square foot New York City store. When did this remodel begin?
MARK TRITTON: You know, back in December 19. , remember the journey. Just after I joined, we came in here with the owners that were talking about our lease being up, what did we want to do. And we've been in this store in this space for 30 years servicing Chelsea, servicing New York with both local residents and tri-states and tourists. So this is an important landmark destination and a landmark building.
So in our 50th year, we remodeled the store, we started talking about in December. We begin our plans. COVID hit. We still believe in New York, we still believe in this space. We continued. So it's an iterative process. We closed the store in December 31 at the end of 2020. And then we spent the last six, seven months remodeling. So here we are.
BRIAN SOZZI: You spent time. You were an executive at Nostram, executive at Target. What did you think about when you walk through the store, you haven't seen a remodel really in 30 plus years, how do you go upon redesigning it?
MARK TRITTON: You know, I think it's about the customer experience and the customer journey of who we want to be and what is the easy evolution of the business. And I think that the store we inherited here was incredible. It was large, but it was a pretty daunting experience, if I can call it that. It was more like a warehouse.
BRIAN SOZZI: You put it nicely.
MARK TRITTON: Yeah. Well, everyone remembers. It was dark, it was jam packed with merchandise. It was kind of a bit of a bizarre, and that was fun, but it really wasn't standing for the brand that we wanted to create. So really thinking about how to modernize the experience, and that starts with creating an omnichannel experience here in the store. So it's about the physical and the digital merging. But let's celebrate the home. Let's make home happier and celebrate rooms, categories that we dominate and the customers expect from us.
Behind us here, an incredible bath area like you'll see nowhere else in New York. Bed, kitchen, storage, and all, health and beauty, indoor decor, this store has it all. And the physicality of everything from the lighting, to the floors, to the fixtures, to the layout, and the details, much more residential, much more modern. And so customers are able to envision themselves in their own homes, as opposed to shopping off shelf and then trying to work it out later.
BRIAN SOZZI: Where did the racks go? I walked in here, I stood at one end of the store and I saw the other end of the store.
MARK TRITTON: Yes.
BRIAN SOZZI: Bed Bath Beyond known for their really high racks and you can't see anything.
MARK TRITTON: No. I mean, 92,000 square feet is a lot. Opening it up and having sight lines from front to back and creating that sense of discovery in a store was really important. So light, bright, fresh, great signage, great value signage, but experiential shopping. And I think that people are so hungry to look and touch and feel and kind of just wander and find things in store. And we really wanted to play off that.
BRIAN SOZZI: There are a couple of different elements in here. You have a SodaStream shop.
MARK TRITTON: Yes.
BRIAN SOZZI: You have buy online, pick up at the front of the store. You have scan and go. What are some of the other innovations?
MARK TRITTON: You know, I think the omni stuff is really important, that you can take out your phone and you can literally shop and scan or use it as a map, or we have a great coffee shop. You can stop and have a great cup of coffee here. You can actually check menu on your own phone beforehand if you want.
But we've got things like you know Nespresso, as you said, SodaStream. We've got a really cool innovation in our vacuum areas. So I've worked with vacuum cleaners for a long time and customers always say, I can't take that off the rack. I can get the box easily, but what am I actually buying here? And it's a big ticket item. We actually have an experience space. Carpet, dirt, and great vacuum cleaner assortment. You can pick them up, they're plugged in. You can see what's the weight of this, what's the power of this.
BRIAN SOZZI: I'm going to try this out, you realize?
MARK TRITTON: I know. It's super cool. But I think this idea of more experiential and more in-home expectations of how a customer shops and wants to reiterate what the product is really important. I think coming down here, we have the Casper shop, you can lie on a bed, you can test it out.
BRIAN SOZZI: Part of a new deal, you just struck a new deal with Casper.
MARK TRITTON: Absolutely. I think the first ever in-store, major in-store presentation in the US. Think about bed, think about sleep, think about us, and think about Casper. It's a natural progression. So here we have a full assortment of Casper, but it's also experiential. Pillows, pet beds, mattresses, you name it.
So the idea that you can come in, you can touch, you can feel, and you can experience, and find that easily and navigate and discover in the store is really important to us.
BRIAN SOZZI: 92,000 square feet. I imagine, to lease the store is not cheap.
MARK TRITTON: No.
BRIAN SOZZI: Why are you so confident New York comes back?
MARK TRITTON: We never doubted it, we really didn't. I think that it's not a vanity project, it's not about we have to have this flagship to kind of put a stake in the ground like a castle like a lot of retailers used to do. We have a thriving business here in New York. We have a thriving Chelsea business. We have a thriving New York business.
BRIAN SOZZI: So you have four stores. With this, you have what? Three other stores?
MARK TRITTON: Yes. We have Tribeca, we have Lincoln Center, we have Kips Bay, and the store here. And we'll look at the total real estate across New York over time. But this for us was a landmark store for our customer and for the space. I think the area of Sixth Avenue Arena is definitely home-orientated and it's a great destination space. Whether you're a college student or an apartment dweller, this is the place to come. So we wanted to be here.
BRIAN SOZZI: How much will this store make in terms of sales in a year?
MARK TRITTON: A-ha, there's a surprise. I would say to you it runs five to seven times, our average suburban store, it's that big. And so, there was a revenue hit there, but it has to be profitable, it has to make money. And that's what we've been focused on all the way in. And so, we will have maybe a few more of these across the country in the right markets where we have the right real estate where we can fully express the ultimate expression of the brand, like a hub and spoke. But there won't be anything like Chelsea.
BRIAN SOZZI: So you are also remodeling 450 stores, what components from this store will be in those stores?
MARK TRITTON: Yeah. Look, I think this is really emblematic of the 450 stores we're going to remodel. We've already started that process, they're off and running doing very well, exceeding our expectations on both ROIC and the sales and margin. But what you'll see is these open sight-lines, this sort of a more residential feel. Sight-lines being brought down, actually a curation of the assortment, about 20% to 30% less product in the store than there was traditionally.
And a celebration of great national brands and their own brands to differentiate and create exclusivity. So I think better lighting, better freshness, better ease, and this sense of discovery again at Bed Bath and Beyond.
BRIAN SOZZI: Can you get enough workers to work on this store? This is a two-level store, there's a lot of different shops, how many people working here and how have you been able to find the talent?
MARK TRITTON: Yeah. About 350 people work here on rotation. We have been able to find staff here. I think we've pulled from all our best talent across the business, as well as we've recruited brand new talent. But people are still passionate about working in retail and working in a great environment. And this is a beautiful environment to work in.
But we're a company that has focused a lot on being people-powered and how do we invest in team members and their experiences, as well as their benefits. And I think just creating a community for our associates that they can believe in and belong to has been really important. So yeah, we have the team.
BRIAN SOZZI: What you you've pulled off with this store, it really is impressive. It is a different representation of the company. Does it make you rethink closing 200 stores over the next three years?
MARK TRITTON: No, we feel really solid about that. I mean, I think that we always talk about when we all came into the business, we had a 1.0 version of Bed Bath. And it serviced us for a very long time in a very great way, but it wasn't relevant in all its elements, whether it be supply chain, IT, product, and definitely the store's definition. Those stores were built, placed, and run in a pre-internet world.
And so even prior to COVID, we saw an opportunity where we're either not making money in specific stores or we were crossing over in the DMA's that we operated. And a chance to calm that down and refocus for potential reinvestment in other markets is really essential. So we don't regret that at all. We continue to monitor the effectiveness of our stores. I think that the industry is still coming out of the COVID moment, we'll still iterate, we'll still look at that math. But we feel really positive about that initial decision.
BRIAN SOZZI: There's a lot going on at Bed Bath and Beyond. You're remodeling a 92,000 square foot store, 450 other stores, and oh yeah, you're also trying to find labor and fight off inflation. How do you prioritize what to do?
MARK TRITTON: Look I have an unbelievable team, both in my leadership team and below. And we work really collaboratively together. We're doing a lot, I won't doubt it. We've really put a lot on the agenda. There's a lot of sweat going in there, but we sit down every week, every month and we look at our priority listings. And how do we say no to some things and stay focused on the prize.
We built a three year plan, in which we communicated in October 2020 that is going to see us through for our growth. We think we're going to be absolutely able to hit that plan, and that's through the prioritization we've created to deliver. There'll be incremental ideas and incremental drive. We'll look at that judiciously, but we stay very focused with agility on that plane, delivering that plan, which included the remodels and this fantastic store.
BRIAN SOZZI: What inning are you in in the turnaround?
MARK TRITTON: Oh, this is a good question.
BRIAN SOZZI: I think you told us maybe third or fourth inning last time.
MARK TRITTON: You know what? I'm going to stop you there because I'm Australian and people start talking about innings, that's not my strong suite.
BRIAN SOZZI: Fair enough.
MARK TRITTON: But I'd say it's a relay race. We're at the very south of the relay race. We've done the pre-training, we've grouped our team together, we've done the work outs, and we're about to hand off that first baton. So we still have a journey. We're in our second quarter of a three year plan. We're on track, we're happy with where we're at. But we're really-- I'm giving you another sports analogy.
BRIAN SOZZI: Fire away.
MARK TRITTON: But we're in the beginning. And so for us, we feel really great about our start at the foundation that we're laying for this house and that good things lie ahead.
BRIAN SOZZI: How would you grade consumer spending right now?
MARK TRITTON: You know what? I think I would give it a solid B. The only reason why I say that is I think there's energy and excitement, but there's also a new world out there. People are starting to experience summer and being together. I mean, you're here for the first time. People are doing things for first. People are going out and they're, I think, traveling, shopping for experiences.
There's been a strong pivot to that. I think that's a moment in time. We have a really interesting time coming up, back to school, back to college. Back to college for us, big business. It's a time we have that people have to get real. And we have another freshman and sophomore year who are both starting off for the first time, it's really unique. I think we're starting to see the signs of people really doubling down and going, OK, I want to get my next phase of my life in order. But people will always be spending on their home, refreshing and building. But I think people are continuing to build confidence and build confidence in the right area.
BRIAN SOZZI: It's amazing, I'll say, what you've managed to do in a short period of time. I will let you be, I know you have to walk around the store and I need a $5 towel.
MARK TRITTON: There's one right over there.
BRIAN SOZZI: I know, yes there is. I'm looking at it right now. Mark Tritton, good to see you.
MARK TRITTON: Thank you, Brian.