Case 1: BED BATH & BEYOND’S PLAN FOR GROWTH

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(source: Retail Management: A Strategic Approach 11th Ed., Berman & Evans)

Case 1: BED BATH & BEYOND’S PLAN FOR GROWTH

Bed Bath & Beyond (BB&B, www.bedbathandbeyond.com), the power retailer of domestics and home furnishings, has annual sales of $7 billion and a net income of $562 million. The firm’s profitability can be explained by its increasing gross profit margins at the same time it decreases selling, general, and administrative (SG&A) expenses as a percent of sales. BB&B is able to increase its gross profit margins due to its excellent atmosphere, wide assortments, and a deep variety within most merchandise lines. Its control over SG&A expenses is partly due to the outsourcing of its distribution centers to a third party.

BB&B has opened hundreds of stores over the last few years, ranging in size from 30,000 to 80,000 square feet. Because it uses a flexible real-estate strategy, BB&B is able to situate in a variety of locations. BB&B is now also being allowed into large shopping centers. In the past, department store anchor tenants blocked BB&B. In 2004, BB&B had about 630 stores with a total of 20.5 million square feet of store space. By the end of 2008, these numbers had expanded to nearly 1,000 stores with 31 million square feet of store space. Its long-term goal is to operate 1,300 stores. In addition, BB&B plans to remodel and expand many existing stores.

In 2003, BB&B purchased Christmas Tree Shops (www.christmastreeshops.com), a chain of stores specializing in giftware and household items. Although the Christmas Tree Shops’ name suggests that it concentrates on Christmas merchandise, the chain is positioned against Pier 1 (www.pier1.com). In March 2007, BB&B acquired buybuyBABY (www.buybuybaby.com), a retailer specializing in infant and toddler merchandise. In December 2007, BB&B opened its first foreign BB&B store in Ontario, Canada. In May 2008, BB&B purchased a 50 percent equity interest in Home & More, a

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