Bed Bath & Beyond Inc. Q3 FY2025 earnings call

• Completed name change back to Bed Bath & Beyond, a brand with deep consumer connection. - Seventh consecutive quarter of measurable improvement towards achieving profitability. - Year-over-year, net loss improved 93%, adjusted EBITDA improved 85%, gross margin up 420 basis points. - Strengthened foundation by investing $3 million in GrainChain, acquiring Kirkland's home intellectual property for $10 million, and raising ~$113 million through ATM. - Place greater emphasis on data-driven decisions, faster technology and customer-focused solution-based experiences. - Enhance technology and analytics team, combining internal talent with external experts. - Intend to broaden connection with customers by focusing on home-related aspects. - Omnichannel transformation progressing, expect all 250 locations converted by mid-2026 with local franchise model. - Identified $20 million in additional operating expense efficiencies to realize over 2026, targeting 12% marketing expense in 2026. - tZERO and GrainChain making steady progress; tZERO exploring public market listing potential. - Integrate AI-driven strategies to improve customer experience and platform efficiency.

Net revenue for the third quarter was $257 million, down 17% year-over-year or 13% excluding the impact from exit from Canada. Average order value improved 3% driven by focus on assortment. Gross margin was 25.3%, up 420 basis points year-over-year. Sales and marketing expense improved by 260 basis points to 14% of revenue. Technology and G&A expense declined by $13 million year-over-year. Net loss narrowed by to $4.5 million, a 93% improvement year-over-year and adjusted EBITDA loss of $4.9 million improved 85%. Ended the quarter with $202 million in cash equivalents and inventory, plus $36 million from ATM settlements post quarter end.

• Expect positive revenue growth in 2026. - Intend to convert all 250 locations to local franchise model by mid-2026. - Expect to realize $20 million in additional operating expense efficiencies in 2026. - Target 12% marketing expense ratio in 2026. - Focus on expanding Everything Home ecosystem, deepening AI and data integration, maintaining margin discipline, and driving top line and bottom line improvement.

• Uneven consumer confidence in spending patterns may impact business. - Uncertainties such as tariffs may affect suppliers and costs. - Risks associated with technology transformation and implementation. - Potential risks related to data and customer experience management.

Q: Steven Forbes asked about targeting the 12% sales and marketing expense ratio in 2026, including efficiencies and growth narrative relation to active customer base.

A: Marcus Lemonis broke down by growth mindset, recognizing past inefficiencies in conversion and data, and discussed importance of clean data, personalization, and performance marketing.

Q: Francesco Marmo asked about expected revenue growth in 2026 and driving initiatives.

A: Marcus Lemonis stated they commit to positive revenue growth in 2026, involving balance of asset-light model, exploring new categories, merging merchandising organizations, and improving conversion.

Q: Jonathan Matuszewski asked about supplier price pass-on and AI automation in customer service.

A: Marcus Lemonis talked about supplier pricing pressures, need to eliminate unprofitable SKUs, and AI's role in staffing efficiency and better customer experience.

Q: Bernard McTernan asked about timeline of personalization tools coming to Bed Bath and revenue trend.

A: Marcus Lemonis discussed the transition at Overstock, learning from it, and plans to ensure stability before applying to Bed Bath, with focus on conversion and growth metrics.