Bbb Case Study

Intro

This case study was written in 1994

Leonard Feinstein and Warren Eisenberg founder BBB in Springfield, NJ in 1971.

initially 14 years were sluggish, then in 1985, they started to open huge stores...like the ones in the city.

BBB is now expecting $415mm in sales/revenue -- an increase of 35% from the last year (which was $306mm). Earnings are expected to grow $28mm(or 82 cents per share) -- from $22mm(64 cents last year).

Question is, how long can BBB maintain this growth? Rising interest rates, and housing bubble means fewer house purchases or house starts -- which means less business for BBB. Competition is also coming in from Linen and Things and a few other upstarts.

Some are selling shares, including the founders.

Despite, the stock market is still in favor of BBB.

At one point, BBB asked suppliers to run with extended payment schedule. This suggested that BBB is not doing well financially. And hence BBB’s stock price fell by 10%, right after this news was revealed by Norton in Barron’s. Still the analysts stood behind BBB and said it’s a BUY.

Company Background

Feinstein and Eisenberg founded “Bed n Bath” in 1971 in NJ. Initially they used to sell linens and bath accessories in NJ/NY area. In 1985, they shifted towards a superstore format selling both, domestic merchandise, as well as home furnishings. They renamed to store to BBB.

The growth of BBB increased in two ways...the number of stores, and size of stores. By 1994, when this article was written, they had 49 stores of which only 4 were not superstores.

BBB’s strategy

provide value by carrying name-brands at low prices. prices were 40% below stores prices.

The superstore format allowed them to grow both, in depth and breadth. They had 30,000 SKU’s by 1994

provided excellent customer service -- while selling and while returning even.

The success of BBB allowed them to complete its IPO in 1992

Industry and Competition

In 1993, the domestic and houseware industry was...