Bed Bath & Beyond and Snap both announce plans to lay off 20% of staff

Retail chain Bed Bath & Beyond and social media firm Snap both announced major layoffs on Wednesday, as high inflation and a sagging economy hammer large US companies. 

Bed Bath & Beyond, which has become the latest meme-stock darling for small traders on Reddit,  announced plans to close 150 stores of its roughly 900 and lay off 20 percent of corporate and supply chain staff.

The big-box chain – once considered a so-called ‘category killer’ in home and bath goods – has seen its fortunes falter, with CEO Mark Tritton fired in June after sales plunged 25 percent in the first quarter. 

The company hired Sue Gove, an independent board director, to replace him on an interim basis.

On Wednesday, Gove said the retailer was ‘continuing to see significant positive momentum’ and intended to build its ‘deep heritage as a retailer.’ 

‘While there is much work ahead, our road map is clear and we’re confident that the significant changes we’ve announced today will have a positive impact on our performance’ she said on a conference call. 

Shares of Bed Bath & Beyond dropped sharply on Wednesday following the news

The retailer also announced a plan to raise money by issuing new shares and said it had secured $500 million in new financing — but investors took a dim view of the strategic plan, and shares fell as much as 25 percent in morning trading.

Traders on the Reddit forum WallStreetBets, who have cheered the stock in recent weeks, reacted with a mixture of stoicism and despair.

‘I just wanted make money without any effort. why I have to suffer like this? why?’ wrote one user on the forum. 

Sue Gove took over as interim CEO of Bed Bath & Beyond earlier this year

In Wednesday’s update, Bed Bath & Beyond also forecast a bigger-than-expected 26 percent slump in same-store sales for the second quarter and said it would retain its buybuy Baby business, which it had put up for sale.

The efforts to sell buybuy Baby had been encouraged by GameStop Chairman Ryan Cohen, the company’s biggest investor until this month when he sold out of his 9.8 percent stake, sending shares plummeting.

Once known for providing many shoppers with 20%-off coupons, Bed Bath & Beyond revamped its merchandise in recent years to focus on private-label products including its Our Table brand cookware.

The chain is now ditching that strategy, nixing three of its private label brands, and reprioritizing national brands with labels including Calphalon, Ugg, Dyson and Cuisinart underpinning that strategy, executives said on a conference call.

Executives said Bed Bath & Beyond is cutting about 20 percent of its corporate and supply chain workforce, and eliminating its chief operating officer and chief stores officer roles. The company has about 32,000 employees overall.

Meanwhile, Snap CEO Evan Spiegel told staff in a memo on Wednesday that ad sales were not keeping up with earlier projections and announced plans to reorganize and cut roughly 20 percent of the company’s 5,600 employees. 

Snap CEO Evan Spiegel told staff in a memo on Wednesday that ad sales were not keeping up with projections and announced plans cut staff by roughly 20 percent

‘Unfortunately, given our current lower rate of revenue growth, it has become clear that we must reduce our cost structure to avoid incurring significant ongoing losses,’ Spiegel wrote. 

Snap will shut down ambitious projects, including mobile games and novelties like a flying drone camera, helping the company save an estimated $500 million in costs annually, the company said.

Investors approved of the move, with shares of Snap rising as much as 15 percent in morning trading. 

Spiegel said Snap was restructuring its business to focus on community growth, revenue growth and augmented reality. 

Anything that doesn’t contribute to those three areas ‘will be discontinued or receive substantially reduced investment,’ Spiegel said.

Last fall, Snap said its ad sales were being hurt by a privacy crackdown that rolled out on Apple´s iPhones, which raised investor fears about the app´s potential for growth. 

Most social media platforms rely heavily on advertising revenue, one reason that Facebook has been an outspoken critic of Apple’s recent changes to privacy controls.

Shares of Snap rose on Wednesday as investors signaled approval for the cost cuts

Since Snap posted its first-ever profitable quarter in the last quarter of 2021, there has been little good news from the company.

On May 24, Snap shares lost nearly half their value, falling 43 percent after the company said in an SEC filing that the ‘macroeconomic environment has deteriorated further and faster than anticipated’ and that it would not meet its own sales and profit targets in the period. 

Shares tumbled another 39 percent on July 22, a day after Snap posted quarterly results that fell short of projections.

Snap’s staff has grown to more than 5,600 employees in recent years and the company said even after laying off more than 1,000 people, its staff will be larger than it was a year ago.

Snapchat is a video messaging platform that automatically deletes posts after they’ve been viewed by recipients.

Like most other social media companies, Snap boomed during the pandemic when workers and students spent longer hours online at home. Snap shares peaked in late September of 2021 at more than $83 per share.

Snap shares gained about 10 percent in midday trading on Wednesday, to $11 per share, after the layoffs were reported.