Coupon use squeezes the profit margin
Besides the electric bill and new credit card offers, it’s probably the least surprising thing in your mailbox: a blueandwhite Bed Bath & Beyond coupon promising 20 percent off one item.
That little piece of paper is creating a big headache for the home furnishings giant, which has seen its profit margins squeezed as customers increasingly rely on the discount.
In the most recent quarter, Bed Bath & Beyond reported that its revenue rose 1.7 percent to $ 3 billion but profits fell 10 percent to $ 202 million, which company executives largely blamed on “an order of magnitude increase” in expenses related to coupons.
In otherwords, shopping with a coupon at Bed Bath & Beyond has begun to feel like a given instead of like a special treat, and that’s bad news for the chain’s bottom line.
“These are expected now by most shoppers,” said Seth Basham, a retail analyst atWedbush Securities. Plus, he added, “you canwalk in with a handful of them” and end up getting 20 percent off your entire purchase.
The coupon crush is just one problem that has contributed to the company’s stock tumbling nearly 25 percent this year. Analysts say that like many of its big- box store counterparts, Bed Bath & Beyond has struggled to adapt its sprawling brick- and- mortar chain for the e- commerce era.
The economics of bringing the home furnishings business online aren’t easy: Shipping costs can run high for bulky items. And, generally, “It’s a very low- margin business, and it’s difficult to differentiate” from competitors, said David Trainer, chief executive of investment research firm New Constructs.