CEO Mark Tritton has been staging a turnaround at Bed Bath & Beyond. Shares of the company have risen 11% so far this year, as of Friday’s close.
Justin Sullivan/Getty Images
Bed Bath & Beyond stock doubled in premarket trading Monday after GameStop Chairman Ryan Cohen took a big stake in the home-goods retailer and urged it to explore strategic alternatives, including a full sale of the company.
Cohen, who co-founded online pet products retailer Chewy (ticker: CHWY) owns a 9.8% stake in Bed Bath & Beyond through his investment firm, RC Ventures LLC, according to a letter sent to its board Sunday. That makes him a top-five shareholder in the New Jersey-based chain, which is valued at around $1.6 billion.
Shares in Bed Bath & Beyond (BBBY) leaped more than 110% to $34 Monday, which, if the gains hold, would be its best day on record. The stock has dropped 47.76% in the past 12 months as of Friday’s close.
Bed Bath & Beyond said that it will “carefully review” the letter from RC Ventures and hopes to “engage constructively around the ideas they have put forth.”
“2021 marked the first year of execution of our bold, multi-year transformation plan, which we believe will create significant long-term shareholder value,” the company said in a statement on Monday.
Under chief executive Mark Tritton, Bed Bath & Beyond has been staging a turnaround, introducing a number of private-label brands in the past few months, but it has come under pressure from rising inflation and ongoing supply-chain issues.
Cohen wrote in the letter that the company’s “scattershot strategy” is failing to end the stock’s “tailspin”, noting that core sales dropped 14% from a year ago in the most recent quarter.
“These results cannot be solely blamed on the pandemic when other retailers are nearing or exceeding 2019 sales levels. That is why we feel compelledto scrutinize the viability of the Company’s extremely ambitious and widely-touted strategy,” Cohen wrote.
He urged the company to narrow the focus of its turnaround plan and maintain the right inventory mix to meet demand, and consider separating its Buybuy Baby chain or selling the whole company, which he said could be better off owned by private equity.
Bed Bath & Beyond should also better align leadership compensation with results, Cohen wrote. He added that he is focused on the long-term and won’t criticize management for laying the foundation for future value creation.
Wedbush analyst Seth Basham agrees with the general tone of the letter, if not all the details. He takes issue with the valuation of buybuybaby, which Cohen puts at multiple billions, but Basham argues is worth well over $1 billion. Yet the problems facing Bed Bath & Beyond, including declining market share and supply chain issues, are very real. “
“BBBY needs to prove that it can stop losing market share and grow comparable-store sales as home furnishings category sales normalize, something we view as challenging,” writes Basham, who leaves his rating at Neutral on the stock.
The letter was first reported by The Wall Street Journal.
Write to Lina Saigol at [email protected]
