Bed Bath in Play…Act 2

Here we go again.

With activist investor Ryan Cohen’s big-time buy-in to Bed Bath & Beyond stock announcement last night and his aggressive push to make major changes at the retailer, BBB is facing the Barbarians at the Gate for the second time in three years.

Cohen, who made his big mark as the co-founder of online pet products retailer Chewy and is now running Reddit-darling GameStop, in a letter to BBB said the company should consider going private, spin off its BuyBuyBaby operation and, by the way, CEO Mark Tritton (above, at the reopening of the company’s Manhattan store in 2021) and his team make way too much money.

As expected the company came back with the standard response in these sorts of situations, saying, “We will carefully review their letter and hope to engage constructively around the ideas they have put forth.”

Wall Street, which loves a good fight like this, immediately jumped in and BBB stock is up some 50% this morning, topping $24 a share after languishing in the mid-teen range since the year began.

Cohen’s RC Ventures, according to an SEC filing, has taken a 9.8% stake in the company, making it one of its largest shareholders. Most BBB stock is believed to be held by institutions and investment firms.

In his letter, Cohen wrote, “We believe Bed Bath needs to narrow its focus to fortify operations and maintain the right inventory mix to meet demand, while simultaneously exploring strategic alternatives that include separating BuyBuy Baby, and a full sale of the company.”

The big home furnishings chain has seen its share prices ricochet over the past two years, initially surging with the arrival of Tritton, a new board and virtually a top-to-bottom overhaul of the company. Tritton has instituted a new merchandising strategy based on private label and direct sourcing of products, has sold off peripheral nameplates like Cost Plus/World Market and Christmas Tree Shops and is in the process of closing 200 Bed Bath stores. The stock has also been caught up several times in the same social-media feeding frenzy, ironically, as GameStop, spiking as high as $44 a share at one point.

But its recent lackluster performance, beset by supply chain issues and the transition to the new merchandising strategy, have resulted in two quarters of sub-par results. It is scheduled to release its critical fourth quarter and annual numbers later this month or early in April and those will be closely watched to see if recent results have been a blip or something more troubling.

It was several years of sliding performance that caused a group of outside investors to move in and demand changes back in 2019 that resulted in the new management and board.

And now it’s happening again.

What comes next is open to speculation. If other investors back Cohen it could result in a sale of BBB, either a go-private deal or to another company. The spin-off of the baby business – a nameplate that has been holding up well and is in a market sector still disrupted by the demise of Kids’R’Us several years ago – could be an attractive idea even as Tritton says it’s a core element to the overall corporation.

Or Cohen could be appeased by some board seats, perhaps a special buyback or dividend program or any of the other myriad tactics companies under siege use to fight off outside attacks. It’s certainly happened enough times before.

The other option could come when the fourth quarter numbers are released and they beat expectations, backing off those seeking changes. It will be a lot of pressure given the recent BBB stumbles are not necessarily easy to fix.

In the meantime the company is saying we’ve got this:  “Our Board is committed to acting in the best interests of our shareholders and regularly reviews all paths to create shareholder value. 2021 marked the first year of execution of our bold, multi-year transformation plan, which we believe will create significant long-term shareholder value.”

If only it were that easy.

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