Beyond disappointing.
That's the overarching theme behind a scathing new note from GameStop Chairman Ryan Cohen to the board of Bed Bath & Beyond (BBBY). The Chewy billionaire turned wanna-be-savior of once proud retail organizations has disclosed a 9.8% stake in Bed Bath & Beyond.
Cohen says Bed Bath & Beyond's execution under CEO Mark Tritton has bordered on terrible, compensation is not realistic and the business should be split up (Buy Buy Baby business sold off) and then sold in entirety to financial sponsors (aka private equity).
"We have carefully assessed Bed Bath’s assets, balance sheet, corporate governance, executive compensation, existing strategy and potential alternatives. While we like Bed Bath’s brand and capital allocation policy, we have concerns about leadership’s compensation relative to performance and its strategy for reigniting meaningful growth. Approximately 18 months after releasing a 170-page cover the waterfront plan, the Company is struggling to reverse sustained market share losses, stem years-long share price declines and navigate supply chain volatility. Meanwhile, the company’s named executive officers were collectively awarded nearly $36 million in compensation last fiscal year — a seemingly outsized sum for a retailer with a nearly $1.6 billion market capitalization," Cohen said in a letter obtained by Yahoo Finance.
Cohen believes Bed Bath & Beyond could unlock billions in shareholder value by narrowing its focus and selling itself in parts.
Bed Bath & Beyond shares surged 60% in pre-market trading Monday, in the wake of the surprise disclosure.
A representative for Cohen declined to make him available to Yahoo Finance for an interview. Bed Bath & Beyond declined to comment to Yahoo Finance on the report Sunday evening.
"Bed Bath & Beyond's Board and management team maintain a consistent dialogue with our shareholders and, while we have had no prior contact with RC Ventures, we will carefully review their letter and hope to engage constructively around the ideas they have put forth. 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," Bed Bath & Beyond said in a statement before Monday's opening bell.
Nonetheless, talk about a way to start the week for Tritton and Bed Bath & Beyond's 11-person board of directors.
While Cohen (and his new CEO) still hasn't publicly articulated a plan to investors at GameStop to save that struggling retailer (besides an NFT marketplace launch), he does make valid points on Bed Bath & Beyond.
Bed Bath & Beyond's once promising turnaround has hit a brick wall as the company has confronted pandemic-driven supply chain challenges and issues executing on a sweeping plan to remake the store shopping experience. A decision several months to pullback on coupons was not well-received by consumers.
And all of this has shown up in Bed Bath's financials and communication to Wall Street. Sales for the just completed three-month period plunged 28% year-over-year. Adjusted operating profits fell $80 million from a year ago. When the company reported its results in early January, it outlined current quarter adjusted earnings of $0 to $0.15. The Street at the time was looking for $0.70.
The stock has plunged 63% from a 52-week high on June 2 (before Monday's reaction to Cohen's involvement).
"It's going to take a lot more than coupons to save Bed Bath & Beyond," said Bank of America analyst Jason Haas.
Cohen couldn't agree more.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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