Bed Bath & Beyond has record gain as activist calls for sale

Bed Bath & Beyond Inc. shares had their biggest gain in 30 years of trading after Ryan Cohen’s investment firm RC Ventures disclosed a large stake in the retailer and asked that it consider a sale of the whole company.

The Union, New Jersey-based home-goods retailer jumped as much as 86 per cent on Monday after Cohen said Bed Bath & Beyond should consider selling itself to a well-capitalized buyer or sell its baby-products business. In a letter sent to the company’s board Sunday, RC Ventures said its executives received “outsized” compensation relative to its performances.

Bed Bath & Beyond said Monday it will carefully review a letter from RC Ventures pushing it to explore a sale, and hopes “to engage constructively” with the company. RC Ventures has a 9.8 per cent stake, making it the fourth-largest holder, according to data compiled by Bloomberg.

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Cohen, co-founder of Chewy Inc. and chairman of GameStop Corp., has had a strong following of retail traders who piled into shares of both the pet supplies provider and video-game retailer at the height of the coronavirus pandemic with consumers stuck at home. GameStop surged 688 percent last year and 210 percent in 2020.

Bed Bath & Beyond, a darling of so-called meme-stock traders, reported quarterly sales that missed estimated and reduced its outlook for sales and adjusted earnings per share for the current fiscal year when it released results in January. It had to increase prices and adjust its discount strategy due to freight and supply-chain headwinds.

Last year, it was one of the first retailers to show how a COVID-19 variant was affecting its supply chain, changing consumer behavior and eroding sales. It then announced an accelerated share buyback program and the launch of a new digital marketplace for merchandise from third-party producers.

Its shares had slumped 42 per cent in the prior 12 months, while the S&P 600 Consumer Discretionary Index was 9.7 per cent lower and the S&P 500 rose 13 per cent in that period.

Many Wall Street analysts aren’t convinced that a total sale of the company makes sense right now. Bed Bath & Beyond is facing challenges this year, including shoppers spending less money on home gadgets and accessories than they did at the start of the pandemic.

Simeon Gutman, an analyst at Morgan Stanley, said in a note Monday that RC Ventures’ pitch to value Bed Bath & Beyond’s Buy Buy Baby division like an e-commerce business seems “aggressive.” Guman has an underweight rating on the stock.

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