Shares of Bed Bath & Beyond rose by more than 65% in premarket trading on Monday after it was learned that activist investor Ryan Cohen bought a 10% stake in the company.
Cohen, the CEO of video game retailer GameStop and the co-founder of online pet store Chewy, bought a piece of the domestic merchandise chain through his investment firm, RC Ventures.
In a letter to the Bed Bath & Beyond board, Cohen blasted the company’s performance under the leadership of CEO Mark Tritton. The letter was first reported by The Wall Street Journal.
Cohen, whose estimated net worth has been valued at $2.1 billion, also called for major changes to the corporate structure, including the selling off of the store’s Buy Buy Baby division and then selling the whole company to private equity.
“We have carefully assessed Bed Bath’s assets, balance sheet, corporate governance, executive compensation, existing strategy and potential alternatives,” Cohen wrote in the letter to the board.
“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.”
Cohen said the retailer was “struggling to reverse sustained market share losses” and had failed to “stem years-long share price declines and navigate supply chain volatility.”
Despite the poor performance, per Cohen, the company’s top executives were given around $36 million in compensation last fiscal year — “a seemingly outsized sum for a retailer with a nearly $1.6 billion market capitalization,” he 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 Buy Buy Baby, and a full sale of the company,” wrote Cohen.
Bed Bath & Beyond released a statement in response to Cohen’s note.
“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,” the company wrote.
“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.”