Activist investor Jonathan Duskin at Macellum Capital Management fought a failed management team at Bed Bath & Beyond and won big in 2019.
Duskin — whose successful campaign led to a board overhaul and ultimately the addition of current Bed Bath & Beyond CEO Mark Tritton — tells Yahoo Finance Live what GameStop Chairman Ryan Cohen is doing with the home goods retailer makes sense.
“Ryan has a great following and is very well respected,” Duskin says. “I think we’ve articulated there is a lot of value in Buy Buy Baby for a long time. Remember, Baby was struggling when Mark and the board stepped in. They did a good job of turning it around. And now they have plans to grow the footprint significantly. So Baby is a tremendous asset. They definitely have to do something more to monetize that.”
Enter Cohen.
The Chewy billionaire turned wanna-be-savior of once proud retail organizations disclosed a 9.8% stake in Bed Bath & Beyond on Monday.
Cohen says Bed Bath & Beyond’s execution under 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 34% to $21.72 on the session.
A representative for Cohen declined to make him available to Yahoo Finance for an interview. Bed Bath & Beyond declined to comment 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.
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).
Added Duskin (who is now waging a campaign against bumbling Kohl’s management), “I am sure the board will listen to Ryan. I think he [Tritton] is doing a good job. He has hit some speed bumps, but I believe they are well on their way to achieving what they laid out last year.”
Duskin is open to working with Cohen on Bed Bath & Beyond.
“I don’t know Ryan. He seems like a smart guy. He seems very successful. Always happy to listen and see if there is an opportunity to work with someone,” Duskin added.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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