Bed, Bath & Beyond (BBBY) shares soared Monday after an investment group backed by GameStop (GME) chairman and Chewy.com founder Ryan Cohen, revealed a 10% stake in the home furnishings retailer.
RC Ventures LLC wants Bed, Bath & Beyond to consider several strategic alternatives to boost the value of its shares, which have fallen 36% over the past six months, including the sale of the group's stand-out buybuyBaby division, which posted solid comp sales growth and a 35.9% gross margin over three months ending in December.
"We believe Bed Bath needs to narrow its focus to fortify operations and maintain the right inventory mix to meet demand," Cohen wrote to the Bed, Bath & Beyond board, adding that it should also consider a full company sale.
"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 said in response to RC Ventures.
"Our Board is committed to acting in the best interests of our shareholders and regularly reviews all paths to create shareholder value," the letter added. "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 shares were marked 55% higher in early trading Monday to change hands at $25.00 each.
"Fundamentally, results and our data have pointed to material challenges for Bed, Bath & Beyond, based on softer industry trends and market share losses," saud KeyBanc Capital Markets analyst Bradley Thomas.
"While RC Ventures' position and the value of buybuyBaby could help support shares, we remind investors that many of the aspects of Sunday’s letter echo those called for by activists in 2019, which already resulted in a turnover of the majority of the board and the management team as well as the divestiture of many assets."
