Bed Bath & Beyond’s recovery hopes fade as Cohen hangs in

Bloomberg

Mark Tritton was supposed to be the savior for Bed Bath & Beyond Inc — a hotshot executive from Target Corp who knew how to charm customers with in-house brands and train stores on handling online and in-person orders.
But the chief executive officer never saw the fruits of his labour, and the home-goods retailer watched its sales melt away during the pandemic even as customers snapped up the same wares at nimbler competitors. One last dismal quarterly report was all it took, and Tritton was unceremoniously dumped.
Behind the scenes, activist shareholder Ryan Cohen, whose Reddit-reading fans had followed him into the stock, had grown fed up with Tritton’s performance and pushed the board to fire him, according to a person familiar with Cohen’s thinking. Cohen continues to believe the better-performing Buybuy Baby unit is a great asset and sees Tritton’s departure as a chance to undo a series of missteps over the last three years. The challenge, with the stock down 80% in the past 12 months and bond yields rising, is persuading other investors that Bed Bath & Beyond still has time to recover.
“They’re done. I mean, stick a fork in them,” said Anthony Chukumba, managing director at Loop Capital Markets, which has a sell rating on Bed Bath & Beyond shares. Sue Gove, a board member who was appointed interim CEO to replace Tritton, told analysts on a call that the company is aware of interest in the baby-products business and continues to evaluate its options.
The person familiar with Cohen’s thinking said he believes the company needs to narrow its focus, reduce spending and get back to catering to customers’ core demands and focus on national brands — rather than pushing expensive private labels. Cohen thinks Tritton was the wrong CEO with the wrong strategy, the person said.
Tritton, now 58, was a superstar at Target when Bed Bath & Beyond hired him in late 2019 after settling with a trio of activist investors who criticised it for failing to adapt quickly to online shopping. He had been the architect of Target developing more than 30 new private brands in areas like apparel and home decor, which seemed to fit well with Bed Bath & Beyond’s goal of taking back market share from the likes of Amazon.com, Wayfair and TJX Cos’ HomeGoods.
His task was straightforward: reverse a deep sales slump. But despite the pandemic driving a surge in demand for spruced-up living spaces, Bed Bath & Beyond has reported declining year-over-year sales in every quarter but one since the end of 2018. Profitability has also suffered. In the past three quarterly losses, analysts didn’t foresee two of them and most recent one was twice as steep as they had expected. The odds are even longer now as Bed Bath & Beyond attempts to return to profitability while contending with rapidly changing consumer habits and the highest US inflation in 40 years.
Like other retailers, Bed Bath & Beyond is also suffering from a glut of unwanted stuff. Most of that is private-label products, executives said on the earnings call. The company will need to mark down items to clear out excess inventory, which will put pressure on profit margins.