Bed Bath & Beyond Stock Soars Higher on Real Estate Deal

Written by: Michael Harris
January 6, 2020
  • A sale-leaseback real estate agreement provides Bed Bath & Beyond with capital injection
  • Shares trade more than 5% higher in New York today
  • New CEO Mark Tritton has set his sights on transforming the challenged retailer

Shares of Bed Bath & Beyond (NASDAQ: BBBY), a US-based chain of domestic merchandise retail stores, soared more than 5% today on the announcement that it had completed a sale-leaseback transaction worth $250 million.

The deal, agreed upon with the Chicago-based real estate firm Oak Street Real Estate Capital, targets around 2.1 million square feet of commercial space, including a distribution facility, office space, and retail space, the company said in a press release.

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“We are pleased to complete this sale-leaseback transaction. This marks the first step toward unlocking valuable capital in our business that can be put to work to amplify our plans to build a stronger, more efficient foundation to support revenue growth, financial stability and enhance shareholder value,”

said Mark Tritton, Bed Bath & Beyond’s new President & Chief Executive Officer.

The plan is to reinvest the proceeds in its core business and transformation efforts, as well as fund share repurchases, and to reduce outstanding debt.

Bed Bath & Beyond currently has around 1,500 shops in total, including Buy Buy Baby and Harmon drugstores. The company has initiated a transformation phase under the new CEO Mark Tritton, who previously held the role of CMO at Targett, as it attempts to recover its business growth.

Similarly to other companies, Bed Bath & Beyond has faced challenges following the increased presence of Walmart and Target, and especially Amazon. The real estate deal will bring more liquidity to the business, but will also increase the costs as the company will start paying rent now.

In October, the company reported its Q2 financial results, for which the sales were reported to be at $2.72 billion, slightly lower than market expectations of $2.752 billion. In addition, Bed Bath & Beyond failed to match analysts estimates to same-store sales as it reported -6.7% versus the expected -5.4%.

On the other hand, the retailer posted adjusted earnings per share of $0.34, compared to $0.27 expected by the market. The company is set to report quarterly earnings on Wednesday.

Shares of Bed Bath & Beyond have risen more than 40% since the beginning of 2018.