Bed Bath & Beyond turnaround strategy not practical, says Chewy co-founder

on Mar 8, 2022
  • Chewy co-founder Ryan Cohen wants Bed Bath & Beyond to streamline its turnaround strategy
  • Cohen holds 9.8% interest in Bed Bath & Buy via RC Ventures
  • Splitting Buybuy Baby retail chains or selling entire company right move

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Chewy Inc. (NYSE: CHWY) shares are up 2.91% after following reports that the online pet-offerings retailer’s co-founder, Ryan Cohen, is pushing Bed Bath & Beyond Inc. (NASDAQ: BBBY)  to streamline its business strategy and consider other strategic alternatives.  Cohen has a 9.8% stake in the houseware retailer.

Cohen questions Bed Bath & Beyond’s turnaround strategy.

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Following the news, Bed Bath & Beyond’s shares dropped 3.4%.  According to the letter sent to the retailer’s Board on Sunday and seen by the Wall Street Journal, Cohen, who is also the chairman of GameStop Corp (NYSE: GME), holds a stake in BBBY through RC Ventures LLC.  His 9.8% holding makes him among the top five stockholders in the company, whose market value is around $1.6 billion.

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Bed Bath & Beyond runs the Harmon and Buybuy Baby retail chains, which have hundreds of locations across the country.  While the pandemic originally boosted its stock, it has since plummeted over the last year, closing at $16.18 on Friday, almost where it was three years ago.

The business is implementing a turnaround strategy that includes lowering the number of products in its locations and introducing new private-label brands.  However, this strategy exposed it to supply-chain concerns plaguing the retail business, causing it to lose sales to competitors like Target Corp and Inc. Surprisingly, even analysts that once supported CEO Mark Tritton’s strategy are now doubting its practicality.

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In his letter, Cohen states that the company’s strategy is unable to sustain market share losses and that in the most recent quarter, core sales were 14% down.

Cohen suggests splitting of Buybuy Baby business.

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The Wall Street Journal reports that Cohen is urging the company to take two vital steps.  The first is narrowing the focus of the turnaround plan and maintaining the correct inventory mix to satisfy demand. The second is exploring splitting the BuyBuy Baby business or selling the whole company.

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He states that considering Buybuy Baby’s growth path, the business is worth billions of dollars. However, Cohen also suggests that the houseware retailer could be better off under a private equity company.

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