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Here’s What Activist Investor Wants from Bed Bath & Beyond

Bed Bath & Beyond’s leadership came under fire in a letter sent Sunday by activist investors RC Ventures criticizing decisions made over the past year.

The investment firm—which is owned by Chewy co-founder and GameStop chairman Ryan Cohen, and has a 9.8 percent stake in the home goods retailer—sent the letter to the company’s board of directors detailing concerns about leadership compensation and decisions.

“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,” the letter said.

The letter cited Bed Bath & Beyond’s executive leadership compensation—nearly $36 million last fiscal year—as too rich for the retailer, particularly considering its recent earnings declines. During the first two-thirds of the most recent fiscal year, total sales dropped 28 percent, and comps declined 7 percent. The company also reported a net loss of $25 million.

Cohen suggested remedies including a spinoff or full sale of the Buy Buy Baby brand, as well as raising the prospect of selling the entire company to a well-capitalized buyer with experience in retail operations.

Bed Bath & Beyond issued a brief statement Monday in response to the letter, saying the board and management team haven’t had prior contact with RC Ventures but are open to dialogue.

“Our board is committed to acting in the best interests of our shareholders and regularly reviews all paths to create shareholder value,” it said. “2021 marked the first year of execution of our bold, multi-year transformation plan, which we believe will create significant long-term shareholder value.”

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The hubbub sent Bed Bath & Beyond’s stock on an upward trajectory, soaring 86 percent at opening on Monday. While those gains slowed by mid-morning, shares were still trading at more than 34 percent higher at the close of business.

This is the second time in three years that activist investors have targeted Bed Bath & Beyond. In 2019, an activist-led upheaval led to the ouster of former CEO Steve Temares, as well as board resignations by Warren Eisenberg and Leonard Feinstein, and the addition of new board members.

Tritton was hired later that year, and led the company in an attempt to grow leaner by selling off brands such as One Kings Lane, Cost Plus World Market, and Christmas Tree Shops. Over the past year, Bed Bath & Beyond has focused on expanding its “owned brands,” launching eight private labels in 2021. Renovating existing stores has been a priority, as well, with more than 100 locations getting a facelift. The company also opened a flagship location in New York City.

In Bed Bath & Beyond’s most recent earnings call, Tritton blamed continuing supply chain disruptions for $100 million in lost sales during the third quarter of 2021.

“The issue at Bed Bath is that its highly-publicized and scattershot strategy is not ending the tailspin that has persisted before, during and after the pandemic’s nadir and the appointment of chief executive officer Mark Tritton,” the letter from Cohen said. “As evidence, we point to the company’s disappointing shareholder returns and perpetual underperformance across every relevant time horizon.”

The home goods retailer is far from the only name under fire from investors looking to shake things up as proxy season approaches. Kohl’s is mired in its own struggle with a couple different hedge funds while Macy’s seems to have shrugged off recent investor overtures. Huntsman, the chemicals player, is also embroiled in a war of words with Starboard, a hedge fund that once failed to force Macy’s to come around to its way of thinking. Genesco, meanwhile, came out “highly energized” after the parent to footwear chains Journeys and Johnston & Murphy dodged an activist volley last year.