Chewy founder Ryan Cohen’s new activist target: Bed Bath & Beyond

Live Brief:

  • RC Ventures, the activist investment firm headed by Chewy co-founder and GameStop chairman Ryan Cohen, disclosed it has taken a 9.8% stake in Bed Bath & Beyond.
  • In a letter to the retailer’s board, Cohen said that Bed Bath & Beyond’s “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.”
  • Cohen suggested the company pursue a sale of its BuyBuy Baby banner as well a potential full sale of the entire company, along with other possible changes.

Live Insight:

After exiting the digital pet specialist Chewy, Cohen has reinvented himself as an investor investor focusing on struggling retailers.

Cohen took a stake in Gamestop in 2020 and called for accelerated digital transformation. From there, he led a shakeup of the gaming retailer’s leadership. He became chairman shortly after joining the company’s board and spearheading a transformation committee.

Since then, GameStop has replaced a wide cross-section of its executive leadership, including its CEO and CFO, with tech company veterans. As for GameStop’s concrete plans under Cohen, that remains largely a mystery though the company has signal non-fungible tokens will somehow be involved.

Cohen’s stake in Bed Bath & Beyond follows a disappointing decline in sales after a pandemic spike for the home goods retailer as well as mounting losses, with both pegged to supply chain disruptions.

As an investor now, Cohen wrote that the company needs to bring focus to its strategy. “From our vantage point, Bed Bath’s strategy looks far better in a PowerPoint deck than it does in practice,” Cohen wrote. “It is full of ‘principles’ and ‘pillars’ that high-priced management consultants probably thought would placate information-hungry analysts and satisfy shareholders.”

Cohen said in the letter that Bed Bath & Beyond “would have been better served by front-loading the modernization of its supply chain and technology stack before engaging in more fanciful pursuits.” He also argued that the company should simplify its strategic plan and “finish fortifying the infrastructure, make remaining store fleet improvements, and prioritize core assortment and inventory fixes to meet near-term demand.”

More, Cohen suggested Bed Bath & Beyond sell part or all of itself, starting with BuyBuy Baby. Given that [BuyBuy Baby] is estimated to reach $1.5 billion in sales in Fiscal Year 2023 with a double-digit growth profile and at least 50% digital penetration, we believe it is likely much more valuable than the Company’s entire market capitalization today,” Cohen wrote, adding that proceeds from a sale of the unit could be used to pay debt and buy back shares.

Cohen also raised “for consideration” the possibility of Bed Bath & Beyond putting itself up for sale to “one of the many well-capitalized financial sponsors with track records in the retail and consumer sectors.”

In a statement to investors, Bed Bath & Beyond said that, “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 retailer added that its board “is committed to acting in the best interests of our shareholders and regularly reviews all paths to create shareholder value. 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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