Activist company

BBBY stockholders wary as Ryan Cohen lashes out at company

The activist investor who bet on the stoppage of play (NYSE:EMG) short press now goes after Bed, bath and beyond (NASDAQ:BBBY). Ryan Cohen turned $76 million worth of GME shares into $1.9 billion last August. It was a pressure built on the small traders organized to Reddit r/WallStreetBets. Now he’s put $150 million in BBBY stock. It jumped 79% after its position was announced.

Source: Shutterstock

But the game is different now. Instead of just hugging the shorts, who owned about 20% of BBBY’s common stock before acting, Cohen demanded that any vulture on Wall Street clap their hands. It’s about “meeting the new boss, like the old boss”.

What does this mean for BBBY stocks

Cohen’s letter to the Bed, Bath & Beyond board says CEO Mark Tritton’s turnaround looks “better in a PowerPoint presentation than in practice.” He wants the company to sell or spin off Buybuy Baby, which he says will bring in “several billion dollars” based on $1.5 billion in revenue. The company had a market capitalization of $2.2 billion on March 9.

Next, Cohen wants the main chain to be sold, implying that a private equity buyer with retail experience would grab it.

There are holes in the proposal. First, the value of any retail asset is depressed in today’s market. Wars are unhealthy for all asset values. Second, Cohen doesn’t really offer BBBY a turnaround plan. He just wants to strip the assets and sell them for a quick profit.

I wrote endorsing Tritton’s turnaround plan, which includes decluttering its locations and introducing high-quality store brands. But progress has been slow.

Bed, Bath & Beyond sales fell 17% in 2021, mainly due to its sale of Cost Plus World Market. In contrast, the company lost $151 million in 2021, down 75% from 2020.

Tritton used sales of assets like Cost Plus to raise $400 million to redo stores, starting with a flagship in New York. There, a limited selection of merchandise is organized by theme rather than stacked to the ceiling. He calls it an “omnichannel” experience, with online shopping integrated into stores. It has also launched high-quality store brands that offer higher margins than the brand name products the company previously specialized in.

The Basics of BBBY Stocks

If you’re wondering what the future of BBBY stocks might be if Cohen succeeds, look no further than Gamestop. The company is still going nowhere — revenue for 2021 was 21% lower than 2020. It also posted a net loss of $215 million.

It remains a money-losing chain of video game and accessory stores. It is still threatened by cloud gaming, even if the fate of alphabetical (NASDAQ:GOOGLNASDAQ:GOOG) Stadia has put this on the back burner. analysts on TipRanks think you should sell GME shares.

So what does this mean for BBBY stocks?

In short, this is not good news for the company’s shareholders. Cohen’s experiment amounts to publicizing Chewy and selling it to Petsmart, which has ensured most of its growth. Additionally, Cohen hired a proxy attorney who Carl Icahn used to solicit votes for his own slate of Bed, Bath & Beyond board members.

Cohen’s track record in retail pales in comparison to that of Tritton, whose turnaround plan is far better for the company and BBBY shares. That said, that doesn’t mean Cohen is going to lose. Breaking up and selling Bed, Bath & Beyond would earn him a short-term profit and put a smile on the face of vulture capitalists everywhere.

But if I owned shares of BBBY, I would sell to him now and take my profits elsewhere.

As of the date of publication, Dana Blankenhorn held a long position in GOOGL. The opinions expressed in this article are those of the author, subject to Publication guidelines.