Bed Bath & Beyond’s Big Dilemma: Can it survive?

Shares of Bed Bath & Beyond, a company that has been thrust into the volatile world of stock trading even this year, fell around 41% on Friday, days after its share price more than doubled.

The immediate catalyst for Friday’s selloff appears to be the same one that caused the brief surge earlier in the week and long before: activist investor Ryan Cohen.

Cohen, the co-founder of online pet retailer Chewy, has been at the forefront of the meme stocks movement, having helped video game retailer GameStop’s price rally after disclosing his purchase of a stake in that company in 2020 on the belief that it was undervalued.

In March, Cohen disclosed his purchase of a 9.8% stake in Bed Bath & Beyond. Online retail investors took the news as a hint that the home goods retailer was Cohen’s next turnaround candidate. Cohen then pressured the company to kick out then-CEO Mark Tritton and appoint three hand-picked board members.

On Monday, a Securities and Exchange Commission filing revealed that Cohen had, in April, bet that shares of Bed Bath & Beyond would continue to rise.

But on Thursday, another filing showed Cohen planned to sell his shares entirely. According to CNBC calculationsCohen has earned as much as $59 million between when he started investing in Bed Bath & Beyond and this week.

Cohen could not be reached for comment prior to publication.

Since February 2015, Bed Bath & Beyond’s share price has seen an almost continuous decline from $77 per share to Friday’s price of around $11. In 2019, analyst for the investment advice site Motley Fool summary of business issues:

“Its prices aren’t particularly low, most of its merchandise isn’t unique, and it faces stiff competition,” the analyst wrote.

While the revelation of Cohen’s involvement in March sent shares briefly as high as $27 this year, by July they had fallen back below $5.

And today, according to a Wall Street analyst, the physical decline of the company’s stores is proof that the company’s longstanding problems persist.

In a note to investors dated August 3, Anthony Chukumba, managing director of Loop Capital, said he had made visits to several Bed Bath & Beyond outlets in the northern suburbs of Chicago.

The result: the household goods chain continues to suffer. Chukumba said his visits showed there were nearly empty shelves and displays in all stores, and the company had begun to significantly reduce many of its recently introduced private label products, which he said. him, demonstrated a lack of attraction for consumers.

He said he also saw a lot of clearance items.

That was not all.

“We found Bed Bath & Beyond stores – all of which were located in high-end strip malls in some of the wealthiest cities in Illinois, if not the country – to be in poor condition, including carpets that had desperately in need of vacuuming, dirty wood floors and messy displays near the front registers,” he wrote.

“Also the store associates were very disengaged, only one approached and offered to help us in every store we visited,” Chukumba said. “We believe poor store conditions are likely the result of reduced work hours, while listless store associates report low employee morale.”

In a statement reported by CNBC on Wednesday, Bed Bath & Beyond said it had already reached a “constructive agreement” with Cohen’s RC Ventures. in Marchand that it was studying potential changes to its financial structure.

A separate Thursday report from Bloomberg showed that Bed Bath & Beyond hired law firm Kirkland and Ellis to help the company manage its debt.

But in an earlier note to investors, Chukumba said those debt issues likely wouldn’t be resolved without a bankruptcy filing.

“Bed Bath & Beyond’s fundamental performance and financial health continue to deteriorate steadily, and we are increasingly concerned about a Chapter 11 bankruptcy filing,” he wrote on July 5.

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