Bed Bath & Beyond has signed a deal to sell approximately half its real estate to a private equity firm and lease back the space, in a transaction that will generate more than $250 million. The funds will be used to repay debt, buy back shares and aid in the company’s attempted turnaround effort under new CEO Mark Tritton, who joined the company in November from Target.
“This marks the first step toward unlocking valuable capital in our business that can be put to work to amplify our plans to build a stronger, more efficient foundation to support revenue growth, financial stability and enhance shareholder value,” said Tritton in a statement.
The properties sold represent approximately 2.1 million square feet of commercial space, including the company’s headquarters, various retail stores and a distribution facility. Bed Bath & Beyond will continue to occupy these properties as part of the leaseback transaction.
The decision to sell real estate to another party and lease it back is not a new strategy; both Sears and Macy’s have done it in the past to gain liquidity. But these types of deals also mean these companies are now stuck with paying rent. The strategy didn’t seem to do anything to delay the inevitable bankruptcy for Sears, and Macy’s has still struggled to optimize its real estate as sales continue to stagnate.
Bed Bath & Beyond, together with its outside financial advisors, says it is still reviewing its portfolio of retail concepts and owned real estate to optimize its asset base and enhance shareholder value. In connection with this review, the company continues to evaluate certain remaining owned real estate.
Tritton made it clear that he wanted to make big changes to Bed Bath & Beyond in order to implement a turnaround strategy effectively. Last month, he led an executive restructuring that saw the departure of six senior executives, including the retailer’s Chief Merchandising Officer, Chief Marketing Officer, Chief Digital Officer, General Counsel and Chief Administrative Officer. In the company’s most recent quarter, Bed Bath & Beyond saw a 7% decline in total sales.
Tritton replaced Steven Temares as CEO, who was ousted by the Board of Directors in May 2019 due to the company’s prolonged poor performance.