Bed Bath & Beyond is exploring bids for buybuy BABY after an activist investor urged the retailer to sell the brand, people familiar with the matter told The Wall Street Journal. The suitors include Cerberus Capital Management LP and Tailwind Acquisition Corp., an acquisition firm chaired by former Casper CEO Philip Krim. The sources noted that the expressions of interest won’t necessarily result in a deal.
The sale is being pushed by RC Ventures, the venture capital fund of Chewy Co-founder and GameStop Chairman Ryan Cohen, which holds a 9.8% stake in Bed Bath & Beyond. RC Ventures has stated that buybuy BABY could be more valuable alone than as part of Bed Bath & Beyond, which had a market value of approximately $1.3 billion as of April 22, 2022.
Cohen has cited the parent retailer’s poor performance in recent years compared to buybuy BABY’s continued success, and Q4 2021 results followed this trend. Comparable sales at Bed Bath & Beyond fell 12% to approximately $2 billion due to supply chain and inventory challenges, while buybuy BABY’s comparable sales experienced a single-digit increase in Q4 and greater growth during 2021 as a whole.
“Encouragingly, buybuy BABY delivered its sales goal for the quarter which led to $1.4 billion in sales for the full year, growing double digit, at an estimated mid-single digit adjusted EBITDA margin,” said Mark Tritton, CEO of Bed Bath & Beyond in a statement. “Our buybuy BABY and Harmon banners demonstrate our ability to achieve stabilization and growth when there is strength in the face of macroeconomic factors, given its domestic supply chain as well as different key product demand such as apparel and gear versus our Bed Bath banner.”
Tritton stated that he expects investments in supply chain and the retailer’s emphasis on private label to pay off in 2022, but that timeline may be too slow and uncertain to hold under activist pressure, particularly in the current climate. Bed Bath & Beyond is far from the only retailer facing criticism from shareholders:
- Kohl’s has reportedly been exploring its own sale, most recently a bid from JCPenney owners Simon Property Group and Brookfield Asset Management, even as it resists pressure to spin off its ecommerce operations;
- Macy’s also has avoided calls to spin off its ecommerce operations despite a push by Jana Partners. Macy’s has investigated the idea and concluded that it would incur high separation costs and ongoing costs from operating separated businesses; and
- Dollar Tree “reconstituted” its board under pressure from Mantle Ridge, leading to the appointments of former Dollar General CEO Richard Dreiling as Executive Chair and Mantle Ridge Founder and CEO Paul Hilal as Vice Chair.