Firms Eye Bed Bath & Beyond’s Buybuy Baby Unit; Shares Surge

Reflecting optimism, shares of Bed Bath & Beyond Inc. (NASDAQ: BBBY) jumped 6.85% to close at $17.46 a piece on Friday. The price surge followed the potential bids for the houseware retailer’s Buybuy Baby business, per a Wall Street Journal report.

Bidders for the baby-products business included private-equity firm Cerberus Capital Management LP and Tailwind Acquisition Corp. (TWND), a special-purpose acquisition company.

Background

Bed Bath & Beyond is contemplating the sale of its unit under pressure from activist investor Ryan Cohen, the co-founder of pet-supplies retailer Chewy Inc. (CHWY) and chairman of GameStop Corp. (GME), who revealed his 9.8% stake in the American chain of domestic merchandise retail stores earlier.

He outlined strategic alternatives for the company’s future transformation. Based on the company’s performance and recent challenges, his suggestions included selling the company as a whole or at least its baby-products business.

In March, three board of directors were added as part of a settlement with Cohen’s investment firm, RC Ventures.

No details related to bids for Buybuy Baby were revealed, while no comments from Bed Bath & Beyond were released.

Earnings Snapshot

Bed Bath & Beyond reported a surprise loss of $0.92 per share in the fourth quarter of Fiscal 2021 (ended February 26), compared with the Street’s earnings estimate of $0.03 per share. Net sales generated during the quarter declined 22% year-over-year and stood at $2.05 billion, missing the consensus estimate of $2.07 billion.

According to Mark Tritton, Bed Bath & Beyond’s President and CEO, inventory shortages and supply chain problems impacted sales by about $175 million. Also, high inflation, omicron, and other geopolitical factors acted as headwinds.

Wall Street’s Take

Recently, J.P. Morgan analyst Christopher Horvers maintained a Hold rating on Bed Bath & Beyond and a price target of $14 (19.82% downside potential).

The rest of the Street is bearish on the stock with a Moderate Sell consensus rating. That’s based on one Buy, three Holds, and six Sells. The average Bed Bath & Beyond price target of $12.22 implies 30.01% downside potential. Shares have lost 32.46% over the past year.

Estimated Monthly Visits

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR) offers insight into Bed Bath & Beyond’s performance.

According to the tool, the BBBY website recorded a 2.34% increase in global estimated visits in March compared to the month of February. Yet, year-to-date change in visits, compared to the same metric over the same time period in the previous year, came in at a decline of 12.97%. This, in turn, creates skepticism about the company’s revenues and profitability going forward.

Concluding Remarks

These days, based on the company’s lackluster performance and future challenges, activists’ suggestions are hard to ignore. Consequently, retail firms become bound to make changes in their policies and the board. Among other retailers, Dollar Tree (DLTR) and Kohl’s (KSS) have also been eyed by activists recently.

Learn more about the Website Traffic tool in this video by Youtube sensation Tom Nash.

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