Ryan Cohen brings an activist approach to Bed Bath & Beyond
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Shoppers exit a Bed Bath & Beyond store in New York.
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Company: Bed Bath & Beyond (BBBY)
Business: Bed Bath & BeyondA chain of retail shops is managed by the company. The company operates in two areas: North American Retail Sales and Institutional Sales. There are two segments to the company: North American Retail and Institutional Sales. As of Feb. 27, 2021, the company had 1,020 stores, including 834 Bed Bath & Beyond stores in 50 states, the District of Columbia, Puerto Rico, and Canada; 132 buybuy Baby stores; and 54 stores under the names Harmon, Harmon Face Values or Face Values. It also offers products through various websites and applications, such as bedbathandbeyond.com, bedbathandbeyond.ca, harmondiscount.com, facevalues.com, buybuybaby.com, buybuybaby.ca and decorist.com. It also operates Decorist online, which offers personalized interior-design services.
Stock market valueShares: $22.07 each
Activist: RC Ventures
Percentage of Ownership 9.81%
Average cost: $15.34
Commentary by an Activist:Ryan Cohen’s investment vehicle is RC Ventures. Cohen is an entrepreneur who has become an activist investor. Cohen was the former CEO and co-founder of ecommerce. ChewyCohen built the company and then sold it to PetSmart in 2017, for $3.35 million. Cohen was still the CEO after the purchase, and Chewy became public in June 2019 at an estimated $8.7billion. On was his first 13D filing. GameStopThe stock rose to nearly $500 per share due to Reddit forums, short squeezing and Reddit boards. Cohen made a paper profit over $4B on Cohen’s $8.43 average price on 9,001,000 shares. Cohen demonstrated that he was a long-term investor who is more concerned about fixing the company’s problems than his personal profit by refusing to sell a single share when the stock reached such irrational heights. Cohen has now filed his second 13D. This shows that Cohen is more than just an entrepreneur who invests in stocks. He is also an activist investor, with an ownership/operational mindset, and is passionate about fixing companies in poor management, especially in the consumer/retail sectors. His operational and strategic skills in running and building a digital company give Cohen a lot of credibility. He also invests his own money which is a distinct advantage over most other board members and activists.
What’s Happening?
On March 6, RC Ventures – RCV sent a letterThe company’s board was urged to improve their operations, maintain the proper inventory mix, and explore strategic alternatives such as buying out Baby and selling the entire company.
Behind the Scenes
GameStop is in a completely different position. The company has a new CEO and is struggling to sell same-stores. It also has an incredibly valuable asset that is not reflected in the stock price – its buybuy Baby business, which is priority number one. That asset is worth far more than what the whole company has at the moment. The company should seriously look into monetizing it. It could also be worth much more than its entire business. A strategic transaction would work well for that asset but the company might consider selling the entirety of the company.
The company must also be focused on its operations. Managers have been focusing too much on different areas, such as product mix and growth, private label sales, capital allocation, balance sheet, and capital allocation. Management needs to be able to concentrate on the core issues. Ryan Cohen grew Chewy by focusing on one thing – providing a great customer experience. Chewy and GameStop are all somewhat commodity-oriented businesses. This is what you need to do in the commoditized world of retail. It means offering great customer service, competitive pricing and fast shipping. This is the area management should focus on. Moreover, Bed Bath & Beyond could have better digital penetration like buybuy Baby does.
Recent shareholder activism has focused on the company. Ancora Advisors, Macellum Capital, and Legion Partners announced their support for the company on May 28th 2019. settled for four board seatsJohn E. Fleming (Sue E. Gove), Jeffrey A. Kirwan (Joshua A. Schechter) All four directors of the three funds are currently on this board, although they have all sold their shares. Ryan Cohen said that he doesn’t want to join the board. He likely stated this because GameStop is still a large part of his investment. The best outcome would be for three additional independent boards to be created with a strategy alternatives committee that includes at least one RC Ventures director. Ryan Cohen, while he is relatively new to activism, should not be dismissed. If he’s ignored, Cohen has all the resources, money and conviction necessary to launch a fully-fledged activist campaign.
Ken Squire, the president and founder of 13D Monitor is an institution research service that focuses on shareholder activism. He also founded and managed the portfolio for the 13D Activist Fund which invests in a range of activist 13D investments.
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