Bed, Bath & Beyond Problems Go Beyond Leadership, Analysts Say

Bed, Bath & Beyond is under pressure from a trio of activist investors to reorganize its entire board of directors, but the retailer's problems go beyond leadership and are magnified by competition from the growing number of e-commerce companies, according to analysts.

Online businesses only in the areas of renovation and design have exploded in recent years. Leesa, Tuft & Needle and other direct-selling mattress manufacturing companies, as well as bedding and interior design companies such as Serena & Lily and Boll & Branch, have successfully used social media networks such as Instagram for increase the brand awareness.

At present, some are even expanding into brick and mortar sites to further stimulate sales. Wayfair, for example, announced Tuesday the opening of its first permanent store, while Casper had previously announced the opening of 200 stores over the next few years.

The growing threat has only put more emphasis on the mistakes made by the current leaders of Bed, Bath & Beyond, according to Jonathan Matuszewski, an analyst at Jefferies.

"We believe that the impact of intensifying competition has been magnified by the fact that management is focusing on non-core activities, reflecting the slowness with which important strategic initiatives are taking place." have progressed, "he wrote in a recent note.

Jefferies had previously estimated that 20 direct brands were selling annual sales of $ 3.5 billion, a figure that could increase by 50% by 2021. And in a survey done by the firm, Bed, Bath & Beyond's & # 39; Is ranked first as consumers buy less.

For its part, Bed, Bath & Beyond says activists have made no suggestions to improve business.

"Instead, they chose to publicly attack the company and provide its intention to appoint directors to assume the entire board," said the New Jersey-based company in a statement, adding that the company "undertakes a complete transformation for the company's core structure, generating shareholder value and positioning the Company for the long-term success."

In a letter published Tuesday, Legion Partners, Asset Management LLC, Macellum Advisors GP LLC and Ancora Advisors LLC, explained what they were looking for, including a more streamlined product offering, reduced use of promotional campaigns to drive traffic improved e-commerce operations and a better offer chain operations.

They are also looking to install 16 new people on a board that is overseen by Co-Chairs Warren Eisenberg and Leonard Feinstein for 48 years.

"This has resulted in an apparent inability to respond appropriately to a changing retail landscape that requires greater ability to compete in an omnichannel world," the letter says.

The goal is to turn around the situation of a retailer who has seen its stock fall by nearly 80% in the last five years. Shares rose 23% on the news of militant action.

Analysts, including Cristina Fernandez of the Telsey Advisory Group, endorsed the suggestions of the three companies.

"Bed Bath & Beyond could consider Target as an example of a mature company that has reinvented itself by reorganizing its private labels, modernizing in-store presentation, lowering prices for key items, and modernizing its sites." and its treatment options, "she said. written in a note on Tuesday.

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The activists are also pushing the company to get rid of its many activities, such as its brand exclusively for babies, BuybuyBABY – which, according to Fernandez, generated $ 862 million in sales in 2018 – and Cost Plus World Market.

Legion, Macellum and Ancora also welcomed CEO Steven Temares' salary, which reached $ 51 million between 2015 and 2017, as the company's shares fell by 70%.