Bed Bath & Beyond Inc (NASDAQ: BBBY) stock is moving up following a report that a group of activists funds are planning to replace the entire board. The group would also like to replace CEO Steven Temares, who has led the company since 2003.
Revenue growth had slowed in the past few years and also the stock underperformed its industry peers. Profits have also come down in the recent few quarters. The Wall Street Journal reported on Monday that a possible sale could include brands such as Buy Buy Baby and Cost Plus World Market.
“Our board of directors and management team remain committed to creating value for all shareholders by transforming our company to best position Bed Bath & Beyond for long-term success, and will continue to take actions to achieve these objectives,” a company spokesperson told Reuters.
Raymond James upgraded the stock in light of the news, with analyst Bobby Griffin writing that “within the foreseeable future, Bed Bath & Beyond may either no longer be a public company or on a journey to go private.”
The company released the third quarter 2018 results on January 09, 2019. Revenue rose 2.6% to $3.03 billion, missing the median analyst revenue estimate by $8.9 million. Comparable sales declined approximately by 1.8%. Sales through digital channel grew; however, the company is facing competition in the brick and mortar stores.
Advertising expenses rose by about $26 million in the quarter which was partially offset by the $28 million gain on sale of the building. Earnings per share for the third quarter came at 18 cents compared to 44 cents per share for the same period last year, beating the median analyst EPS estimate by 1 cent.
Retail inventories dropped 6% to $2.9 billion at the end of the third quarter. This helped to increase cash and cash equivalents to $1.0 billion compared to $561 million in cash at the end of the third quarter of 2017.
Capital expenditure for the nine months was $256 million which was mainly related to the investments in digital capabilities and deployment of new systems and equipment in the company’s stores. The company opened 4 new stores and closed 15 stores in the third quarter. There could be goodwill adjustment in the fourth quarter.
The company’s EPS guidance for the full year 2018 is $2.00 which is above the previous guidance. The next results will be released on April 10, 2019.
Recently, the company has also launched a private label home and furniture line. Prices range from $5 for cleaning supplies to $1000 for furniture. In the words of Barbara Weston, Director of Global Trend at Bed Bath & Beyond. “The materials in the collections include an eclectic blend of rustic, distressed and time loved transitional décor pieces combined with distressed stone, wood and metal. Customers will be able to find quality investment pieces.”
The company is working on improving the digital commerce platforms using Front-End Optimization (FEO). The management believes that this would create a better shopping experience for the customers with improved page load performance.
Conclusion: There could be more volatility in the stock in the next few days. Some investors feel that the activist investors have waited too long to take action and the damage is already done to the company as it failed to catch up with the customer expectations. The company continues to face competition from online retailers.