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Activist investors detail their stance against Bed Bath & Beyond and its CEO

The group of activist investors pushing for big changes at Bed Bath & Beyond is turning up the heat.

The group — Legion Partners, Macellum Capital Management and Ancora Advisors — on Friday released a 100-plus page document that details Bed Bath & Beyond’s “stale retail perspective” and calls for the immediate removal of CEO Steven Temares, blaming him for more than a decade of underperformance.

“Under the current CEO, the company’s operational performance is deteriorating at an accelerating pace and he must be removed immediately and replaced with a highly qualified and capable leader,” the investors wrote. “Historical performance demonstrates Bed Bath & Beyond’s board and management have failed shareholders. We believe Bed Bath has enormous potential under new leadership — our goal is to reinvigorate Bed Bath and restore a winning culture.”

The investors also criticized the acquisitions made under Temares’ watch. These include Harmon Stores, Christmas Tree Shops, buybuy Baby, Cost Plus, One Kings Lane and more.

“Bed Bath & Beyond has spent over $1 billion on questionable M&A activity during CEO Temares’ tenure yet the performance of these acquisitions has never been disclosed,” the investors wrote. “Many appear to be distracting to management, dilutive to shareholders and some are windfalls for the co-founders’ families.”

Bed, Bath & Beyond responded to the document, saying it was doing, or has already done, most everything the investor group is asking for. And the company reiterated that while it is open to engaging with the investor group, the group has "steadfastly declined" to engage in constructive dialogue. Instead, the group “has chosen only to release its perspectives in a public forum.” In its response, Bed Bath & Beyond did not directly address calls for the Temares to be replaced. 

 “The board and management team are confident in the company’s ability to execute its transformation plan and meet key financial objectives,” Bed Bath & Beyond stated. "We have a committed team of associates focused on providing exceptional experiences for our customers as we continue driving improved financial results, which will lead to enhanced shareholder value."

The report makes a case for why shareholders should elect the investor group’s slate of board nominees. (The group collectively own a stake of about 5% in the company.) The group, who first called for the CEO’s ouster in March, are clearly not satisfied with the proposed board shakeup and other changes the retailer announced last week, calling them “too little too late.” Those changes include  the replacement of five current directors with independent directors that reflect “significant diversity.”

The document cited the expertise of the investor group’s director nominees and said the the newly appointed directors “do not appear to have the same level of requisite skills to oversee meaningful operational change.”

“The reconstituted board has not announced a new strategic plan and existing initiatives show little evidence of success,” the investors wrote. “Our nominees have developed a plan that will ensure the right executives are in place to execute, prioritize initiatives and be held accountable.”

The investor group outlined a “strategic plan”  that they said provides a path forward to modernizing Bed Bath & Beyond’s retail practices and “delivering a significant earnings per share improvement which could drive $5.00 per share of annual earnings – a level that Bed Bath achieved just a few short years ago.”   As stated in the document, it includes the following:

  • Revamp executive management recruiting a top-flight CEO to lead Bed Bath going forward and instill a world-class winning culture. We plan to launch a search in the near term to address this key position;

  • Reverse sales weakness– fixing the merchandise over-assortment problem through a detailed SKU rationalization process as well as developing a merchandise architecture that will better resonate with customers. Making the in-store experience something that drives traffic to the stores will be a major priority;

  • Turn around company culture – increase focus on employee training and education to improve motivation; empower employees to better use technology and improve customer experience;

  • Significantly expand gross margins – improve vendor relations and drive profits by establishing a direct sourcing strategy and private label program as well as fixing mix issues created by the company's shift to commoditized and lower margin products;

  • Implement cost cutting– conducting an extensive reassessment of the increases in expenses over the last five years, including the explosion of the Company’s advertising budget, seemingly endless array of initiatives that have failed to produce meaningful results and extensive use of consultants;

  • Improve inventory– increasing inventory turns which would result in a substantial release of cash tied up in slow moving goods; and

  • Fix capital allocation– reviewing all non-core businesses and assessing their value as part of the business or their potential value to other parties. Excess cash created could be applied to share or debt repurchases, both of which are significantly accretive given discounted trading levels. Lastly, the increase in capital expenditures will be addressed.


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