What happened
Bed Bath & Beyond (BBBY) owners trounced a falling market this week, with shares rising 30% through Thursday trading compared to a 1.6% decline in the S&P 500, according to data provided by S&P Global Market Intelligence. That spike helped push the specialty retailer up nearly 50% so far in 2022 compared to an 11% drop in the wider market.
It was sparked by news that an activist investor has taken a large stake in the company and is agitating for some strategic shifts.
So what
Billionaire investor Ryan Cohen has purchased roughly 10% of Bed Bath & Beyond's stock, giving him a loud voice to press the management team. His RC Ventures fund is wasting no time pushing for changes, either. The strategic shifts it is pushing include spinning off parts of the business or even taking the entire company private.
Image source: Getty Images.
Bed Bath & Beyond, for its part, signaled an openness to consider some of these suggestions. "We will carefully review [RC Venture's] letter," executives said, "and hope to engage constructively around the ideas they have put forth."
Now what
Bed Bath & Beyond's business isn't performing well. Sales fell 7% in the most recent quarter even compared to poor results a year earlier. CEO Mark Tritton admitted back in early January that this result was "not where we wanted to be." Challenges include supply chain issues, rising prices, and a traffic shift away from smaller specialty retailing stores.
Those issues won't be solved by spinoffs or going-private transactions, although these moves might help shore up the retailer's finances so it can pursue a more aggressive rebound strategy. That's why investors shouldn't look at this week's news as a fundamental turning point for the stock. There are better buys in the retailing niche to consider
