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Bed Bath & Beyond (BBBY) Divestitures on Track, Sells Cost Plus

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Zacks Equity Research
·4 min read
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Looks like Bed Bath & Beyond, Inc. BBBY is following the Less is More policy to stay afloat, given the tough retail environment. The company is on track with offloading non-core and underperforming assets to focus on its core categories, including Home, Baby and Beauty & Wellness. Notably, it inked a deal to sell Cost Plus World Market (CPWM) to Kingswood Capital Management. This definitive agreement is anticipated to close within fiscal 2020 and is currently subjected to customary closing conditions.

Per the deal, Kingswood Capital will gain access to 243 stores, the CPWM online business, two distribution facilities and a corporate office in Alameda, CA. Post the completion of this deal, CPWM is likely to continue operating as a stand-alone retail brand. Prior to this, Bed Bath & Beyond sold the Christmas Tree Shops retail banner, institutional Linen Holdings business and a distribution facility in Florence, NJ, for cash proceeds of about $250 million. Earlier, it also concluded the sale of PersonalizationMall.com and One Kings Lane home décor unit.

That said, the sale of CPWM marks its fifth divestiture of 2020. These divestitures have contributed significantly to strengthen the company’s financial flexibility. Apart from these, management earlier decided to close roughly 200 namesake stores in the next two years which will bring down the overall store count to 1000. This is likely to generate savings of nearly $100 million on an annual basis.

Further, these strategic actions are part of the company’s three-year transformation plan, which is likely to generate annual SG&A savings of $85 million. Savings are likely to be re-invested in omni-channel transformation and boost shareholder return. Bed Bath & Beyond has approved a second share repurchase plan worth $150 million. This will add to its existing $225-million share repurchase program, which was announced on Oct 28, 2020. This expands the company’s total share repurchase plan to up to $825 million, which remains valid for the next three years.

Apart from these, the company is making efforts such as launching private labels, inking strategic partnerships and accelerating digital capabilities to get back on the growth trajectory. It intends to bring more than 10 private labels in the upcoming spring season. Additionally, management recently joined hands with Shipt to offer free same-day delivery services from Dec 14-17 to customers who purchase from bedbathandbeyond.com and buybuybaby.com. This facility will be available for purchases worth $39 or more and next day delivery will be applicable for items purchased by 1 p.m. Topping it, there will be a 20% discount from Dec 17-24 on curbside pickup or buy-online-pickup-in-store orders.

Driven by such well-chalked initiatives, this Zacks Rank #3 (Hold) stock has surged 50.4% in the past three months, outperforming the industry’s growth of 1.9%.

3 Retail Stocks to Watch

DICK’S Sporting Goods, Inc. DKS has a long-term earnings growth rate of 5.6% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Hibbett Sports HIBB has an expected long-term earnings growth rate of 17% and a Zacks Rank #1.  

The Michaels Companies MIK, with a Zacks Rank #1, has an expected long-term earnings growth rate of 1.3%.

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Bed Bath & Beyond Inc. (BBBY) : Free Stock Analysis Report
 
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