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Bed Bath & Beyond's future is bleak even with a former top Target executive running things: analyst

Brian Sozzi
Editor-at-Large

Bed Bath & Beyond’s new CEO Mark Tritton impressed a good many on Wall Street with his first earnings call on Wednesday night.

But not everyone. The skepticism reflects the challenged state of the home goods retailer kicking off 2020 and Tritton’s tenure as CEO. “Investors are really banking the new CEO can turnaround the business. But one of the phrases we like to say is that new leadership isn’t a magic bullet. If you look at J.C. Penney and GameStop and where they ended up during CEO shakeups, they haven’t been able to turnaround,” CFRA retail analyst Camilla Yanushevsky said on Yahoo Finance’s The First Trade.

“Until we see the strategic plan, we don’t think there is anything to be excited about,” added Yanushevsky, who reiterated her Sell rating and $8 price target on the stock — about 42% lower from current levels.

Tritton — a retail veteran who joined Bed Bath & Beyond (BBBY) 66 days ago after a successful C-suite stint at Target — is expected to unveil that strategic plan to investors in the spring.

Optimism is riding high on the Street on Tritton’s turnaround powers — shares of Bed Bath & Beyond have surged 40% since Tritton was announced as CEO on Oct. 9. The stock had been up close to 60%, but gave back about 18% of that gain on Thursday amid a tough holiday quarter earnings report.

A Bed Bath and Beyond store in Daly City, California. (Photo by Justin Sullivan/Getty Images)

Tritton’s turnaround plan could be a doozy, including the sale of non-strategic brands (we see you, Christmas Tree Shops), the sale of more real estate (Tritton recently netted $250 million from real estate sales) and a complete reboot on how the stores look and function with the website. Bed Bath & Beyond is also expected to detail a new couponing strategy and an entirely new management team after Tritton booted six former executives several weeks ago (well overdue and expected).

To be sure, Tritton has his work cut out for himself as he tries to jump start a brand that for years was terribly managed. The stores were underinvested in, ditto the website. The company became addicted to offering coupons. Its brand portfolio swelled to include non-strategic assets. Heck, even the company’s HQ staff was reportedly lacking the modern day technology needed to properly function.

All of that operational disarray continued to be reflected in the company’s latest quarter and will likely do so for much of 2020 as Tritton and his new team gets to work.

‘Progress lacking’

Bed Bath & Beyond’s fiscal third quarter same-store sales plunged 8.3% versus the 5% drop expected. The loss per share clocked in at 38 cents whereas analysts estimated 2 cents a share in profits.

“Given a highly-competitive landscape, pending C-suite changes, and weak fundamentals, we'd prefer to remain on the sidelines. Initiatives are in-motion, but progress is lacking,” said Jefferies retail analyst Jonathan Matuszewski. 

One of the upsides here for the company? It will have more than $1 billion in cash following the latest real estate sales, which could go a long way to rebuilding a well-known consumer brand such as Bed Bath & Beyond. Not many other struggling retailers could boast that type of balance sheet strength.

“I truly believe this is one of the last iconic retail turnarounds in this country, and I'm excited about the future of our business,” said Tritton on the Wednesday evening earnings call.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Watch The First Trade each day here at 9:00 a.m. ET. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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