Home Baby brand Is splitting or selling Buybuy Baby the right move for Bed Bath & Beyond? – RetailWire

Is splitting or selling Buybuy Baby the right move for Bed Bath & Beyond? – RetailWire

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April 27, 2022

Bed Bath & Beyond is under pressure from activist investor Ryan Cohen to sell its Buybuy Baby chain and interested parties are lining up for a chance to acquire the business, according to a report published last week by The Wall Street Journal.

The newspaper reports that Cerberus Capital Management and Tailwind Acquisition, a company chaired by former Casper Sleep CEO Philip Krim, have expressed interest in possible deals to acquire the baby products chain.

Mr Cohen, who co-founded Chewy and is the current chairman of GameStop, took a nearly 10% stake in Bed Bath & Beyond last month and began advocating for the company to spin off Buy Buy Baby and go private. under new ownership.

Mr. Cohen wrote in a letter last month to Bed Bath & Beyond’s board of directors that Buybuy Baby alone is likely more valuable than its parent company based on its $1.5 billion fiscal year 2023 sales target, rates double-digit growth and market penetration of around 50%.

“In the event that Bed Bath pursues a full or partial sale of BABY, it could position itself to pay down debt, put cash on the balance sheet and continue to reduce its share count, creating significant shareholder value. “, Mr. Cohen wrote. “Separating BABY’s stock would be an even more efficient way to transfer value to shareholders. Notably, BABY’s strong online penetration would likely reduce operational hurdles. We assume that Bed Bath and BABY could still have a shared services agreement to maintain an omnichannel experience for customers.

Buybuy Baby was a bright spot for Bed Bath & Beyond, which has seen its performance falter in recent quarters due to supply chain issues.

Bed Bath & Beyond CEO Mark Tritton, speaking earlier this month on the company’s fourth quarter earnings call, said a 12% drop in same-store sales and adjusted gross margins of 28.8% were directly related to “lack of available inventory” and which proved to be a permanent obstacle.

Buybuy Baby has been identified as a growing business by Bed Bath & Beyond, with US birth rates rising again after declines related to the novel coronavirus pandemic. The chain is expected to open between 20 and 25 new stores this year and its products will be showcased as part of Bed Bath & Beyond’s shop-in-shop collaboration with Kroger announced last November.

DISCUSSION QUESTIONS: Would Bed Bath & Beyond be a stronger company with or without Buybuy Baby? Would Buybuy Baby be a stronger company if split or sold by Bed Bath & Beyond?

Braintrust

“Although running it or selling it might make sense in the future – for example if Bed Bath & Beyond management can’t right the mothership – otherwise I would hold on.”

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