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Bed Bath & Beyond Inc. stores are getting a revamp, with new Chief Executive Mark Tritton saying one set of investments will be complete in the first half of the year, and up to three new store formats are in the works.
After a news-packed day, Tritton hopped on a call late Wednesday, his 106th day on the job, to announce the struggling retailer’s 2020 capital allocation strategy, which will include $600 million for capital returns to shareholders and debt reduction, and $400 million for stores, supply chain infrastructure, and more.
Earlier in the day, Bed Bath & Beyond BBBY, +2.63% announced it was selling PersonalizationMall.com to 1-800-Flowers.com Inc. FLWS, +1.18% for $252 million.
Read: Bed Bath & Beyond shares plummet 25% after sales warning includes surprise margin decline
“After being outbid three years ago, 1-800-Flowers now takes over a healthy growth asset that should fit nicely with their gifting business and offer several avenues of revenue synergy upside,” wrote Benchmark analysts about that deal.
Benchmark rates 1-800-Flowers.com stock a buy with a $27 price target. Shares of the company have soared 39% over the last three months, and are up 3.4% for the last year.
As for Bed Bath & Beyond’s store redesign, the company will start with upgrades to the buy-online-pickup-in-store (BOPIS) function, in-store marketing and updates at checkout.
Tritton, a former Target Corp. TGT, -0.25% executive, said Bed Bath & Beyond is also looking at a set of store formats in order to settle on a range of up to three.
“Bigger picture, new CEO Mark Tritton is moving quickly to fix fundamental issues at Bed Bath & Beyond while also applying a test-and-learn strategy to significant in-store changes including wider aisles that improve visibility and enhance the shopping experience; less overwhelming assortments that reduce clutter, improve sales and reduce inventory; and new signage that increases visibility and clarity on pricing,” wrote Wedbush analysts led by Seth Basham.
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“We see potential for results to improve materially starting in the second half of 2020 on the back of price/value changes, better inventory management, BOPIS rollout and other omnichannel enhancements.”
Wedbush rates Bed Bath & Beyond stock outperform with an $18 price target.
Wedbush analysts also highlight the likelihood that PersonalizationMall.com won’t be the only asset sale as Bed Bath & Beyond focuses on core categories: baby, health and beauty.
With debt maturities years down the line, Raymond James analysts see the value of Bed Bath & Beyond’s strategy.
“[R]etail turnarounds are never linear and always highly controversial, with the majority of them failing,” analyst Bobby Griffin wrote. “Accordingly, maintaining a high cash balance (i.e. not spending all the asset sale proceeds) will give investors more comfort in ‘buying into’ the multi-year turnaround process.”
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Raymond James thinks all pieces of Bed Bath & Beyond news are positive developments despite recent poor quarterly results.
Bed Bath & Beyond stock gained 6.3% in premarket trading, and was up 3.7% on Wednesday. Shares have slumped 27.3% for the past year. The S&P 500 index SPX, +0.37% has gained 21.7% over the last 12 months.
