Bed Bath & Beyond stock surges after GameStop chairman Ryan Cohen's new stake, CEO criticism

Shares of Bed Bath & Beyond jumped over 40% Monday after GameStop chairman and Chewy.com co-founder Ryan Cohen revealed he acquired a massive stake in the home goods retailer. 

According to a letter filed with the Securities and Exchange Commission, Cohen's investment firm, RC Ventures, is now a top-five shareholder in Bed Bath & Beyond with approximately 9.8% of the company's outstanding shares. 

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In the letter, Cohen warned that Bed Bath & Beyond is "struggling to reverse sustained market share losses, stem years-long share price declines and navigate supply chain volatility." He also expressed concern about the compensation of Bed Bath & Beyond's leadership, including chief executive officer Mark Tritton, "relative to performance and its strategy for reigniting meaningful growth."

Tritton, according to the letter, received $27 million in pay over the past two years. 

Additionally, Bed Bath & Beyond is looking at an approximately 29% decline in full-year sales from pre-pandemic levels during Tritton's tenure. In its most recent quarter in January, it reported a 14% year-over-year drop in core sales and a 7% year-over-year drop in same-store sales. 

"These results cannot be solely blamed on the pandemic when other retailers are nearing or exceeding 2019 sales levels," Cohen wrote. "That is why we feel compelled to scrutinize the viability of the Company’s extremely ambitious and widely-touted strategy."

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Under Tritton's direction, Bed Bath & Beyond has remodeled stores, closed underperforming stores, introduced new private label brands and much more.

However, Cohen argues that its "highly-publicized and scattershot strategy is not ending the tailspin that has persisted before, during and after the pandemic’s nadir" and Tritton's appointment.

"We believe Bed Bath needs to narrow its focus to fortify operations and maintain the right inventory mix to meet demand, while simultaneously exploring strategic alternatives that include separating buybuy Baby, Inc. ("BABY") and a full sale of the Company," Cohen said. 

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Cohen joined GameStop's board in January 2021 after RC Ventures amassed a 13% stake in the video game retailer. In June 2021, he was elected as GameStop's board chairman. 

While Cohen said he is not in a position to join Bed Bath & Beyond's board and oversee the initiatives outlined in the letter due to his commitments at GameStop, he emphasized that RC Ventures will seek to hold its board and management accountable if necessary. 

Bed Bath & Beyond said it would "carefully review" RC Ventures' letter and "hope to engage constructively around the ideas they have put forth."

"Our Board is committed to acting in the best interests of our shareholders and regularly reviews all paths to create shareholder value," the company added. "2021 marked the first year of execution of our bold, multi-year transformation plan, which we believe will create significant long-term shareholder value."