Bed Bath & Beyond’s board overhaul fails to please hedge funds

By: Carleton E.

Bed Bath & Beyond’s splashy announcement of a board overhaul on Monday failed to boost the stock — or ward off a looming proxy battle by a trio of angry hedge funds.

The retail chain’s stock sank 4% on Monday after it announced a “transformation” of its board, including five new independent directors and the resignation of two co-founders as chairmen of the board.

The retailer said it made the changes in response to “shareholder feedback,” including three hedge funds that have called for an entirely new board and the ouster of the CEO.

But the hedge funds, which together control 5% of the company’s stock, quickly pooh-poohed the company’s slate, saying its candidates lack the experience needed to turn the retailer around.

“The board changes announced today by Bed Bath are not nearly enough when measured against what is needed to address issues with the current board and management,” hedge fund Legion Partners said Monday in a joint statement with Macellum Advisors and Ancora Advisors.

“We will therefore continue to move forward with our campaign to install fresh, experienced and independent oversight and management at the company.”

Bed Bath and Beyond’s stock was down a whopping 55% over the last two years on seven quarters of same-store sales declines when the hedge fund group announced its overhaul plans last month.

The stock is still down 5.6% over the last 12 months — including the 22% pop in the stock on March 26, the day the hedge fund group surfaced.

Loop Capital Markets analyst Anthony Chukumba called Bed Bath & Beyond’s move “drastic” but badly timed. “From the activist [investor] perspective, it’s too little too late,” he said.

Indeed, the hedge fund group has also demanded CEO Steven Temares be replaced, calling him “richly rewarded” despite the company’s “chronic underperformance,” including $51 million in total compensation between 2015 and 2017.

On Monday, they blasted Bed Bath & Beyond for leaving Temares in place, saying he “must be held accountable for the company’s prolonged poor performance and destruction of shareholder value.”

The group has criticized the company for having “lost touch with modern retail,” including its “dizzying array of too similar items” in stores.

They are pushing a slate of 16 candidates, including former Gap CEO Jeff Kirwan and former Pier 1 Imports CEO Alexander Smith, to replace the entire board.

Analyst Chukumba on Monday agreed that the company has been slow to adopt to changing consumer habits.

“Merchandising has deteriorated,” he said, referring to the stores’ “hodgepodge” of “as-seen-on-TV” wares that “cheapen” the customer experience.

Bed Bath and Beyond said it new 10-member board, including Ann Yerger of the Council of Institutional Investors nonprofit, will give the board 9 out of 10 independent directors, with the CEO being the 10th director.

The new board will also form a “business transformation and strategy review committee to review all aspects of the company’s business transformation, strategy and structure,” the company said.

Bed Bath and Beyond declined to comment.