By Svea Herbst-Bayliss
(Reuters) -Billionaire investor Ryan Cohen said on Sunday he now owns nearly 10% of Bed Bath & Beyond (NASDAQ:BBBY) and wants the housewares retailer to explore strategic alternatives that include a full sale of the company.
Cohen, who co-founded online pet products retailer Chewy (NYSE:CHWY) and is chairman of the board of videogame retailer GameStop Corp (NYSE:GME), criticized Bed Bath & Beyond, which is worth roughly $1.6 billion, for an "overly ambitious" strategy, overpaying its top executives and failing to reverse market share losses.
"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 and a full sale of the Company," Cohen wrote in a letter to the company's board.
Cohen said in the letter he owns 9.8% of the company through his investment company RC Ventures LLC.
Bed Bath & Beyond said it would review Cohen's letter. Shares of the highly shorted company were up about 60% at $26 on Monday.
Short interest in the company has risen 12% over the past week, with 30.9 million shares shorted, about 33.3% of the free float, S3 Partners said. The analytics company expects the trend to reverse on the back of the RC Ventures news this morning.
Bed Bath & Beyond was a part of the meme stocks phenomenon last year where retail investors fueled eye-popping rallies in certain shares coordinating through online message boards Reddit and Stocktwits, costing short sellers billions of dollars.
Cohen is pushing for changes after three activists and the company reached a settlement in 2019 where four new directors were added to the board. The group criticized the retailer for failing to adapt to shoppers' growing preferences to buy online.
Soon after the settlement, the company hired Mark Tritton as CEO, but Cohen said Tritton has failed to navigate supply chain volatility and presided over a 14% drop in core sales from a year ago in the most recent quarter.
Still Tritton was paid about $27 million over the past two fiscal years, Cohen said, noting it was far more than what CEOs earned at far bigger retailers including Macy's (NYSE:M), Kohl's (NYSE:KSS), and Dollar Tree (NASDAQ:DLTR).
Cohen said he is focused on the long term and won't criticize management for laying the foundation for future value creation, underscoring his own style at GameStop where he has given few details about how he plans to resuscitate the company.
At Bed Bath & Beyond, Cohen wants the company to streamline what he calls a "scattershot strategy" and consider separating the buybuy Baby chain or selling the whole company, which he says might be better off owned by a private equity company.