Bed Bath & Beyond activists submit alternate board slate
NEW YORK – The activist investor group that has been challenging Bed Bath & Beyond to revamp its board, replace its CEO and make a series of other financial, operational and merchandising changes has said the company’s recently announced revamp of its board does not go far enough toward addressing the group’s concerns.
Instead the group has put forth its own new board recommendations and called for the immediate dismissal of CEO Steven Temares, claiming he is responsible for the company’s declining stock price and recent poor performance.
“The Board changes announced earlier this week by Bed Bath are not nearly enough and appear hastily constructed. We believe CEO Steven Temares must be terminated as soon as possible and new directors must be added to the Board that have direct experience in the following areas: customer-centricity, retail operations, sourcing, supply chain, private label, marketing, branding, e-commerce, and turnarounds,” the group said in a released statement. “That is why we carefully selected our nominees to address the long list of issues at Bed Bath which have led to prolonged poor performance and destruction of shareholder value. We look forward to discussing the details of our plan and our nominees’ ability to drive material value creation at the Company over the coming weeks.”
Proposed members of the activists’ board include Janet Grove, former corporate vice chairman for Macy’s ; Victor Herrero, former Guess CEO; Hugh Rovit, former CEO of Ellery Homestyles; Theresa Backes; current managing director and COO of Independent Pet Partners, LLC; Sue Ellen Gove former CEO of Golfsmith and COO of Zales; Cynthia Murray, founder and CEO of Stanmore Partners and former brand president and women’s clothing chain Chico’s; Jeff Kirwan, current Chairman of Maurices and former global president of Gap Brand at The Gap; Alex Smith, former Pier 1 CEO; David Duplantis, a former Coach, Inc., executive; John Fleming, former CEO of Global eCommerce at Uniqlo and former EVP, chief merchandising officer at Walmart; and Jeremy Liebowitz, founder of Alchemy-Rx and former vice president of digital commerce at Jarden Corporation.
The three activist funds, Legion Partners, Macellum Advisors and Ancora Advisors hold a five percent stake in the retailer and released their own “strategic plan” that can be seen in its entirety at restorebedbath.com/.
Details of the plan include an immediate search for a new CEO, a detailed SKU rationalization process, enhancement of in-store experience and an effort to expand gross margins that includes a direct sourcing strategy and the development of a private label program. Other parts of the plan include the implementation of cost cutting measures and, “an extensive reassessment of the increases in expenses over the last five years, including the explosion of the company’s advertising budget, seemingly endless array of initiatives that have failed to product meaningful results and extensive use of consultants.”
Highlights of the Investor Group’s Strategic Plan include:
- Revamp executive management – recruiting a top-flight CEO to lead Bed Bath going forward and instill a world-class winning culture. We plan to launch a search in the near term to address this key position.
- Reverse sales weakness – fixing the merchandise over-assortment problem through a detailed SKU rationalization process as well as developing a merchandise architecture that will better resonate with customers. Making the in-store experience something that drives traffic to the stores will be a major priority.
- Turn around Company culture – increase focus on employee training and education to improve motivation; empower employees to better use technology and improve customer experience.
- Significantly expand gross margins – improve vendor relations and drive profits by establishing a direct sourcing strategy and private label program as well as fixing mix issues created by the Company’s shift to commoditized and lower margin products.
- Implement cost cutting – conducting an extensive reassessment of the increases in expenses over the last five years, including the explosion of the Company’s advertising budget, seemingly endless array of initiatives that have failed to produce meaningful results and extensive use of consultants.
- Improve inventory – increasing inventory turns which would result in a substantial release of cash tied up in slow moving goods.
- Fix capital allocation – reviewing all non-core businesses and assessing their value as part of the business or their potential value to other parties. Excess cash created could be applied to share or debt repurchases, both of which are significantly accretive given discounted trading levels. Lastly, the increase in capital expenditures will be addressed.
Bed Bath & Beyond this morning released its response, indicating it was already or had completed some of the suggested initiatives as part of its own transformation efforts. For example, earlier this year, the retailer announced announced plans to launch six private label brands in 2019 and 2020. The first, Bee & Willow, launched in February.
“Other target areas identified include actions that have been, and continue to be, considered by Bed Bath & Beyond. The company will provide a more detailed response at the appropriate time,” the company said in its statement.
Bed Bath & Beyond said it will carefully review the activist shareholder group’s presentation and remained open to alternatives.