Bed Bath & Beyond (BBBY) Divests Underperforming Assets

In order to simplify its portfolio, Bed Bath & Beyond Inc. BBBY recently announced the completion of the divestiture of the Christmas Tree Shops retail banner, institutional Linen Holdings business and a distribution facility situated in Florence, NJ, for cash proceeds of about $250 million. Notably, the latest action marks a significant milestone in its restructuring plan, thus optimizing portfolio and unlocking potentials in business. This move will also help the company to efficiently focus on the Home, Baby, Beauty and Wellness markets.

We note that Bed Bath & Beyond remains on track with its strategic restructuring program. The program comprises of efforts to reorganize and simplify field operations, reduce management positions and outsource several functions. Management intends to expedite this comprehensive restructuring program in a bid to achieve improved profits over the next two-three years. The company will continue to divest its additional non-core assets, and through the divestiture of such assets, it generated above $750 million.

Management expects annual SG&A savings of $85 million from the strategic restructuring program. Savings are likely to be re-invested in omni-channel transformation and boost shareholder return. Encouragingly, it recently accelerated share repurchase by $225 million, in the context of its authorized share-repurchase plan summing up to $675 million in the next three years.

Last month, management announced plans to sell the aforementioned assets. The sale agreement of Christmas Tree Shops with Handil Holdings, LLC included its 80 brick-and-mortar Christmas Tree Shops and a distribution center in Middleborough, MA. It also unveiled that the Linen Holdings business will be sold to Lion Equity Partners through its affiliate The Linen Group, LLC, and will be merged with Riegel Linen, which is its existing portfolio company. Further, Bed Bath & Beyond signed an agreement to sell the Florence, NJ-based distribution center to an institutional buyer, as part of its efforts to streamline and modernize distribution and fulfillment capabilities to enhance omni-channel services. The deal allows Bed Bath & Beyond to continue operations for business continuity during the transition period through a lease agreement.

In another release, the company also announced a latest Cozy Backyard Holiday collection so that customers can enjoy a winter wonderland at home. The collection is designed in such a manner with an assortment of furnishings, decor, design and expert tips, so that customers can celebrate traditions with an outdoor twist this holiday season. The company has also announced plans to introduce same-day delivery at Bed Bath & Beyond and buybuy BABY stores, and also online ahead of this holiday season. It has also partnered with Instacart and delivery service provider Shipt, owned by Target TGT, to improve its omni-channel capabilities. Apart from the Bed Bath & Beyond and buybuy BABY websites and mobile apps, the same-day delivery services will be available to customers through the Shipt and Instacart websites and mobile apps.

Over the past three months, shares of this Zacks Rank #3 (Hold) company have increased 57.2% against the industry’s 2.1% dip.

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Boot Barn BOOT is also a Zacks Rank #1 stock with a long-term earnings growth rate of 20%.

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