Bed Bath & Beyond
stock was jumping Wednesday morning following news that the home-goods retailer is selling some noncore assets, including its Christmas Tree Shop chain.
The company said late Tuesday it was also selling its Massachusetts-based distributor, its institutional Linen Holdings business, and a distribution center in New Jersey. The company said it expected to generate about $250 million from the deal.
Bed Bath & Beyond (ticker: BBBY) is in the midst of a turnaround, prompted by years of poor management. Last year, activist investors got involved, prompting management changes and other moves. Still, even with consumers spending more on their homes during the Covid-19 crisis, the company had seen little benefit.
More recently the picture has started to brighten. The company introduced same-day shipping to complement its other omnichannel offerings such as click-and-collect services, and Bed Bath reported a surprise profit in its latest quarter, an indication that new management has introduced changes that are gaining traction and could reverse its long losing streak.
Bed Bath shares were up 8.2% to $23.96 as the
Dow Jones Industrial Average
Analysts appeared happy with the news. Raymond James’s Bobby Griffin reiterated a Strong Buy rating on the shares and raised his price target by $4 to $26. He wrote that the asset sales dovetail with management’s strategy of focusing on core concepts, including home, baby and beauty. He said the transaction will further shore up the company’s cash position. “which will provide ample flexibility to execute the turnaround.”
Telsey Advisory Group’s Joseph Feldman reiterated an Outperform rating and $23 price target on the shares, writing that the move not only allows management to focus on the Bed Bath and buybuyBaby banners, but the proceeds will provide “flexibility for the company to invest in the core business, pay down debt, or return it to shareholders in the form of share repurchases or dividends.”
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