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Bed Bath & Beyond (BBBY) Concludes Cost Plus World Market Sale

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Bed Bath & Beyond Inc. (BBBY - Free Report) concluded its previously announced sale of Cost Plus World Market (“CPWM”) to Kingswood Capital Management. The companies signed a transition services agreement to ensure business continuity after the transaction closes. As part of the deal, Kingswood Capital gains access to 243 stores, the CPWM online business, two distribution facilities and a corporate office in Alameda, CA. Moreover, CPWM will continue operating as a stand-alone retail brand.

The transaction forms part of Bed Bath & Beyond’s efforts to streamline its portfolio by offloading non-core and underperforming assets to focus on its core categories, including Home, Baby, and Beauty & Wellness. The sale of CPWM marks its fifth divestiture of 2020. Prior to this, Bed Bath & Beyond sold the Christmas Tree Shops retail banner, the institutional Linen Holdings business and a distribution facility in Florence, NJ, for cash proceeds of about $250 million. Earlier, it also concluded the sale of PersonalizationMall.com and One Kings Lane home décor unit.

The divestitures contributed significantly to strengthen the company’s financial flexibility. Apart from these, management earlier decided to close roughly 200 namesake stores in the next two years, which will bring down the overall store count to 1000.

The strategic actions are part of the company’s three-year transformation plan, which is likely to generate annual SG&A savings of $85 million. Savings are likely to be re-invested in omni-channel transformation and boost shareholder return.

Simultaneously, Bed Bath & Beyond is in the process of strategically expanding its store count apart from increasing the productivity of existing stores by adjusting the breadth and depth of its merchandise offerings to suit customer preferences. In 2019, the company announced its Store Network Optimization project, which is likely to generate savings of $100 million on an annual basis.

Also, it is progressing well with the store-remodeling program, wherein proof-of-concept stores will showcase destination categories, bed, bath, kitchen, and storage products. The company is now iterating this within 10 Houston stores, which is likely to be completed by February 2021. The three-year-long plan will be executed on more than 450 stores, accounting for nearly 60% of its sales.

As part of its efforts to rebuild its business foundation and create a durable business model, Bed Bath & Beyond recently announced a strategic restructuring program. The program comprises efforts to reorganize and simplify field operations, reduce management positions, and outsource several functions. The company intends to expedite the comprehensive restructuring program in a bid to achieve improved profits over the next two-three years. In this regard, adjusted EBITDA is anticipated to be $250-$350 million.

Alongside this, it expects SG&A savings of $85 million from the restructuring program announced in February 2020. Out of these cost savings, management intends to reinvest roughly $150-$200 million in future initiatives. Additionally, it anticipates realizing savings of nearly $150 million and $200 million, respectively, through cost-cutting actions and reduced discretionary costs as well as renegotiations with existing vendors.

 


 

Backed by these actions, shares of this Zacks Rank #3 (Hold) company have surged 165.4% in the past six months compared with the industry’s growth of 33.1%.

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