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Bed Bath & Beyond Sale-Leaseback Deal to Enhance Capital

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Bed Bath & Beyond Inc. (BBBY - Free Report) has completed the sale-leaseback transaction with an affiliate of Oak Street Real Estate Capital, garnering net proceeds of more than $250 million. The deal includes roughly 2.1 million square feet of commercial space with a distribution facility, office space and retail outlets. Management notified that it will continue to occupy the aforesaid space through long-term leases.

Notably, Bed Bath & Beyond will reinvest these proceeds in its core business and ongoing transformation efforts. Also, the proceeds will enable the company to make share repurchases and reduce outstanding debt. Per the company, the completion of this transaction marks the first step toward generating valuable capital in its business. This will facilitate Bed bath & Beyond to capitalize on its plans to strengthen organization and make it more efficient. This will enhance revenues, stabilize finances and boost shareholder’s value.

We note that the company, with its outside financial advisors, has been reviewing its retail space and owned real estate portfolio to optimize asset base. Consequently, it continues to assess some of its remaining owned real estate.

Through Bed Bath & Beyond’s transformation plan, management targets accomplishing four major near-term priorities. These are stabilizing and boosting top-line growth; resetting the cost structure; reviewing and optimizing asset base with its portfolio of retail banners; and refining the organization structure.

Moreover, the company plans to undertake inventory reduction of up to $1 billion over the next few months, with removal of older surplus inventory from its stores. This will enable it to reset inventory faster in stores and distribution centers. Moreover, cost savings, reduction of corporate workforce and other short-term actions are projected to reduce cost by $10 million, which will improve margins.

Price Performance & Zacks Rank

In the past three months, shares of the omni-channel retailer have surged 68.3% compared with the industry’s 7.2% rise.

Bed Bath & Beyond currently carries a Zacks Rank #2 (Buy).

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