Bed Bath & Beyond (NASDAQ:BBBY) has been one of the big victims of this year’s Retail Armageddon, the shares falling from an April high of $19.41 to a low of $7.40 in August. But BBY Stock is enjoying a pop of over $2 per share after announcing that Australia-born Mark Tritton, who had been chief merchandising officer for Target (NYSE:TGT), is becoming its CEO.
The reaction is a tribute to Target CEO Brian Cornell, who joined in 2014 after a computer hack took down his predecessor. Target now trades at more than twice its level of mid-2017, helped in part by store brands created under Tritton.
Can Tritton really take Bed Bath beyond? Can he step up as CEO, or did he reach his full potential as an assistant coach?
Mark Tritton and BBBY Stock
The 55-year-old Tritton, who was earning $5 million per year at Target, and learned his stuff at Nordstrom (NYSE:JWN) before jumping to Cornell’s team in 2016. He has also worked for Timberland and Nike (NYSE:NKE).
Bed, Bath & Beyond has been looking for a CEO since May, when Steven Temares stepped down.
Tritton made his reputation at Target with house brands which compete with name brands on style. They have names like A New Day, Goodfellow & Co., Project 62 and Cat & Jack. That last is a kids’ brand that saw $2 billion in sales during its first year and became a “trip driver,” a brand that drove people specifically to the store.
Walmart’s (NYSE:WMT) strategy, by contrast, has been to buy existing brands like Bonobo’s and Bare Necessities. Costco Wholesale (NASDAQ:COST) has put all its effort into delivering high quality through its Kirkland brand. Amazon.Com (NASDAQ:AMZN) has taken a traditional route of value through its Amazon Basics line.
The Turnaround Challenge for BBBY Stock
The challenge at Bed Bath & Beyond is like the one Cornell faced five years ago. The company has averaged $12 billion in sales per year but has endured four straight quarters of losses, leading it to announce 60 store closings so far in 2019. Sales at stores open over a year sank 6.7% in the most recent quarter.
If Tritton can eke out even a small profit, however, BBBY stock can rise quickly. Its current market cap is barely $1.5 billion, and it currently has a 17 cent per share dividend yielding 6.84%.
There is almost $1 billion in cash on the books, and long-term debt is just $1.5 billion. Its strengths already had analysts nibbling on it. Two of them jumped to “Buy” recommendations over the last three months, although most remain in the non-committal “hold” camp.
The real problem at BBBY should be right up Tritton’s alley. Its merchandise is mediocre. It’s an old-fashioned “category killer” in the mold of Best Buy (NYSE:BBY) (which could be good) or the late Toys R Us (which would be bad). The website looks great, if it’s 2005, with brand names on sale prominently displayed.
The company launched its first private house brand, Bee & Willow Home, early this year, with plans to launch five more brands by the end of next year.
The Bottom Line on BBBY Stock
The BBBY challenge sets up very well for Tritton, if the economy holds up.
The company has already taken its first step into private brands. Its balance sheet is reasonably healthy. What it seems to need is pizzazz, and that’s what Tritton is known for.
Joining the crowd that’s nibbling on the stock is speculation, but it’s a reasonable one, assuming Tritton really deserves credit for Target’s turnaround.
Dana Blankenhorn is a financial and technology journalist. He is the author of the environmental story, Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AMZN.