Bed Bath & Beyond has sold two of its businesses, part of a turnaround
Bed Bath & Beyond Inc. stock jumped 5% in Wednesday trading after the retailer announced that it had sold its Christmas Tree Shops and Linen Holdings businesses in separate deals.
Bed Bath & Beyond BBBY, +6.05% also sold a Florence, N.J. distribution center.
The sales are expected to generate about $250 million in aggregate. The retailers says it could also sell other “non-core assets.”
Handil Holdings LLC has purchased all 80 Christmas Tree Shops stores along with a Middleborough, Mass. distribution center. Handil expects to continue to operate the retailer as a standalone brand. The transaction is expected to close in November.
The Linen Group LLC, an affiliate of Lion Equity Partners, has purchased Linen Holdings, which will be merged with another Lion Equity business, Riegel Linen. That sale is expected to close this month.
The sale of the Florence distribution center is expected to close this month as well, with Bed Bath & beyond signing a lease with the buyer during a transition period.
In addition to offloading some of its businesses, the company also aims to streamline its merchandise and will reveal a store redesign on Oct. 28, according to The Wall Street Journal.
“We continue to view the risk/reward as positive and believe the potential turnaround offers more incremental upside, than incremental downside, especially with ~$2.4 billion in available liquidity (including asset sale announcement), further cash flow from inventory reductions, and a positive net cash position,” wrote Raymond James analysts led by Bobby Griffin.
Raymond James rates Bed Bath & Beyond shares strong buy with a $26 price target, up from $22.
Raymond James is also upbeat about Bed Bath & Beyond’s additions of curbside pickup and other services.
UBS analysts say the sale of the two businesses “should not come as a surprise.” Analysts rate the stock neutral with a $20 price target.
“Being spread so thin across several concepts has probably contributed to some of the retailer’s struggles, in our view,” analysts said.
“While this recent move is clearly a positive, we think Bed Bath & Beyond still has a lot of heavy lifting to do. In our view the company needs to better curate its merchandising, revamp its supply chain, improve its pricing tools, and wean away from solely relying on coupons to drive sales.”
UBS anticipates a long turnaround road ahead and warns of stock volatility.
Bed Bath & Beyond shares are up a whopping 179% over the past three months, and have gained 35.3% for the year to date. The S&P 500 index SPX, +0.08% is up 8.8% for 2020 so far.