Bed Bath & Beyond Shares Stage Biggest Rally in 10 Years
October 10 2019 - 4:18PM
Dow Jones News
By Karen Langley
Shares of Bed Bath & Beyond Inc. surged Thursday, on course
for their best day in more than a decade, after the retailer named
a new chief executive -- and short sellers scrambled to cover their
positions.
The company said late Wednesday that the head of merchandising
at rival Target will become its new CEO, helping to push Bed Bath
& Beyond stock up 20% to $11.97. Shares are poised for their
largest one-day increase since April 8, 2009, when they jumped
24%.
Investors liked the new leadership for the housewares chain,
which has been struggling to adapt to the changing retail
environment and has been looking for a permanent leader since
earlier this year. The new chief executive, Mark Tritton, will join
in early November, ahead of the critical holiday shopping
season.
Bank of America Merrill Lynch analysts said in a research note
that Mr. Tritton was "an ideal choice," who has experience in
sourcing, merchandising and online retail, areas where they say Bed
Bath & Beyond needs improvement.
The company's shares are down 85% from their all-time closing
high of $80.48 in January 2014, and many investors expect the stock
to continue to fall.
About 53% of the company's publicly available shares are sold
short, according to FactSet.
Short sellers sell borrowed stock, hoping to buy the shares back
at a cheaper price to lock in a profit. A squeeze occurs when short
sellers respond to a share-price jump by buying back stock they
have sold in an effort to keep their losses from mounting.
Analysts note the 1,000-store chain faces fundamental
challenges.
Goldman Sachs analysts wrote that Bed Bath & Beyond likely
has too many stores and a supply chain that needs investment, among
other hurdles.
Analysts at UBS questioned whether a retailer that has
conditioned customers to shopping with coupons can maintain that
strategy in an age of price transparency.
With the company's shares up about 20% Thursday, "we see the
market putting the cart before the horse," Wells Fargo analysts
wrote, saying that while Mr. Tritton appears to be a strong hire,
it isn't guaranteed that Target's success can be repeated at Bed
Bath & Beyond.
(END) Dow Jones Newswires
October 10, 2019 16:03 ET (20:03 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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