Bed Bath & Beyond, continuing to take quick and dramatic steps under its new CEO, has reportedly sold off half its real estate—including its corporate offices, at least one distribution center and an unspecified number of stores—to a private-equity firm that will lease the space back to the retailer.
The move is yet another reversal of the strategy of the prior management, which touted it had not “mortgaged” its future by selling off its real estate.
In the process, BBB will reportedly clear about $250 million in proceeds, which will go toward paying down debt, possible further stock buybacks and working capital for its turnaround efforts. The news of these moves comes from a Wall Street Journal story that quotes people “familiar” with the situation, although the company itself has not confirmed the report.
That could come on Wednesday when it discloses the results of its third quarter, the first time new CEO Mark Tritton will speak publicly about his plan for the troubled retailer. In December, Tritton dramatically removed virtually the entire C-level management layer of Bed Bath, including its chief merchant and chief marketing officer. Wednesday’s announcements could include successors for some of those positions as well as more details on how Tritton plans to reinvigorate a retailer that has suffered from negative comps, declining overall sales and its first-ever quarterly loss over the past year. Tritton came on board in November following a purge led by an outsider investor group that saw the departure of its former CEO as well as the company’s two legendary founders, Warren Eisenberg and Len Feinstein.
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Retailers selling and then leasing back their physical spaces is not a new tactic, but it has been viewed with caution by some companies in similar situations as Bed Bath. Several years ago, outside investor William Ackman tried to get Target to do a similar sale, but the company resisted, and Ackman went on to his ill-fated investment in JC Penney. Macy’s has done limited asset sales but has resisted widespread use of this action. Other retailers, likes Sears, have embraced it with poor results.
Bed Bath itself made it a point in its most recent proxy statement—issued by its interim management—that it had not gone this route. “We have not mortgaged our future, as have some in the retail sector,” it wrote over the summer. At the time, it said it had some 940,000 square feet of “leased and owned facilities for procurement and corporate office functions,” the owned portion seemingly part of this new transaction.
It also said at the time that it operated 43.1 million square feet of retail store space, without specifying how much it owned and how much it leased. Some of this space would also be part of this sale-and-leaseback arrangement, although, again, specific numbers are conjecture at this point.
There could also be further details on company plans for its secondary nameplates, including buybuy Baby and Harmon beauty, the WSJ report said. BBB had previously said it was evaluating how to proceed with is collection of myriad retail divisions.
How much Wednesday’s meeting will provide in the way of answers will be highly anticipated. For a company that admitted it was “risk adverse” and tended to move exceedingly slowly at making changes, Tritton has made his mark quickly and boldly. One has a feeling he is far from done.