Bed Bath & Beyond Sells Cost Plus World Market, Buys Back More Stock

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Bed Bath & Beyond is rising early Tuesday, a day after it announced it would sell Cost Plus World Market, its last non-core brand.

Bed Bath & Beyond (ticker: BBBY) said that private-equity firm Kingswood Capital Management was buying the store chain for an undisclosed amount; the deal is expected to close before Bed Bath’s fiscal year ends in February. In addition, Bed Bath announced a new $150 million accelerated share repurchase program. It will be added to the $225 million buyback plan launched in October, which it has largely funded from noncore asset sales.

The shares closed down in regular trading Monday, but are up 1.9% to $19.23 at recent check. Bed Bath has gained more than 9% year to date, rising nearly six-fold from its lows in March.

Analysts were largely happy with the news. Raymond James’s Bobby Griffin reiterated a Strong Buy rating and $26 price target on the shares. He writes that the sale dovetails well with management’s strategy to focus on its flagship brands, and calls concerns that the lack of disclosure about the price is “shortsighted,” given its strong balance sheet. “Accordingly, at this point, the monetization of Cost Plus is not needed as a core part of the investment thesis and is just extra capital for an incremental accelerated share repurchase plan,” he says.

Robert W. Baird’s Peter Benedict reiterated an Outperform rating and $50 price target, writing that following the sale, Bed Bath’s “portfolio restructuring [is] seemingly complete.” He notes that some investors might have been disappointed that the release didn’t include any update for the third quarter, but overall it was good news: “With a streamlined portfolio of assets and strong balance sheet, Bed Bath has the focus and financial flexibility to drive its business transformation over the next few years.”

Telsey Advisory Group’s Joseph Feldman reiterated an Outperform rating and $28 price target. He says the sale will allow Bed Bath to focus on its four key categories: home, beauty, wellness, and baby. “Looking ahead, the planned initiatives—which target merchandising, pricing, stores, supply chain, digital, and technology—should result in a smaller, but more profitable Bed Bath & Beyond by 2023.”

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