I ❤️ $BBBY: How I’d Pitch Ryan Cohen 🛏 🛁 ↗️ 🌝

I love Cohen’s strategic narrative about the future of the aging big-box giant. It’s street smart, but it’s also smart smart. Here’s what I’d pitch to him.

Even though Bed Bath & Beyond is considered a boomer brand, it enjoys a cult following and scratches a modern itch for stuff-at-home upgrades. It’s also an unlikely — but well-positioned — contender in retail.

TL;DR I think Cohen’s suggestions are Very Ryan Cohen and my interpretation is something like “study Target.”

What the Fuck is Up, Ryan

Chewy Co-Founder and activist investor Ryan Cohen (of Gamestop fame) has acquired a 9.8% stake in $BBBY. The company says they’ve never communicated with Cohen’s RC Ventures, but the pressure is on either way, following Cohen’s letter to the board. Stocks began soaring this week in reaction to Cohen’s announcement (GameStop PTSD, but maybe not a short squeeze), and the company will need to address the buzz.

The key components of Cohen’s letter include:

• Narrow its focus
• Fix operations
• Maintain the right inventory mix to meet demand
• Consider separating or selling buybuy Baby, Inc. (“BABY”)
• Consider selling entire company

While Cohen is not in a position to join BBBY’s board given his position as Chairman of Gamestop, he doesn’t rule out RC Ventures seeking “to hold the board and management accountable if necessary.”

So. Let’s Get This Out of the Way.

Most of the headlines are dragging the “full sale of the company” out, but that’s not what’s most interesting about the letter. It’s an attention-grabber, for sure, and a guarantee that the statement would make a big impact on the street, and it might be a wee threat, but that’s probably all.

What is Cohen suggesting, then?

Between the lines, it seems like Cohen is posturing after purchase, shining a light on poor numbers. He’s also just sort of making fun of CEO Mark Tritton, who has been at the helm of the new strategy for two years, while the company has underperformed the S&P Retail Select Index by ~58% on an absolute basis.

“From our vantage point, Bed Bath’s strategy looks far better in a PowerPoint deck than it does in practice.“It is full of ‘principles’ and ‘pillars’ that high-priced management consultants probably thought would placate information-hungry analysts and satisfy shareholders.”

The translation of his jab at the PowerPoint is “There’s been no execution.” Lack of execution stems from a strategy that’s got too many competing lanes (cost cutting, innovation, infrastructure, etc.), creating a distracted c-suite.

So yeah, that’s a flex.

But let’s dig in.

1. Lack of execution indicates internal disagreement and competing budgets.
2. Operations must lead, but they’re not moving fast enough.
3. Transforming operations is painful, few CEOs have the stomach when push comes to shove.
4. It’s remarkable that buybuy Baby hasn’t been spun-off by now. $1.5B expected earnings represent a ton of much-needed debt payoff.
5. Cohen doesn’t think Tritton has developed a meaningful supply chain strategy.

‘Customer Experience’ is both buzz and brilliant. Without the how, it’s just a PDF.

“They would have been better served by front-loading the modernization of its supply chain and technology stack before engaging in more fanciful pursuits.”

Snarky but wise advice. Tritton described their strategy as a customer experience project, but the how has been blurry at best. It’s tempting to redress the windows when you’re down 48% in the last year, but Cohen knows that the back-of-house is where change begins. Especially in 2022, a rapid tackle of supply chain is critical above all else.

Hang the decorations later.

“Finish fortifying the infrastructure, make remaining store fleet improvements, and prioritize core assortment and inventory fixes to meet near-term demand.”

Prioritizing assortment and inventory fixes sounds simpler than it is, of course, but is a critical part of any future success. Cohen advised Gamestop on inventory reduction and focus as well. Think about the off-brand retail wasteland Amazon has turned into, and the pain of searching for products on the web. Now consider yourself a retail business trying to sell ads as cookies die. The differentiator becomes intentional curation grown from a deep understanding of the market gaps and customer research.

The differentiators are intentional curation, a deep understanding of the market, and customer research led by service design.

What Is This Project Like?

Here’s how I’d start thinking about finding the ‘how’ for Mr. Cohen and $BBBY.

Operations & Infrastructure Audit

What is the supply chain ecosystem? Where are the most impactful pain points? What can we change and what can never change? Look at both supply, fleet, shipping as well as organizational structure, stores, etc.

Critical outputs:

A service blueprint that visualizes the entire system, connecting back-end to customer experience, identifying weak points and places to make the biggest impact quickly. Like, double down on BOPIS and immediately review SKUs to find which imports aren’t worth the pain. And don’t blame massive loss on vendor unreliability, even if it’s true. It looks bad.

Recommendations for store closings, role reductions, smaller footprints, more online, as well as guidance on how to reorg internally to best support this effort. Some teams might need to blend, but most important will be a cross-org agreement on the path forward, communicated clearly and consistently to employees.

Inventory Audit

Review profitability and loss on regularly stocked inventory. Identify can’t-lose brands. Find products that were high-demand. Look at departments, but bring findings together for a holistic overview.

Critical output:

Recommendations on products to retire, products to be online only, products to be BOPIS, brands to feature, products to prioritize. Roadmap that aligns with infrastructure plan. Identify short term wins that don’t distract from bigger change.

Mr. Cohen, RC Ventures, jump in my DMs for my complete pitch.

🛏🛁🌝