GameStop chairman's big stake reveals push for Bed Bath & Beyond turnaround.

• GameStop Chairman Ryan Cohen's nearly 10% stake in Bed Bath & Beyond through his investment company RC Ventures caused the retailer's stock to jump.
• In a letter to Bed Bath's board, Cohen, who is also the co-founder of online pet retailer Chewy, stated that he believes the retailer is facing challenges in regaining market share and managing supply chain issues.
• He suggested that the company should consider selling itself to private equity and separating its Buybuy Baby chain.
• Bed Bath stated that they would thoroughly examine their letter and aim to engage in a constructive dialogue regarding the ideas presented.

On Monday, the retailer's stock price jumped by 34% after Chairman Ryan Cohen disclosed that his investment company, RC Ventures, held a nearly 10% stake in the company.

Cohen, who is also the co-founder of an online pet retailer, wrote a letter to Bed Bath's board stating that he believes the retailer is facing challenges in reversing market share losses and navigating supply chain issues. Additionally, he criticized the top executives, including Bed Bath's CEO Mark Tritton, for receiving excessive compensation during periods of underperformance.

Cohen stated that Bed Bath should concentrate on enhancing its operations and inventory management to meet customer demand, while also considering potential strategic options such as separating Buybuy Baby and selling the entire company.

RC Ventures did not have any prior contact with Bed Bath before receiving the letter on Sunday evening.

We will carefully review their letter and hope to engage constructively around the ideas they have put forth," Bed Bath stated. "Our 2021 transformation plan, which we believe will create significant long-term shareholder value, is now in its first year of execution.

After settling a dispute with activist investors in 2019, Cohen pushed for changes at Bed Bath. The activist group had criticized Bed Bath's e-commerce presence compared to peers, including .

Tritton, a former executive with deep merchandising experience and a successful track record at Target, was appointed as CEO of the retailer soon after a settlement was reached. This appointment sparked hope among investors that a turnaround was imminent.

Tritton has been actively closing underperforming Bed Bath locations, selling noncore assets, increasing stock buybacks, remodeling stores, introducing private labels, and leading the company through a pandemic since becoming CEO.

Cohen believes that Bed Bath's "scattershot strategy" is not effective and suggests that the company would benefit from a private equity owner. He also believes that the Buybuy Baby chain is worth several billion dollars.

Cohen holds a nearly 10% stake in Bed Bath, making him a top five shareholder in the retailer, which had a market value of roughly $1.6 billion as of Friday's market close. Despite this, Bed Bath shares have dropped nearly 45% in the last 12 months.

Cristina Fernandez, an analyst at Telsey Advisory Group, advised clients that Bed Bath must enhance its operations and inventory assortment, two challenges the retailer faced prior to the pandemic. Additionally, the company should accelerate the delivery of online orders, as it trails competitors in this area, she stated.

According to Fernandez, the sale of the entire GameStop company is less certain due to past private equity opportunities and no suitors emerging. Cohen also pushed for a sale at GameStop, but it did not occur, she noted.

Zachary Fadem, a Wells Fargo analyst, stated that Bed Bath has weakening fundamentals and is "structurally disadvantaged."

Given Bed Bath's 26% short interest and low investor expectations for better results, it is understandable that the stock may move higher today.

In his letter, Cohen stated that although he is concentrating on GameStop, he is unable to join the Bed Bath board due to his focus on GameStop. However, he emphasized that this does not impede his ability to hold the board and management accountable.

In January 2021, Cohen joined GameStop's board and contributed to a surge in its shares due to a Reddit-fueled movement. He later became chairman in June of that year. Cohen is also the co-founder of Chewy, where he served as CEO from 2011 to 2018.