Bed Bath & Beyond shares jump after sale of two businesses

Bed Bath & Beyond has sold two of its businesses, part of a turnaround

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Bed Bath & Beyond Inc. stock jumped 5% in Wednesday trading after the retailer announced that it had sold its Christmas Tree Shops and Linen Holdings businesses in separate deals.

Bed Bath & Beyond
also sold a Florence, N.J. distribution center.

The sales are expected to generate about $250 million in
aggregate. The retailers says it could also sell other “non-core assets.”

Handil Holdings LLC has purchased all 80 Christmas Tree
Shops stores along with a Middleborough, Mass. distribution center. Handil expects
to continue to operate the retailer as a standalone brand. The transaction is
expected to close in November.

The Linen Group LLC, an affiliate of Lion Equity Partners, has purchased Linen Holdings, which will be merged with another Lion Equity business, Riegel Linen. That sale is expected to close this month.

Read: Bed Bath & Beyond turnaround under way, but analysts say outside forces are also giving the company a boost

The sale of the Florence distribution center is expected to
close this month as well, with Bed Bath & beyond signing a lease with the
buyer during a transition period.

In addition to offloading some of its businesses, the company also aims to streamline its merchandise and will reveal a store redesign on Oct. 28, according to The Wall Street Journal.

“We continue to view the risk/reward as positive and believe
the potential turnaround offers more incremental upside, than incremental
downside, especially with ~$2.4 billion in available liquidity (including asset
sale announcement), further cash flow from inventory reductions, and a positive
net cash position,” wrote Raymond James analysts led by Bobby Griffin.

Raymond James rates Bed Bath & Beyond shares strong buy
with a $26 price target, up from $22.

Raymond James is also upbeat about Bed Bath & Beyond’s additions
of curbside pickup and other services.

UBS analysts say the sale of the two businesses “should not come as a surprise.” Analysts rate the stock neutral with a $20 price target.

Watch: Why retail bankruptcies won’t necessarily create a ‘retail apocalypse’

“Being spread so thin across several concepts has probably
contributed to some of the retailer’s struggles, in our view,” analysts said.

“While this recent move is clearly a positive, we think Bed Bath & Beyond still has a lot of heavy lifting to do. In our view the company needs to better curate its merchandising, revamp its supply chain, improve its pricing tools, and wean away from solely relying on coupons to drive sales.”

UBS anticipates a long turnaround road ahead and warns of
stock volatility.

Bed Bath & Beyond shares  are up a whopping 179% over the past three months, and have gained 35.3% for the year to date. The S&P 500 index
is up 8.8% for 2020 so far.

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