Bed Bath & Beyond, Inc. · NYSE:BBBY
Bed Bath & Beyond — Proxy Contest (April 2019)
14 slides from Bed Bath & Beyond's proxy contest presentation, Apr 16, 2019
Slide 1: Legion Partners
LEGION PARTNERS
Slide 2: Disclaimer – Important Information
2 Disclaimer – Important Information This presentation is for discussion and general informational purposes only . It does not have regard to the specific investment objective, financial situation, suitability or the particular need of any specific person who reads this presentation, and should not
Slide 3: Restore Bed Bath & Beyond
RESTORE BED BATH & BEYOND
Slide 4: BBBY Shares Have Materially Underperformed
(32%) (70%) (78%) (40%) (58%) 13% 28% 54% 410% 599% 19% 3% 30% 477% 754% 10% 46% 66% 324% 350% 1-Year TSR 3-Year TSR 5-Year TSR 10-Year TSR Since April 2, 2003 Bed Bath & Beyond Inc. Retail Peers Proxy Peers S&P 500 7 BBBY Shares Have Materially Underperformed Bed Bath shares have underperformed the
Slide 5: Prolific Value Destruction through Share Buybacks
8 Prolific Value Destruction through Share Buybacks Source: SEC Filings (1) Market capitalization as of March 25, 2019, the day before the Investor Group announced their nomination of directors Historical Share Buyback Program and Average Repurchase Price Bed Bath has repurchased $10.6 billion in st
Slide 6: Gross Margins are in Rapid Decline
41.4% 40.2% 39.7% 38.9% 38.2% 37.5% 36.0% 34.1% 30.0% 31.0% 32.0% 33.0% 34.0% 35.0% 36.0% 37.0% 38.0% 39.0% 40.0% 41.0% 42.0% FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Gross Margin % 9 Gross Margins are in Rapid Decline Gross Margin History Proprietary and Confidential Source:
Slide 7: SG&A is at Peak Levels
10 SG&A is at Peak Levels SG&A $’s and % of Sales Proprietary and Confidential SG&A growth has exceeded top - line expansion due, in our view, to increased investments in advertising and omnichannel initiatives – we believe, investments are not earning an appropriate return due to poor execution Sou
Slide 8: EBITDA Margin Declines Accelerating
11 EBITDA Margin Declines Accelerating Annual Adjusted EBITDA Margin Proprietary and Confidential Source: SEC Filings, Capital IQ 18.4% 16.8% 16.0% 15.1% 14.0% 11.7% 8.8% 6.3% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
Slide 9: What's Broken: Inventory Turns are Below Peers
12 What’s Broken: Inventory Turns are Below Peers Trailing inventory turns are a drag on return on invested capital Retail Brick and Mortar Peers: Inventory Turnover LFY (Trailing 4 Quarter Average Inventory) Source: SEC filings, Capital IQ, Investor Group estimates Significant slow turning furnitur
Slide 10: SKU – Deep Dive
13 SKU – Deep Dive Source: Legion research – store visits Bed Bath Crate & Barrel Sur La Table Williams Sonoma Walmart Target # of SKUs 37 19 26 35 11 20 Number of brands 8 4 5 4 3 5 Private Label % 5% 58% 65% 86% 82% 30% Average price $10 $10 $16 $19 $4 $8
Slide 11: The Result is a Worst-in-Class Valuation Multiple
14 The Result is a Worst - in - Class Valuation Multiple Proprietary and Confidential CY19 EV/EBITDA Ratio based on Consensus Estimates Source: SEC Filings, Capital IQ Valuation is among worst in retail which we believe is due to lack of confidence in management, poor governance, and limited transpa
Slide 12: Excessive Executive Office Compensation
$186,429,263 $63,155,190 $63,434,253 $0 $50,000,000 $100,000,000 $150,000,000 $200,000,000 $250,000,000 $300,000,000 $350,000,000 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Total Cumulative Compensation Steven Temares Total Compensation Warren Eisenberg Total Compensa
Slide 13: Governance Overview
16 Governance Overview We believe massive governance reforms are needed to address poor structure and years of abuse • Deeply entrenched board of directors with 8 of 12 directors serving for more than 15 years • Co - founders have been on the board for 48 years • ISS recommended “AGAINST” votes on t
Slide 14: The New Path Forward
17 The New Path Forward Bed Bath’s Best Days Are Ahead! • Replace entire 12 - person Board – with directors that have significant retail operating experience • Replace CEO • Implement our comprehensive Improvement Plan » Address merchandise architecture » Enhance in - store experience » Implement di