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Bed Bath & Beyond Inc. BBBY, -0.78% announced Monday that it has entered into a definitive agreement to sell Cost Plus World Market for an undisclosed amount to Los Angeles-based private-equity firm Kingswood Capital Management.
The deal includes 243 bricks-and-mortar stores, two distribution facilities, an e-commerce business and a corporate office in Alameda, Calif.
Cost Plus World Market is expected to continue operating as a stand-alone brand.
See: Bed Bath & Beyond has laid out its transformation plan, now analysts are focused on execution
The deal marks the final sale of Bed Bath & Beyond’s non-core businesses. For example, the company has also sold PersonalizationMall.com to 1-800-Flowers.com Inc. FLWS, +5.40% and divested its One Kings Lane home décor business earlier this year.
Bed Bath & Beyond laid out a three-year transformation plan during its investor event in late-October that included the sale of non-core assets with proceeds funding its resumed share buyback program.
The retailer also announced Monday that it has approved an additional $150 million accelerated share buyback program (ASR), in addition to the $225 million program approved on Oct. 28. Both are expected to be complete by the end of the fiscal year on Feb. 27, 2021.
The new approval will bring the total for the company’s share repurchase program to $825 million over the next three years, up from $675 million previously.
Shares of Bed Bath & Beyond fell 1% in Monday trading.
“While we understand the investor pushback that management not disclosing the terms of the transaction implies the amount is not meaningful versus other asset sales, we believe that is mostly shortsighted,” wrote Raymond James analysts led by Bobby Griffin.
“[W]e view the announced ASR as a sign management remains comfortable with the progress they are seeing in results and would not be spending incremental capital if trends were deteriorating.”
And both Raymond James and GlobalData think the sale frees Bed Bath & Beyond to focus on its core businesses.
“In terms of many operational aspects, Cost Plus World Market is a better retailer than that Bed Bath & Beyond,” wrote Neil Sauders, managing director at GlobalData.
“Its range is more focused and innovative, store layouts and merchandising are superior, and it has a strong base of loyal customers. However, the business lacks scale and Bed Bath & Beyond has neither the ambition nor the will to grow it in a significant way.”
However, Cost Plus Market’s online business needs work, and stores are hurt by the impact of the coronavirus pandemic.
“This issue may resolve itself in 2021, but Bed Bath & Beyond does not want to run the risk of having another brand to fix in addition to remedying the problems at its main banner.”
Separately, Bed Bath & Beyond announced a three-day free same-day delivery promotion with Shipt that will launch on Monday for the namesake retailer and buybuy Baby. The deal applies to orders of $39 or more, and items purchased by 1 p.m. will be delivered the next day.
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Customers will also get a 20% discount Dec. 17 through Dec. 24 on purchases made using curbside pickup or buy-online-pickup-in-store.
Bed Bath & Beyond is scheduled to report fiscal third-quarter earnings on Jan. 7, 2021.
Bed Bath & Beyond shares have rallied 49.6% over the past three months, and nearly 24% over the past year. The benchmark S&P 500 index SPX, +0.36% has gained 16% for the past 12 months.
