New York (CNN Business)Bed Bath & Beyond, facing heavy pressure from a trio of activist investors, will replace its veteran chief executive as the struggling company attempts to survive upheaval in retail.
Steven Temares, who has been Bed Bath & Beyond's CEO since 2003, stepped down on Monday and resigned as a member of Bed Bath & Beyond's board of directors. Temares will be replaced on an interim basis by Mary Winston, former chief financial officer at Family Dollar. She will be, for now, one of the handful of Fortune 500 female CEOs.
The company's board of directors said it will form a search committee to find a permanent CEO. It will try to find a CEO who has "transformation and innovation experience" in retail.
Temares' resignation is "a necessary first step in revitalizing the fortunes of the beleaguered retailer," Neil Saunders, managing director at GlobalData Retail, said in a note to clients on Monday. Bed Bath & Beyond needs to hire a leader who can "put in place a plan to refashion the company to the modern realities of retailing."
Cluttered stores and confusing strategy
Bed Bath & Beyond has struggled to compete with traditional retailers such as Walmart (WMT) and Target (TGT), as well as online retailers Amazon (AMZN) and Wayfair (W) and discounters like TJ Maxx and its HomeGoods arm. Walmart, Target and Amazon have launched cheaper private label home brands, while Wayfair has spent heavily on advertisements to get customers familiar with its brand.
Bed Bath & Beyond's (BBBY) stock has plummeted in recent years and same-store sales have also fallen two years in a row.
In March, three activist funds built a roughly 5% stake in Bed Bath & Beyond and attempted to replace the company's entire board of directors and CEO Temares.
The group — Legion Partners, Macellum Advisors, and Ancora Advisors — blamed cluttered stores and a confusing pricing strategy for Bed Bath & Beyond's prolonged slump. The group wants Bed Bath & Beyond to trim its product selection and beef up the in-store experience to drive traffic back to stores. The funds also pressuring the company to improve profit margins by selling more of its own labels.
Bed Bath & Beyond has fallen behind rivals and will replace its longtime CEO.
Since the activist fight kicked off, Bed Bath & Beyond has taken steps to show investors it has a turnaround plan.
Bed Bath & Beyond nominated several new directors to its board, including a new lead director, and revamped its corporate governance structure. It also announced plans to shut down about 40 locations this year and test new ideas with "lab" stores that sell more home decor and food products.
But those steps were not enough to placate the activist group. The investors sued Bed Bath & Beyond last week for keeping its nominees off the board.
On Monday, Patrick Gaston, independent chairman of the Bed Bath & Beyond board, said "the board determined that now is the right time to identify the next generation of leadership."
Saunders, the GlobalData analyst, warned that there will be "many more painful quarters ahead" for Bed Bath & Beyond. He said the company should consider closing underperforming stores and investing online and in stores that are more profitable.
Although those investments will "cause disruption" and pressure the retailer's profit, they are the "price for long term survival," he said.
