By Karen Langley 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 11, 2019).

Shares of Bed Bath & Beyond Inc. surged Thursday, registering their best day in six months, after the retailer named a new chief executive -- and short sellers scrambled to cover their positions.

The company said late Wednesday that the head of merchandising at rival Target will become its new CEO, helping to push Bed Bath & Beyond stock up 22% to $12.09. Shares made their largest one-day percent increase since March 26, when they rose by a slightly larger percentage.

Investors liked the new leadership for the housewares chain, which has been struggling to adapt to the changing retail environment and has been looking for a permanent leader since earlier this year. The new chief executive, Mark Tritton, will join in early November, ahead of the critical holiday shopping season.

Bank of America Merrill Lynch analysts said in a research note that Mr. Tritton was "an ideal choice," who has experience in sourcing, merchandising and online retail, areas where they say Bed Bath & Beyond needs improvement.

The company's shares are down 85% from their all-time closing high of $80.48 in January 2014, and many investors expect the stock to continue to fall.

About 53% of the company's publicly available shares are sold short, according to FactSet.

Short sellers sell borrowed stock, hoping to buy the shares back at a cheaper price to lock in a profit. A squeeze occurs when short sellers respond to a share-price jump by buying back stock they have sold in an effort to keep their losses from mounting.

Analysts note the 1,000-store chain faces fundamental challenges.

Goldman Sachs analysts wrote that Bed Bath & Beyond likely has too many stores and a supply chain that needs investment, among other hurdles.

Analysts at UBS questioned whether a retailer that has conditioned customers to shopping with coupons can maintain that strategy in an age of price transparency.

With the company's shares up about 20% Thursday, "we see the market putting the cart before the horse," Wells Fargo analysts wrote, saying that while Mr. Tritton appears to be a strong hire, it isn't guaranteed that Target's success can be repeated at Bed Bath & Beyond.

 

(END) Dow Jones Newswires

October 11, 2019 02:47 ET (06:47 GMT)

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