What's getting missed as Bed Bath & Beyond unravels: Morning Brief
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Tuesday, September 6, 2022
Today's newsletter is by Brian Sozzi, an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
I spent Labor Day weekend reflecting deeply on how I wanted to approach reporting on the suicide of Bed Bath & Beyond CFO Gustavo Arnal. I didn't really discover a comfortable answer.
I've been critical of how Bed Bath & Beyond has been run and blunt about what lays ahead for the home goods retailer. That comes with the territory of being a journalist since it's what we signed up to do: hold truth to power.
At the same time, a family man took their own life and that must be handled by a journalist with great care. I'd argue that a few outfits aren't doing that, instead playing up Arnal's stock sales in August and the fact he signed off on 150 store closures last week. That approach is a shame.
So what I have for you essentially boils down into two parts.
First, the human component.
Arnal, 52, fell to his death from the New York City skyscraper known as the "Jenga" tower on Friday afternoon. Reports say he jumped from the 18th floor. Myself and others just had listened to Arnal on a conference call Wednesday where Bed Bath & Beyond outlined its near-term turnaround strategy.
Arnal was an early hire of former Bed Bath & Beyond CEO Mark Tritton in 2020, having risen the executive ranks in finance capacities at P&G, Walgreens, and Avon. Arnal's LinkedIn page was deleted on Monday.
Suffice it to say, landing the CFO job at Bed Bath & Beyond was the highest-ranking position in his career. If he were able to save Bed Bath & Beyond, it would have likely put him on a CEO track.
People that knew Arnal tell me he was a family man through and through, as well as a great teammate and leader. What he did on Friday was incredibly out of character, these people said.
"Our memory of Gustavo is of a great professional and a happy family man, very devoted to his lovely family," one former colleague at P&G told me. He was a very smart 'work hard play hard' man, always ready to share his energy and smiles with the people around him, both in the office and outside."
Another former coworker at P&G echoed that sentiment to me via email.
"He was a really good guy, well-liked, straight 'up-the-middle' kind of guy," the person said. "Always had a smile."
Someone who worked with Arnal at Bed Bath & Beyond told me they were "shocked" at the news and that it made "no sense."
Bed Bath & Beyond communications chief Julie Strider didn't return my request for comment. The company put out a statement saying they are "profoundly saddened by this shocking loss."
Having talked to these people and others, what happened does seem out of character for Arnal. I think Bed Bath & Beyond interim CEO Sue Gove keeping Arnal on as CFO after Tritton was ousted and allowing him to present to investors last Wednesday says a lot on how he was viewed internally by the executive team, board, and his own finance team.
But as one former CEO told me while discussing this tragedy, C-suite jobs are high pressure and full of loneliness. And to that end, you just never know what a person is dealing with inside.
Indeed, Arnal's recent job was a full on pressure cooker: He had to deal with a struggling retailer burning through cash, wild swings in the stock price in this meme trader driven backdrop, vile threads on social media, and the actions of influential shareholder Ryan Cohen.
Arnal dealt with stressful high-profile executive positions for decades, which adds up and takes a toll physically, mentally, and emotionally— however tough and smiley one appears to be on the outside.
We don't know what's going on in a person's mind and heart. It's especially hard for us on the outside to figure out executives at public companies, as they tend to play by the book. But as an investor, you have to remember these are the imperfect humans running companies that you have invested in. No one is a perfect executive. Mistakes will be made because companies aren't run by robots (at least not yet).
Aside from the tragedy, I would be remiss if I didn't bring up part two.
When companies unravel (usually after a period of bad financial performance), strange things often happen in sequence. I have seen it time and time again. A quarter is missed by 30 cents, the stock price crashes, analysts hammer the company and say the future looks bleak for whatever reason. Speculation surfaces on a need to raise cash on penalizing terms. Shareholder lawsuits pop up from investors who lost a ton of money. Execs are canned. Perhaps financial reports are delayed. And so on.
All of this has begun to happen at Bed Bath & Beyond.
A pre-earnings investor call to outline a turnaround strategy, as seen last week, isn't normal. Having three people stuffed on a board because Cohen — who founded the pet services company Chewy but is no longer affiliated and is currently GameStop's chairman — buys a bunch of shares and writes a shareholder letter isn't normal. Same-store sales tanking 26% in a quarter isn't normal. Potentially selling 12 million shares to raise cash isn't normal, especially for an established company like Bed Bath & Beyond. A shareholder lawsuit like the one filed on August 23 against Arnal, Cohen, and JP Morgan that alleged a "pump and dump" scheme isn't normal. (Bed Bath & Beyond described the allegations as "without merit," and a representative for Cohen didn't return a request for comment.)
All of these are symptoms of an unraveling company, and I would expect more abnormal things to surface in the days, weeks, and months ahead. Investors have to be incredibly careful when putting money into distressed situations such as Bed Bath & Beyond because there is usually a turn in the story you couldn't see coming. Sometimes those turns are tragic.
My thoughts are with Arnal's family and friends.
What to Watch Today
9:45 a.m. ET: S&P Global U.S. Services PMI, August final (44.2 expected, 44.1 during prior month)
9:45 a.m. ET: S&P Global U.S. Composite PMI, August final (45.0 expected, 45.0 during prior month)
10:00 a.m. ET: ISM Services Index, August (55.2 expected, 56.7 during prior month)
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This post has been updated with Bed Bath & Beyond's response to the shareholder lawsuit and some clarifying context.
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