The Ratings Game: Bed Bath & Beyond’s new CEO expected to repeat the private-label success he had at Target

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Analysts expect Mark Tritton, Target Corp.’s former chief merchant and Bed Bath & Beyond Inc.’s new chief executive, to bring his experience launching successful private-label brands to the struggling home retailer, which is in search of a turnaround.

Investors appeared to agree, as the stock rocketed Thursday toward its best one-day performance in over 19 years.

Target TGT, -0.54%   announced late Wednesday that Tritton had resigned, with two senior vice presidents, Christina Hennington and Jill Sando, taking the leadership roles for the merchandising department. Target said that it doesn’t have plans to start an external search for a new chief merchant at this time.

Separately, Target announced a new chief financial officer, company veteran Michael Fiddelke, effective November 1.

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Bed Bath & Beyond BBBY, +23.94%   said Tritton starts November 4, succeeding Mary Winston, a board member who has served on an interim basis. Bed Bath & Beyond announced in May that the previous CEO, Steve Temeres, was stepping down.

Bed Bath & Beyond said Tritton’s “immediate focus” will be improvements to the assortment and omnichannel experience, part of the larger business transformation. The retailer announced 60 store closures along with its most recent earnings.

Bed Bath & Beyond shares soared over 25% in morning trading, putting them on track for the biggest one-day percentage gain since March 2000, and second-biggest gain since going public in June 1992. Still, the shares are down 11% over the past year compared with a 4.9% increase for the S&P 500 index SPX, +0.96%   .

Target stock slipped 0.7% on Thursday.

Analysts are bullish about Tritton’s selection, with Wedbush calling the new CEO “strong.”

“There is much work to do to improve Bed Bath & Beyond’s comp trajectory and right-size the company’s asset base and we believe Mr. Tritton has valuable omnichannel and merchandising expertise needed to lead the transformation,” analysts said.

Wedbush rates Bed Bath & Beyond outperform with a $16 price target.

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Credit Suisse analysts credit Tritton with helping to “meaningfully” improve Target over the last couple of years, with merchandising “clearly a bright spot.”

“So we see the fit,” analysts said. “Bed Bath & Beyond’s merchandising has gone from positive to negative in recent years. Its assortment advantage waned as Amazon and other new competitors gained access to better brands seeking growth.”

Credit Suisse rates Bed Bath & Beyond stock neutral with a $14 target price.

“[A]s head of Target’s merchandising operations, he led the improvement and evolution of Target’s private label strategy (launched ~30 new brands in 2.5 years),” wrote Raymond James analysts in a note. “This is particularly important, in our view, as Bed Bath & Beyond currently does not have a well-defined private label strategy and strong private-label products are a key pillar in retail success today.”

Raymond James rates Bed Bath & Beyond stock strong buy.

Some of Target’s private labels, including the children’s brand Cat & Jack, have reached $1 billion in sales.

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“While Bed Bath & Beyond is not an easy turnaround given its market share losses and declining profitability in recent years, we believe Mr. Tritton can improve the company’s performance by implementing many of the strategies that have succeeded a Target,” wrote Telsey Advisory Group analysts led by Cristina Fernandez.

Telsey upgraded Bed Bath & Beyond stock to outperform from market perform and raised its price target to $16 from $14.

On the flip side for Target, JPMorgan calls Tritton a “loss,” but analysts interpret Target’s decision not to start an internal search as a plan to get through the holidays and test Hennington and Sando, likely the two candidates to succeed Tritton in the role.

Moreover, if Target does decide to look outward, the company is a draw for a top talent.

JPMorgan rates Target stock overweight with a $115 price target. It rates Bed Bath & Beyond neutral with a $13.50 price target.