Now playing
03:24
Analyst: Volatility is another word for retail
Now playing
00:54
See Nike's new 'hands-free' shoe
One of many large boxes of returned products that fill the warehouse. The returned products in this box will eventually be sorted and categorized.
PHOTO: John General/CNN
One of many large boxes of returned products that fill the warehouse. The returned products in this box will eventually be sorted and categorized.
Now playing
05:08
Here's where your 'free' online returns actually end up
PHOTO: Shutterstock
Now playing
04:42
Ever receive a package you didn't order? It could be a scam
PHOTO: Orangetheory Fitness
Now playing
02:13
This gym is actually opening studios during the pandemic
Now playing
02:24
How holiday spirit is surging despite the Covid-19 pandemic
NEW YORK, NEW YORK - NOVEMBER 19: A view of the window display as Macy's Herald Square unveils Give, Love, Believe 2020 Holiday Windows on November 19, 2020 in New York City. (Photo by Eugene Gologursky/Getty Images for Macy's)
PHOTO: Eugene Gologursky/Getty Images North America/Getty Images for Macy's
NEW YORK, NEW YORK - NOVEMBER 19: A view of the window display as Macy's Herald Square unveils Give, Love, Believe 2020 Holiday Windows on November 19, 2020 in New York City. (Photo by Eugene Gologursky/Getty Images for Macy's)
Now playing
00:56
Macy's unveils holiday window display with gratitude theme
PHOTO: CNN/Target/Design by John General
Now playing
02:36
It's official: Black Friday is irrelevant
Now playing
02:23
Party City CEO: Consumers still want to celebrate together
NEW YORK, UNITED STATES - 2020/07/08: People wearing face masks shopping inside a retail store in Manhattan as the city enters phase 3 of reopening amid the coronavirus pandemic
As New York City enters phase 3 of reopening retail stores for indoor shopping, restaurants have been postponed for indoor dinning. The U.S. Department of Health recorded a total of 3,219,999 infections, 135,822 death and 1,426,428 recovered since the beginning of the outbreak. (Photo by Braulio Jatar/SOPA Images/LightRocket via Getty Images)
PHOTO: Braulio Jatar/SOPA Images/LightRocket/Getty Images
NEW YORK, UNITED STATES - 2020/07/08: People wearing face masks shopping inside a retail store in Manhattan as the city enters phase 3 of reopening amid the coronavirus pandemic As New York City enters phase 3 of reopening retail stores for indoor shopping, restaurants have been postponed for indoor dinning. The U.S. Department of Health recorded a total of 3,219,999 infections, 135,822 death and 1,426,428 recovered since the beginning of the outbreak. (Photo by Braulio Jatar/SOPA Images/LightRocket via Getty Images)
Now playing
01:38
US retail sales improved in September
PHOTO: thehouseofdrew.com
Now playing
02:01
Justin Bieber's footwear collaboration overwhelms site
PHOTO: Walmart
Now playing
01:01
See what's new inside Walmart stores
WHEATON, MARYLAND - APRIL 16: Customers wear face masks to prevent the spread of the novel coronavirus as they line up to enter a Costco Wholesale store April 16, 2020 in Wheaton, Maryland. Maryland Governor Larry Hogan ordered that all people must wear some kind of face mask to protect themselves and others from COVID-19 when on public transportation, grocery stores, retail establishments and other places where social distancing is not always possible. (Photo by Chip Somodevilla/Getty Images)
PHOTO: Chip Somodevilla/Getty Images
WHEATON, MARYLAND - APRIL 16: Customers wear face masks to prevent the spread of the novel coronavirus as they line up to enter a Costco Wholesale store April 16, 2020 in Wheaton, Maryland. Maryland Governor Larry Hogan ordered that all people must wear some kind of face mask to protect themselves and others from COVID-19 when on public transportation, grocery stores, retail establishments and other places where social distancing is not always possible. (Photo by Chip Somodevilla/Getty Images)
Now playing
02:32
How masks are reshaping the face of the retail economy
3119 E Third Street Dollar General in Dayton, OH on March 12, 2020.
PHOTO: Maddie McGarvey for CNN
3119 E Third Street Dollar General in Dayton, OH on March 12, 2020.
Now playing
06:07
Dollar General's business is booming. It's also vulnerable to crime, police say
Now playing
03:01
How private equity is gutting retail
Now playing
01:55
All retail bankruptcies are not the same. Here's what you need to know
(CNN Business) —  

Activist investors want to shake up Bed Bath & Beyond, which has fallen behind rival retailers in recent years.

Three activist funds said on Tuesday that they have built a roughly 5% stake in Bed Bath & Beyond and will attempt to replace the company’s entire 12-member board of directors and its chief executive. The activist group has nominated a full suite of 16 new board members and plans to recruit a new CEO. The Wall Street Journal first reported the group’s plans.

The activist group sees an opportunity to push for changes because Bed Bath & Beyond’s (BBBY) stock has lost more than 80% of its value since 2015. Bed Bath & Beyond’s (BBBY) same-store sales have also fallen two years in a row.

The group — Legion Partners, Macellum Advisors, and Ancora Advisors — blames cluttered stores and a confusing pricing strategy for Bed Bath & Beyond’s prolonged slump.

“Stores contain a dizzying array of too similar items and lack the experience customers demand,” the group said in a news release on Tuesday. It argued that Bed Bath & Beyond lacked a “clearly defined ‘good, better, best’ strategy” on merchandise at different prices. That’s key to attract a broad range of shopping demographics.

The group wants Bed Bath & Beyond to trim its product selection and beef up the in-store experience to drive traffic back to stores.

Bed Bath & Beyond’s shrinking profit margins also came under attack. Here, the group argued that Bed Bath & Beyond did not sell enough of its own private-label brands, which carry higher margins than outside brands, and the retailer relied too heavily on promotions.

To improve margins, the activist group proposed cutting costs and possibly selling Bed Bath & Beyond’s “non-core businesses,” such as online home decor website One Kings Lane.

Bed Bath & Beyond’s stock rocketed up around 25% Tuesday, signaling that Wall Street supports an overhaul.

The home furnishings’ chain has struggled to compete with traditional retailers such as Walmart (WMT) and Target (TGT), as well as online retailers Amazon (AMZN)and Wayfair (W). Walmart (WMT), Target (TGT) and Amazon (AMZN)have launched cheaper private label home brands, while Wayfair (W) has spent heavily on advertisements to get customers familiar with its brand. On Tuesday, Wayfair (W) said it will open its first brick-and-mortar store this fall.

Bed Bath & Beyond is facing pressure from discounters TJ Maxx and its HomeGoods arm, too. “We still see an enormous opportunity to grow,” TJX (TJX) CEO Ernie Herrman said last month of HomeGoods. The chain plans to open 65 new stores this year.

Competition has swallowed up other home decor chains. Specialists such as Z Gallerie and Heritage Home have recently filed for bankruptcy, while Pier 1 Imports (PIR) has fallen under $1 a share.

Despite the tough competition, the activist group says there’s still hope for Bed Bath & Beyond. The company just needs new leaders and a fresh game plan.

“Bed Bath has tremendous potential with the right board and management team in place,” the investor group said. “Shareholders must demand change now before the [company’s] failures become irreversible.”

In response to the activist push, Janet Barth, vice president of investor relations at Bed Bath & Beyond, said “we are open to the views of our shareholders and value constructive input.”

Barth said Bed Bath & Beyond is already making progress on transforming the company. The company is eliminating some merchandise from stores to reduce clutter and focusing on winning college students and their parents with an improved assortment.

Bed Bath & Beyond will also launch six home furnishing brands in the next two years. The first of those brands, Bee & Willow, debuted earlier this month.

—CNNBusiness’ Jordan Valinsky contributed to this article.