Bed Bath & Beyond Inc. (BBBY.O) soared as much as 25 per cent in early trading on news that activist investors plan to challenge the home-goods retailer’s directors in a proxy fight.

Three activist funds are launching a campaign to replace the entire 12-person board amid concerns that the retailer is not responding well to the rise of e-commerce, according to people familiar with the matter.

The trio of funds -- Legion Partners Asset Management LLC, Macellum Advisors and Ancora Advisors LLC -- control about a 5 percent stake in the Union, New Jersey-based retailer and are seeking to replace Chief Executive Officer Steven Temares, according to the people, who asked not to be identified discussing a private matter.

When contacted for comment, the company said in an emailed statement that it is “open to the views of our shareholders and value constructive input focused on enhancing value.”

Bed Bath & Beyond shares climbed to $17.39 in early U.S. trading. They had sunk 34 percent over the past year on skepticism that the company will be able to hit its targets.

The funds have lined up 16 director candidates, including former Gap executive Jeff Kirwan, to replace the current board, according to the people.

Retail Challenges

Bed Bath & Beyond has faced many of the same challenges of other traditional retailers, including a costly battle to ward off Amazon.com Inc. It has spent heavily to revamp both its brick-and-mortar stores and online presence as it tries to bring to an end seven straight quarters of same-store sales declines.

The company says the investments -- which include new store formats, loyalty programs and a strengthened supply chain -- have started to pay off. It reported “strong” sales growth from its digital channels in the third quarter and it’s been successful in its effort to hold less merchandise.

“We are making significant progress on our transformation to continue to strengthen our position,” the company said in the emailed statement. “Our board of directors and management team remain committed to creating value for all shareholders by transforming our company to best position Bed Bath & Beyond for long-term success, and will continue to take actions to achieve these objectives.”

Representatives for the three funds didn’t immediately respond to requests for comment made outside of regular business hours. The Wall Street Journal had earlier reported on the activist challenge.