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Bed Bath & What Else? Retailer Must Decide The Fate Of Its Secondary Brands
The new management of Bed Bath & Beyond doesn’t just have the job of figuring out what to do with Bed Bath. They also have to figure out what to do with Harmon Face Values, The Christmas Tree Shops, Buybuy Baby, Cost Plus World Market, One Kings Lane, PersonalizationMall.com and the other companies acquired by Bed Bath between 2002 and 2017.
The previous leaders of Bed Bath never adequately articulated why these acquisitions were good for Bed Bath, and never provided information about the financial performance of the individual brands after they were acquired.
That may make it easy for the new leaders to sell the acquired chains off quickly, without needing to offer an explanation. And potential buyers are already making offers, according to an August 29 report by The Deal’s Ronald Orol. Today In: Business
Data released today by Silicon Valley-based location analytics firm Placer.ai shows that the four store chains acquired by Bed Bath—Harmon Face Values, Buybuy Baby, The Christmas Tree Shops, and Cost Plus World Market—could be strong performers, either as sold-off assets, or as part of a re-imagined Bed Bath.
The activist investors who now control the company have said all along that Bed Bath should shed some, if not all, of those acquisitions. The investors group, in its “Restore BedBath” presentation calling for a shakeup at Bed Bath, argued that the sale of “non-core assets” along with inventory rationalization could produce a $1.9 billion windfall.
The investors described acquisitions as questionable and presented the rationale behind most of the purchases as shaky. They called the Christmas Tree Shops “a seemingly random assortment of seasonal gifts, home furnishings, and food and drink.” Of Cost Plus, they said “performance remains a mystery to shareholders.”
Placer.ai looked at the foot traffic and analytics data for Harmon, BuybuyBaby, Christmas Tree Shops and Cost Plus World Market, and found that “overall, all seem to be fairly strong assets.” Looking at traffic between August 2018 and August 2019, they found that only Cost Plus showed declining traffic. The other three chains were all trending above their baseline.
The Harmon beauty chain drew the most upscale shoppers, according to Placer.ai, with over 50% of Harmon visitors earning more than $100,000 a year.
Buybuy Baby was the winner for longest shopper visits, with average visit lasting 52 minutes. Christmas Tree Shops was second at 46 minutes, followed by Cost Plus at 43 minutes and Harmon at 42 minutes.
“Each brand possesses unique strengths, but also some potential weaknesses in how it can and should be used,” Placer.ai analysts concluded after looking at how many, and what types of, shoppers visited the stores.
Bed Bath has grown all four of the chains since buying them.
Harmon, its first acquisition, with 27 stores in 2002, has expanded to 55 stores, and Bed Bath has added Harmon departments to most Bed Bath stores.
Buybuy Baby (founded by the sons of Bed Bath cofounder Leonard Feinstein) had eight stores when it was acquired for $67 million in 2007. There are now 126 Buybuy stores.
Christmas Tree Shops, acquired in 2003 for $194.4 million, has grown from 24 stores to 81.
Cost Plus World Market, acquired in 2012 for $495 million, has gone from 258 stores to 277.
With the acquisitions of Buybuy Baby and Christmas Tree Shops, Bed Bath cofounders Warren Eisenberg and Leonard Feinstein, and former CEO Stephen Temares, typically said they liked the businesses and thought they had strong potential, but didn’t talk much about integrating them into Bed Bath.
With Cost Plus World Markets, their rationale was that the acquisition would provide valuable information about how to source and add food and beverage products to Bed Bath stores.
With PersonalizationMall.com, a 2016 online retailer acquisition, the benefit, they said, was access to personalized offerings, and e-commerce insights.
The activist investors, when they outlined their turnaround strategy, estimated that Cost Plus could be sold for over $400 million. The Deal in August reported there was a $250 million offer for Cost Plus on the table, about half of what Bed Bath paid for it originally.
The investors estimated that Christmas Tree Shops could be sold for $100 million, or liquidated for $50 million.
The investors didn’t mention the likely fate of Harmon in their strategy presentation, but appeared to be somewhat bullish on Buybuy Baby. “We believe Buybuy Baby could be additive to Bed Bath’s merchandise assortment but would like to explore potential value to a private equity firm,” they wrote.
After buying Cost Plus and PersonalizationMall.com, Bed Bath greatly expanded the packaged food offerings in its Bed Bath stores, and added displays of personalized items that could be ordered online. That, along with the existing Harmon beauty departments in the stores only served to make the Bed Bath stores more cluttered, another big complaint of the activists.
Bed Bath took 15 years to acquire four retail chains, four online companies, and a company that sells linens to hotels, hospitals, and other institutional customers. It’s a good bet that the new management will take a much shorter time to figure out which of those Bed Bath buys it wants gone.