From Overstock to Bed Bath & Beyond: What Investors Need to Know

From Overstock to Bed Bath & Beyond: What Investors Need to Know

Posted On July 12, 2023 11:15 am

After months of scrambling for survival and frantic efforts to stage a turnaround, the struggling omnichannel retailer of domestic merchandise and various juvenile products, Bed Bath & Beyond Inc. (BBBYQ), succumbed to gravity earlier this year. Despite securing a financing deal on February 7, it filed for Chapter 11 bankruptcy protection on April 23.

With Holly Etlin, a longtime retail turnaround expert and a partner and managing director with advisory group AlixPartners, at the helm, BBBYQ set about liquidating assets by committing to close all of its Harmon FaceValue stores while keeping 360 namesake stores and 120 Buy Buy Baby locations open and filing motions in New Jersey bankruptcy court asking permission to auction the two brands.

However, since Buy Buy Baby, often considered a crown jewel of BBBYQ’s portfolio, was garnering the most attention and interest to unlock maximum value, BBBYQ, in a rare move, chose to run separate sale processes for its two chains. According to the company, a different method was selected to find a bidder willing to keep the banner’s stores open without the headache of taking on the assets of the namesake stores.

On June 21, online retailer Overstock.com, Inc. (OSTK) won the auction and agreed to buy Bed Bath’s intellectual property and digital assets for $21.5 million. However, the deal does not include keeping the chain’s brick-and-mortar presence alive.

Moreover, the sale price is the same as OSTK’s stalking horse bid on June 13, indicating Bed Bath didn’t receive higher or more attractive bids.

On the other hand, Buy Buy Baby, which sells baby clothes, furniture, and other goods, had courted attention from buyers even before BBBYQ threw in the towel. Consequently, since the sale began, the chain had interested buyers, such as retail investment firm Go Global and online registry platform Babylist, with the former even considering keeping its physical footprint alive.

However, given the rising costs (including leases, overhead costs, and salaries) and waning interest in keeping Buy Buy Baby’s stores open, BBBYQ decided to split the auction process further to secure a higher bid price.

On June 29, Dream on Me, a little-known baby retailer based in Piscataway, New Jersey, which sells cribs, strollers, and other baby goods through a host of retail partners, tentatively won the auction with a bid price of $15.5 million for the intellectual property, business data, internet properties, and mobile platform.

The Aftermath

OSTK, which acquired Bad Bath’s intellectual property assets but opted out of acquiring stores and inventories, has decided to change its website name by moving under the Bed Bath & Beyond domain name in the coming weeks.

The website, post its rebranding, has been relaunched in Canada. This is expected to be followed by a rollout of a website, mobile app, and loyalty program in the U.S. “weeks later.”

OSTK has also been suffering from a shift in consumer spending from discretionary household purchases to out-of-home experiences, such as traveling and dining out. According to its earnings release for the first quarter of the fiscal year, the online retailer reported revenue of $381 million and a net loss of $10 million.

However, given that OSTK has still managed to…

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