The online retailer saw its first-quarter loss widen to $73.9 million, or $1.62 a diluted share, from a net loss of $10.3 million a year ago. Revenue inched up to $382.3 million from $381.1 million. For the quarter ended March 31, Beyond had cash and cash equivalents of $256.3 million, and that gives it some breathing room to work on its restructuring strategy.
But revenues for the quarter were from its new Bed Bath & Beyond (BB&B) site. And the new leadership team, which includes new executive chairman Marcus Lemonis, has implementing a soft relaunch of the firm’s legacy Overstock.com site in March.
Lemonis told investors during a conference call that his mission is to “quickly reframe, reposition, and retool” the company. “I see green shoots everywhere, and where I don’t, we will correct,” he said.
Lemonis spoke about the sale of BB&B’s textile brand Wamsutta, which garnered it $10.25 million, or half of the purchase price of the BB&B assets. And it is testing four BB&B stores in the United Arab Emirates, in addition to licensing the brand on an omnichannel basis in Mexico. And while the business has 30-plus million unique customers, Lemonis said the company soon discovered that Overstock’s historical furniture, rugs and large patio categories didn’t resonate as well on the new BB&B site. Those categories are now back on the Overstock.com.
Overstock focused on home decor and furniture before rebranding as Bed Bath & Beyond following the company’s acquisition of the bankrupt retailer’s IP assets nearly a year ago. Overstock’s roots include a liquidation focus of goods across multiple categories, including fashion, before shifting to a focus just on home goods. The new plan includes a variety of vendor-supplied special buys, closeouts and excess across categories that include apparel, footwear and jewelry, Lemonis said.
“We intend to further leverage the Overstock brand as the leader in excess, factory-direct liquidations and reverse logistics businesses,” Lemonis said. “We are currently in discussions around the final term sheet for a partnership with one of the largest liquidators in America. We believe there is a moat to be established if you create a circle that provides wins for the vendor community.”
The executive chairman emphasized that if the company can be “part of improving [the] supply chain for the vendors on the backend, which is where the game is often won or lost, we’ll have found another way to monetize the Overstock brand again in an asset-light way.”
Overstock’s corporate name was changed to Beyond Inc. in November. Beyond then acquired the IP assets of the defunct Zulily brand this past March. Plans are in place for a site relaunch later this year. The company also acquired the Zulily customer lists, which should provide a jump-start to its marketing outreach. Lemonis said that Beyond has re-engaged Zulily’s top 10 vendors and have started the onboarding process. He also said that while the “TJ Maxxes, the Rosses, the Marshalls of the world” are big at the brick-and-mortar level, he sees “white space” for off-price apparel online.
“We believe that as you go down the price value stack all the way to the every man or every lady in the middle of America, we don’t believe that they’re being served properly,” Lemonis said. “We believe there’s more volume opportunity and margin opportunity when you play in that mid-level tier.” And he sees a path for margins that typically were in excess of 20 percent to a “higher number, closer to 24 percent once mature,” adding that the competitive advantage for the brand will be in no longer having fixed costs for corporate offices and giant warehouses. He’s working on how to get fashion vendors, by properly incentivizing them, to “become sticky to the Zulily brand.”
Between the three brands—Bed Bath & Beyond, Overstock and Zulily—Lemonis believes proper brand positioning will position the assets so each one can grow and become billion-dollar-plus revenue generators.
That’s an ambitious strategy. And that’s not to say it can’t be done, but the plan is reliant on drawing back many consumers who have long drifted to—and become comfortable with—other shopping sites. That was a big problem when former J.C. Penney & Co. Inc. CEO Ron Johnson alienated loyal consumers with his new store concept. And even though Johnson’s successor tried to bring back some of the core elements that resonate with those former customers, many of them never returned to the J.C. Penney fold.
Beyond has another challenge on its hands. For new potential shoppers and even former customers who return to check out the relaunched sites, Beyond will need to find a way to make them want to be loyal, repeat customers again. That won’t be easy.
Lemonis said the company hired Salesforce to help analyze actual customer transactions to better understand who the customer is, what their propensity is to buy, how they behave and other key data points. That information will help the company differentiate which shoppers are taking advantage of a deal with no intention of returning and those who are long-term prospects.
Jefferies retail analyst Jonathan Matuszewski has a “Hold” on shares of Beyond stock. “We believe the business is better-positioned now than it was months ago with portfolio of distinct home brands and highly-incentivized C-Suite, but near-term will be an uphill battle as Beyond seeks to balance reengaging shoppers and reducing losses,” he concluded.
Matuszewski called the playbook envisioned by Lemonis “ambitious,” noting that he and his C-suite team face challenges that include convincing consumers who have established loyalty elsewhere to return, and isolating pockets in the retail channel where it came take share and “do it all profitably.”