Will Bed Bath & Beyond bolster or drag down Overstock’s balance sheet?

Online home furnishings resource’s latest results illustrate challenges it’s already facing despite a strong cash position

SALT LAKE CITY — Overstock CEO Jonathan Johnson said its recent $21.5 million purchase of Bed Bath & Beyond will offer new growth opportunities because of its strong brand and customer following in the U.S. and Canada in particular.

“The acquisition of the Bed Bath & Beyond brand is the beginning of a new phase of growth for us,” Johnson said as part of the company’s release of second-quarter results on Thursday. “The successful launch and early performance of our Bed Bath & Beyond business in Canada has been encouraging. The Bed Bath & Beyond brand is strong. In Canada, customers want to buy — and are comfortable buying — from the new Bed Bath & Beyond website.”

“We are optimistic about our future with this new brand in the U.S.,” he added. “The combination of a highly recognized and much-loved consumer home brand and our asset-light operating model should meaningfully grow and scale our business in the U.S. and Canada. We know there is work to be done to win Bed Bath & Beyond customers and retain our existing loyal customers through this transition. We have the right strategies, the right action plan and the right people in key positions to execute this transformation. The entire organization is focused on ensuring the success of the Bed Bath & Beyond U.S. launch, still targeted for early August.”

Yet how the purchase of a bankrupt brand will bolster Overstock’s position in the marketplace remains to be seen. As Johnson noted, the company has already successfully relaunched the Bed Bath & Beyond domain in Canada, which will be followed by the relaunch of a co-branded and refreshed website, mobile app and loyalty program in the U.S. next month, thus allowing new and existing customers of both brands to experience a single online shopping destination.

Based on the results of its second quarter ended June 30, Overstock already faces challenges of its own heading into this transition, despite having a strong cash position of $343 million in cash and cash equivalents.

Second-quarter net revenues of $422.2 million were down 20% from $528.1 million during the same period last year, while its revenues for the six-month period were down 24.7% to $803.4 million from $1.06 billion the same period in 2022. It also reported an operating loss of $4.3 million during the quarter compared to operating income of $11.5 million during the same period in 2022. For the six-month period, its operating loss was $12.6 million, compared to operating income of nearly $24 million for the first half of 2022.

It also reported an overall net loss of $73.5 million, or $1.63 per share, during the quarter compared to income of $7.2 million, or 12 cents per share, during last year’s second quarter and a net loss of $83.8 million, or $1.86 per share, in the first six months of this year, compared to net income of $17.3 million during the first six months of 2022.

Other challenges highlighted during the second-quarter earnings release are as follows:

+ The company reported 4.6 million active customers during the quarter, down 29% compared to the same period last year.

+ Net revenue per active customer was $361, down 1% from last year.

+ The average order value was $234, down 5% from last year

+ Delivered orders totaled 1.8 million, down 16% compared to last year

+ Orders per active customer totaled 1.56, down 5% year over year

Still, the company’s results for the quarter look strong compared to pre-pandemic levels. For example, its overall revenues for the second quarter ended June 30, 2019, totaled $373.7 million, compared to $422.2 million during the most recent quarter, while revenues for the first six months of 2019 and 2018 were $741.4 million and $928.5 million respectively, compared to $1.06 billion for the first half of this year.

Its operating loss for the second quarter also was significantly lower than the $25.8 million reported during the second quarter of 2019. It was also lower for the full first half of 2023 compared to the $61.8 million reported in the first six months of 2019.

In addition, the company’s cash and cash equivalents have also more than doubled, from $121.3 million at the end of the second quarter of 2019 to $343 million during the same period this year. This is net of the amount it paid for the Bed Bath & Beyond brand.

“The team continued to execute well during the second quarter,” Johnson said. “As we navigated an intensely competitive environment well with our asset-light business model, we were able to provide smart value to our customers, improve our year-over-year revenue trend, and deliver another quarter of positive adjusted EBITDA. Our balance sheet remains strong with over $300 million in net cash, setting us up well to execute the transformative rebranding of our furniture and home furnishings e-commerce business.”

Pre-pandemic results aside, shareholders focus on the results from the latest quarter and thus how things might improve moving forward. Thus, they likely will be laser focused on whether the Bed Bath & Beyond purchase will ultimately strengthen or drag down the company’s balance sheet in the months and years ahead.

All of this remains to be seen, although Johnson has obviously presented an optimistic view of things moving forward.

In the June 28 acquisition announcement, he noted, “This acquisition is a significant and transformative step for us. Bed Bath & Beyond is an iconic consumer brand, well known in the home retail marketplace. The combination of our winning asset-light business model and the high awareness and loyalty of the Bed Bath & Beyond brand will improve the customer experience and position the company for accelerated market share growth.”

“Combining the strengths of the Overstock operational model and the Bed Bath & Beyond brand will create a powerful synergy,” he added at the time of the announcement. “I’m excited for consumers to experience the new Bed Bath and an even bigger and better Beyond.”

Thomas Russell

Home News Now Editor-in-Chief Thomas Russell has covered the furniture industry for 25 years at various daily and weekly consumer and trade publications. He can be reached at tom@homenewsnow.com and at 336-508-4616.

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