Beyond, Inc., the parent company of Bed, Bath & Beyond, has entered a multi-faceted strategic partnership with home décor retailer Kirkland’s that will bring the currently online-only Bed Bath & Beyond back to brick-and-mortar retail, a year-and-a-half after it shuttered all its stores.
Kirkland’s will become Beyond’s exclusive brick-and-mortar operator and licensee for a series of small-format (up to 15,000 square feet) “neighborhood” Bed Bath & Beyond stores. The stores will feature a curated assortment of Bed Bath & Beyond’s legacy vendor partners alongside a selection from the Kirkland’s Home product assortment. Beyond plans to leverage Kirkland’s store operations expertise and existing brick-and-mortar footprint — which encompasses 325 stores in 35 states — to make Bed Bath & Beyond’s return to physical retail a success. New markets outside of Kirkland’s current footprint will be considered, as will store conversions.
“An omnichannel approach to Bed Bath & Beyond is quintessential to its success,” said Marcus Lemonis, Executive Chairman of Beyond in a statement. “We understand that retail is both an art and a science and have vetted the management team and infrastructure of Kirkland’s Home as an ideal organization to help bring the iconic Bed Bath & Beyond brand back. The key to retail is efficiency in assortment, space management, sourcing and merchandising, all while recognizing that smaller, tighter footprints with significantly lower fixed-cost models is a winning recipe. We view this partnership as a meaningful step forward in our long-term vision of growing through asset-light collaboration with complementary businesses while monetizing both the intellectual property of our iconic brands as well as the suite of affinity products being developed.”
Beyond to Invest $25 Million in Kirkland’s
The partnership with Kirkland’s follows swiftly on the heels of Beyond’s partnership with The Container Store, which was announced last week. That deal includes a $40 million investment from Beyond in The Container Store and will see Bed Bath & Beyond products soon arrive on shelves at the organizational retailer.
The deal with Kirkland’s also includes a much-needed cash injection from digital conglomerate Beyond, which in addition to Bed Bath & Beyond, owns the Zulily and Overstock brands. Kirkland’s has entered into a $17 million term loan credit agreement with Beyond, $8.5 million of which will convert into Kirkland’s common stock at a price of $1.85 per share if and when the deal is approved by Kirkland’s shareholders. Osmium Partners, which owns approximately 9% of Kirkland’s outstanding shares, has committed to support the transaction.
Proceeds from the term loan portion of the transaction will be used by Kirkland’s to repay its existing term loan with Gordon Brothers. If the deal is approved by shareholders, Beyond also will purchase an additional $8 million of Kirkland’s common stock at the same price.
Expansion of the Kirkland’s Brand Also in the Cards
Kirkland’s will begin participating in Beyond’s consumer data collective, global loyalty program, financial services and consumer protection products (just like The Container Store), with the goal of driving traffic and revenue for both brands while increasing conversion and lowering customer acquisition and retention costs. Beyond also will support Kirkland’s digital transformation through improvements in its ecommerce technology.
In addition to bringing the Kirkland’s Home assortment to the forthcoming Bed Bath & Beyond stores, the partners also will bring the retailer’s products to other nodes in Beyond’s retail network, including the Bed Bath & Beyond website and other online marketplaces.
“Kirkland’s Home has a 58-year legacy in the home décor sector, and the core strength of our brand and this organization lies in merchandising and store operations,” said Amy Sullivan, CEO of Kirkland’s in a statement. “We expect the investment from Beyond will not only enhance our financial performance but also provide meaningful opportunities to introduce Kirkland’s to new customers in a cost-efficient manner while we continue to re-engage our core customer and extend our reach across multiple formats.”
Details of the Deal
In addition to Beyond’s loan and stock investment, which totals $25 million, the partners have entered collaboration and licensing agreements. Under the collaboration agreement Beyond will earn a fee equal to 0.25% of Kirkland’s quarterly retail and ecommerce revenue beginning in Kirkland’s first quarter of fiscal 2025 (which will begin in February 2025), as well as an incentive fee equal to 1.5% of Kirkland’s incremental growth in ecommerce revenue.
The licensing agreement will see Beyond earn a store royalty fee equal to 3% of net store sales generated under the Bed Bath & Beyond banner, with that rate increasing to 5% after the collaboration agreement has terminated if the locations are still operating. No timeframe was given for the length of the collaboration agreement.
Following the closing of the common stock purchase of $8 million, Beyond will be able to nominate two directors to Kirkland’s board of directors for as long as it owns at least 20% of Kirkland’s outstanding shares and one director for as long as it owns at least 5% of Kirkland’s outstanding shares.
“I am appreciative of the management teams at both Kirkland’s and Beyond for their collaborative vision,” said John Lewis, Co-Founder, CEO and CIO of Osmium Partners in a statement. “We believe this venture will drive significant shareholder value as the teams unlock the potential for the Bed Bath & Beyond brand through new store growth and leverage the strong merchandising and store operations that Kirkland’s has continued to reinforce over the past year during its strategic repositioning.”