Dive Brief:
- Kirkland’s Home and Beyond Inc. have entered a strategic partnership that includes the pilot opening of up to five neighborhood” small format Bed Bath & Beyond stores, the companies said Monday. Kirkland's is Beyond's exclusive operator and licensee for the new stores. Bed Bath & Beyond shop-in-shops may also open at Kirkland's locations to be determined.
- Beyond is providing $17 million in debt financing to Kirkland’s. Under the deal’s financial terms, $8.5 million of that is a convertible note that will convert to Kirkland’s common stock at $1.85 per share upon stockholder approval. Beyond will also buy $8 million of Kirkland’s stock in a subscription agreement.
- The companies also entered a seven year collaboration agreement. Starting in Q1 of 2025, Beyond will earn a collaboration fee equal to 0.25% on all of Kirkland's quarterly retail and e-commerce revenue, an incentive fee equal to 1.5% of Kirkland's incremental growth in e-commerce revenue and a trademark license agreement where Beyond will earn a store royalty fee equal to 3% of net store sales generated under the Bed Bath & Beyond banner.
Dive Insight:
Monday’s announcement appears poised to once again give the Bed Bath & Beyond banner a brick and mortar retail footprint. The companies said the pilot stores will have a “neighborhood” format and range from 7,000 to 15,000 square feet.
“Having known the iconic Bed Bath & Beyond brand for years, we are thrilled to partner with Marcus and the entire Beyond team to bring the brick-and-mortar strategy back to life,” Kirkland’s CEO Amy Sullivan said in a press release.
After years of financial trouble and merchandising missteps, Bed Bath & Beyond stores disappeared from the retail landscape following the April 2023 bankruptcy of the company’s previous corporate entity. The company now known as Beyond Inc. bought Bed Bath & Beyond’s intellectual property, including social media, mobile platforms, business data and trademarks for $21.5 million last June and revived it as an online-only operation.
The new stores will feature a curated assortment from iconic legacy vendor partners. Kirkland's will also use its store operations expertise and its brick-and-mortar footprint to identify potential store conversion opportunities or new markets, the companies said in their announcement.
“An omnichannel approach to Bed Bath & Beyond is quintessential to its success,” Beyond’s Executive Chairman Marcus Lemonis said in the press release. “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.”
Kirkland’s has also had a difficult period. The company ended its second quarter with net sales of $86.3 million, a 3.6% year over year decline, overall comparable sales down 1.7% and an operating loss of $13.3 million. Net loss narrowed to $14.5 million compared to $19.4 million in the year-ago quarter. As of Aug. 3, the company had 325 stores in 35 states.
But under the new deal, both companies stand to benefit as Kirkland’s merchandising, product development and sourcing teams work to expand the reach of that banner’s product assortment, which includes furniture, rugs and textiles and a décor business, across an expanded store network, Beyond's websites and other marketplaces.
The retailers will also use an enhanced supply chain network to reduce costs, improve inventory management, and drive revenue growth. Kirkland’s will participate in Beyond’s consumer data collective, loyalty program and financial services with the goal of driving traffic and revenue and lowering customer acquisition, conversion and retention costs.
Beyond’s partnership and investment with Kirkland’s is the second deal with a home company announced in a week. The Utah-based company said Tuesday that it’s investing $40 million in The Container Store in a separate strategic partnership.
Also Monday, Beyond said in a filing with the U.S. Securities and Exchange Commission that it has secured a $25 million promissory note with BMO Bank for a one year revolving line of credit. Beyond said the money will be used to finance current or prospective strategic deals, future growth opportunities and for other corporate purposes.
