Officially, Overstock.com begins its transformation to Beyond Inc. on Monday, November 6, when it moves from Nasdaq to the NYSE, but unofficially, it began almost immediately after acquiring the brand and IP assets of Bed Bath and Beyond at the end of June.
Within a week, it relaunched its Canadian website to BedBathandBeyond.com and followed a few weeks later with transitioning its American site, mobile app and loyalty program.
While name changes are typically hard for any company to maneuver – it took years for Restoration Hardware to become RH in the public’s mind – this one will prove fairly simple. Only investors have to adapt to the Beyond Inc. name change; its consumer-facing Bed Bath and Beyond identity will remain.
And the name change has become a rallying cry for the company’s 1,000+ employees. “There is a lot of energy in the building here,” CEO Jonathan Johnson said as we caught up after the third quarter earnings call. “Together, we are building a bigger, better Beyond.”
Putting The Past Behind
One thing’s for sure: Johnson is ready to kick the dust of Overstock’s past off his feet and move forward to realizing Beyond’s brighter future. Overstock’s revenues have been sliding on average 2% per year over the last three years, but that’s nothing compared to this year.
Revenues declined 29% year-over-year in the first quarter, then dropped another 20% in the second and 19% in the third quarters. On a positive note, the distance between last year’s and this year’s performance has narrowed with each successive quarter, but still, it leaves much to be desired.
Overall, nine-month revenues through September 30 are running 23% under last year, from $1.5 billion to $1.2 billion. Net losses have advanced much faster, nearly doubling in the third quarter, from $37 million in the same period last year to $63 million this. Net losses now total $147 million through the first nine months of the year, up from $20 million last year.
Investors are an impatient bunch, and Overstock’s stock has dropped like a stone since the Bed Bath and Beyond acquisition was announced. It peaked in August, trading just below $40 per share; its stock traded just over $15 per share yesterday.
Yet Johnson sees green shoots in the future, and nothing can take the wind out of his sails as he looks to the future for his company.
A Fresh Start
It’s important to remember that this quarter’s earnings are not an apples-to-apples comparison to last year before the Bed Bath and Beyond acquisition. We’ll have to wait till this time next year for that; however, Johnson has a plan to build momentum.
On a positive note, he is encouraged that the company’s active customer base grew from the second to the third quarter, advancing from 4.6 million to 4.9 million, the first time since the pandemic that he has been able to report that.
And the number of orders fulfilled advanced as well, from 1.8 million to 1.9 million, even as the average order value was down nearly 20%, from $234 to $192. This decline was expected since the company brought in more lower-priced categories with the acquisition.
Looking at its active customer base, the company has divided them into three segments, which it can leverage separately in marketing campaigns:
- Legacy Overstock customers
- Bed Bath and Beyond legacy customers – it added over 250 million BB&B names to its file
- New origin customers
Legacy Overstock customers accounted for about two-thirds of order volume in the third quarter and 10 % among legacy Bed Bath and Beyond customers. The company is moving fast to reactivate this cohort with heavy promotions and targeted email campaigns.
Of the totally new customers, Johnson said they account for almost 25% of orders, and they are purchasing furniture and other larger items at a higher rate than either brand’s legacy customers.
“This confirms our new marketing messages are beginning to hit,” he said. “And we’ve been marketing and promoting more kitchen products to make sure Bed Bath and Beyond customers feel at home.”
Further, Johnson reported that any hangover from the bankruptcy and closing of Bed Bath and Beyond stores has been negligible.
“Management kills companies; it doesn’t always kill brands. The longer that languishing brands linger, like Sears, the more likely they are to die, but Bed Bath and Beyond’s was fairly fast. And there are still a lot of people, particularly its online customers, who aren’t aware of the final months preceding the store closings,” he observed.
While the company did not provide any guidance for the next quarter or further out, Johnson is optimistic about fourth quarter performance, especially since the Bed Bath and Beyond brand has a stronger foothold in gifting than Overstock traditionally had as a home furnishings company.
“We’re laser-focused on continuing to build momentum and have a holiday like we haven’t had in the past,” he said.
To get on holiday shoppers’ radar, the company is launching a major national branding campaign this week, including linear and streaming television. At the same time, the gift purchases generated during the fourth quarter will probably have an average order value lower than in previous quarters.
Work In Progress
Under its new name, Beyond Inc. is moving beyond its furniture and hard goods furnishings business into new soft goods territory, closely aligned but still different businesses.
And since the company only fully pivoted to home in 2022 from a cross-category liquidator, it is still a work in progress as it continues to learn the ins and outs of the home furnishing business even as consumers are dialing back their expenditures in the category. So, it is fair to be skeptical that the company can smoothly realize its bigger Beyond ambitions.
Yet Bed Bath and Beyond remains a well-recognized brand name, which Johnson reported ranks number five in brand awareness in the home space compared with Overstock, which comes in at number 25.
Out of the $175 million associated with the Bed Bath and Beyond brand acquisition, some $150 million is allocated to new customer acquisition through greater marketing spend.
The company will also accelerate its CRM efforts to learn about new customers who come onto the list and further build connections and loyalty with established customers. Using predictive logic to personalize the customer experience, the company aims to increase average order value and frequency of purchase, which now stands at 1.5 times per year, with the aim to reach a frequency of two times.
Also, the long-term plan includes a reboot of the cross-category liquidation and clearance model of the old Overstock.com business.
“This Beyond umbrella at the corporate level lets us become a house of brands where we can offer more products and services than Bed Bath and Beyond or Overstock could give. We can become much broader,” he said.
In the short term, Beyond must navigate home furnishings headwinds. “Last year, I predicted 2023 would be a tale of two halves: the first half would be tough, then we’d get back to something more normal in the second half,” he confessed. “But I was proved wrong. “The recession in the furniture space is real, and now, after talking to our large furniture suppliers, we feel like it won’t lift until 2025.
“Yet with Bed Bath and Beyond, we can meet more kitchen, bath, bedding and other home furnishings needs that are more resilient. We will be a bigger, bolder, better Beyond,” he promised.
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