Bed Bath & Beyond Inc. BBBY has successfully completed the divestment of PersonalizationMall.com to 1-800-FLOWERS.COM for $245 million. However, certain customary closing conditions are yet to be fulfilled. Even after the sale, PersonalizationMall.com will continue to support Bed Bath & Beyond and buybuy BABY stores. Initially, it had entered into a definitive agreement in February to sell the PersonalizationMall.com business to 1-800-Flowers and was supposed to be closed on Mar 30. However, the deal closure got delayed as 1-800-FLOWERS.COM was short of resources due to COVID-19.
This move is in sync with the company’s restructuring efforts to focus on its core categories, including Home, Baby, Beauty and Wellness. It has also launched Buy-Online-Pickup-In-Store and contactless Curbside Pickup services in a bid to enhance customers’ shopping experience.
The net proceeds from this sale will be utilized to help the company strengthen its financial position in order to stay afloat during this ongoing COVID-19 crisis. The sale is also expected to fund its transformation program.
As part of the transformation plan, the company is making efforts to reorganize and simplify field operations, reduce management positions and outsource several functions. To this end, it earlier revealed plans to eliminate nearly 500 positions to reduce workforce and generate significant cost savings in the long term. These plans are expected to result in nearly $85 million of reduction in annual SG&A expenses. This will, in turn, enhance customer experience, boost sales and drive long-term success. Also, as part of its restructuring initiative, the company is working toward supply-chain transformation to combat declining margins due to the shift to the online platform. It is also focusing on lowering the cost of goods.
However, Bed Bath & Beyond is affected by the COVID-19 outbreak that led to huge sales loss stemming from temporary store closures and lower margins due to the shifting of consumers’ preference to the digital platform. Due to continued COVID-19 impacts, which are yet to be assessed, management refrained from providing any fiscal 2020 guidance.
All said, we expect this transaction to aid the company’s restructuring process, which in turn will drive growth in the near term. We note that this Zacks Rank #3 (Hold) stock has skyrocketed 98% in the past three months, outperforming the industry’s growth of 21%.
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