In what the companies describe as an initiative to revitalize the Bed Bath & Beyond brand, home decor and furnishings retailer Kirkland’s has entered into a partnership with Beyond Inc. that plans to restore brick-and-mortar operations of what now is an online-only banner in the United States.
Under the agreement, Kirkland’s will pilot up to five “neighborhood” Bed Bath & Beyond stores featuring a curated version of the retail brand’s legacy assortment; and it will open up Bed Bath & Beyond shops in Kirkland’s stores. Although final details aren’t settled, Kirkland’s would own the inventory and develop the merchandising in the physical Bed Bath & Beyond locations. Kirkland’s also is putting on hold a replatforming of its website, so it can collaborate with Beyond and tap its expertise in e-commerce.
Already, the Bed Bath & Beyond website has a Kirkland’s banner on the landing page with a “Shop Now” click-through to a selection of product available from the site.
In the partnership, according to a joint statement:
- Kirkland’s becomes Beyond’s exclusive brick-and-mortar operator and licensee for new, smaller-format, up-to-15,000-square-foot “neighborhood” Bed Bath & Beyond locations in the United States that will feature an edited lineup of home and housewares products, including merchandise from the Bed Bath & Beyond brand’s legacy vendor partners.
- The partnership will apply Kirkland’s merchandising, product development and sourcing teams to expand the reach of its product assortment including decor, furniture, rugs and textiles across an expanded store network, Beyond’s websites and other marketplaces.
- The companies will share 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, global loyalty program, financial services and consumer protection vehicles with the expectation of driving traffic and revenue while increasing conversion and lowering customer acquisition and retention costs.
“An omnichannel approach to Bed Bath & Beyond is quintessential to its success,” Marcus Lemonis, Beyond executive chairman (pictured above). “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.”
Lemonis added, “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.”
In a conference call, Amy Sullivan, Kirkland’s CEO, said, “The investment from Beyond enables Kirkland’s to be in a much healthier financial position to not only execute our strategic repositioning but also provide new avenues for exciting growth opportunities. We expect the overall terms of the arrangement with Beyond including the fee structures to be largely neutral from a P&L perspective compared to that of our previous debt/capital structure while providing us significant growth opportunities.”
Sullivan said Kirkland’s organization offers “skilled merchants who will continue to lead with product through identifying trends, unique product development, diversified sourcing and strategic assortment planning.”
The Kirkland’s physical-store knowledge and proficiency will apply to the first neighborhood Bed Bath & Beyond pilot store scheduled to begin operations in 2025, according to the companies. Sullivan said Kirkland’s would benefit from Beyond’s “robust” data base, a cornerstone of Lemonis’ development of Beyond as a holding company that would apply its customer research and intellectual property to drive operations in the retail banners with which it works. Sullivan also maintained the Beyond deal would get the Kirkland’s brand out in front of 40 million more customers through its Beyond’s online network. Beyond’s Overstock platform will help Kirkland’s by taking on slow-moving products, Sullivan added.
Sullivan said Kirkland’s would launch and learn from the pilot store, and the company looks forward to Bed Bath & Beyond operations helping it return to not the Bed Bath & Beyond banner’s original markets and those exited recently by Kirkland’s.
Under the terms of the partnership, Kirkland’s has entered into a $17 million Term Loan Credit Agreement with Beyond, $8.5 million of which consists of a convertible note that will turn into Kirkland’s common stock at a price of $1.85 per share upon the approval of Kirkland’s shareholders. Prior to receiving shareholder approval, Beyond might elect to convert a portion of the convertible note into up to 2.6 million shares at the conversion price. The companies also entered into a subscription agreement such that Beyond will purchase an additional $8 million of Kirkland’s common stock at the conversion price upon shareholder approval.
In addition, the parties entered into a seven-year collaboration agreement under which Beyond will earn a collaboration fee equal to 0.25% of Kirkland’s quarterly retail and e-commerce revenue starting in Kirkland’s 2025 first fiscal quarter that will remain in effect for the remaining term of the agreement. Beyond also receives an incentive fee equal to 1.5% of Kirkland’s incremental growth in e-commerce revenue during the term of the agreement. The parties entered into a trademark license agreement as well, with Beyond earning a store royalty fee equal to 3% of net store sales generated under the Bed Bath & Beyond banner during the agreement’s term. The rate increases to 5% of net store sales after the agreement has terminated if the locations are still operating.
Kirkland’s will use proceeds from the term loan portion of the transaction to repay its existing term loan with Gordon Brothers, including prepayment fees and transaction expenses, and to reduce borrowings under Kirkland’s existing revolving credit facility with Bank of America. After it makes the common stock purchase under the subscription agreement, Beyond will have a right to nominate two directors to Kirkland’s board of directors, each qualifying as independent directors for Nasdaq listing purposes. The right remains in place as long as Beyond owns at least 20% of Kirkland’s outstanding common stock. Also, Beyond will have the right to designate one person for appointment to Kirkland’s board as long as it continues to own at least 5% of the company’s outstanding common stock.
In the Kirkland’s conference call, Michael Madden, executive vp and CFO, said when the deal is fully executed, Beyond will have about a 40% stake in Kirkland’s.
In announcing the partnership, Sullivan said, “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 Home has a 58-year legacy in the home decor sector, and the core strength of our brand and this organization lies in merchandising and store operations. As we have demonstrated this year, we are a merchant-led organization focused on great product design and development with a strong and diverse sourcing strategy. We are also operators who leverage our brick-and-mortar footprint and channel expertise to create a memorable customer experience. 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. We plan to leverage the core strengths of the Beyond team by accessing its digital and technical expertise.”
