retail watch | Jan 26, 2023 |
Wayfair needs stores. Bed Bath & Beyond needs cash. Could they strike a deal?

Much to its detriment, Wayfair has been slow to add physical stores to its online base—just earlier this month, the e-commerce giant confirmed it’s pushing back the opening of its first flagship location. The 150,000-square-foot store, located in a former Carson Pirie Scott location in the Chicagoland suburb of Wilmette, was originally scheduled to open this spring, but a report in the Chicago Tribune two weeks ago, since confirmed by Wayfair, now says the store won’t open until early 2024.

While the company is in the middle of implementing a huge “efficiency plan” that will see it cut 10 percent of its workforce (or about 1,750 employees) as part of an overall savings strategy of $1.4 billion, the delayed store opening isn’t part of that plan. “It’s not related,” Susan Frechette, associate director of corporate communications, tells Business of Home. In speaking with the Tribune, Frechette didn’t share what’s driving the delay, but a spokesperson for the building site said some recently proposed exterior design revisions, along with interior work permits, are still under review. “[Wayfair] remains focused on expanding our omnichannel presence with the opening of physical retail locations across our brands,” adds Frechette.

Right now Wayfair operates two pairs of stores in the Boston area where it is headquartered: two for its Joss & Main brand and two more for AllModern. These are relatively small stores, about 10,000 square feet each, and were opened in 2022. The company has talked about plans for additional stores—including for its other brands, like Perigold and Birch Lane—but has not announced any other opening specifics. The Wayfair store in Wilmette was to be its flagship and presumably will remain the debut for the nameplate in physical retailing when it does open next year.

But is a solution—and a relatively inexpensive one at that—just sitting out there waiting for Wayfair? Bed Bath & Beyond’s problems have been widely reported, and most who follow the retailer believe it will be forced into bankruptcy at worst, or sold off at best, perhaps as soon as this month. The company is low on cash, has exhausted most of its credit options, and just a few days ago, eight of nine board members sold off most of their stock in the company, a sign that may mean the end is near. All BBB will say on the record is that it continues to pursue financial options, both inside and outside the company.

Could Wayfair be one of those outsiders? Stranger things have happened—and when you do the math, it could be a solution for the problems facing two of the biggest retailers in the home products business.

Even after Bed Bath & Beyond completes its recently announced round of 62 store closings, bringing the total closures to 120, it will still continue to operate about 500 locations under its name. It also owns another 135 or so Buybuy Baby locations, as well as a few dozen health and beauty stores under the Harmon and Face Values nameplates. The stores have all just been remodeled and would not require major gut renovations. They’re also mostly located in prime strip center locations and are rumored to have favorable leasing rates.

And the best part? With the company’s stock price hovering in the range of $3.20 a share this week, the market cap—or the value of its shares if one were to buy them all—is under $400 million. Wayfair has been quite successful at raising cash for investments and growth even as it has only reported a profit in 2021, during the height of the pandemic-fueled home boom.

Even with a substantial premium to the current share price, Wayfair could own Bed Bath & Beyond for well less than $1 billion. Compare that with the cost of building out a retail network from scratch for all its brands, and the numbers start to look attractive. This doesn’t even count the Baby unit, which insiders speculate is in far better business shape, driving about $1 billion of the BBB’s $5 billion in annual revenue.

It’s a fascinating theory, made only more so by winding back the clock a decade or two, to when Bed Bath & Beyond was hugely successful but hadn’t yet gotten its online operations up and running. (Not much has changed there.) A fledgling Wayfair, founded in 2002, was relatively small in size by comparison—and at the time, some in the industry actually speculated that Bed Bath & Beyond buying Wayfair would be a fitting match.

How the tables have turned: Wayfair is now more than twice the size of Bed Bath & Beyond and boasts a balance sheet that would allow for an acquisition of this scope. To be clear, nobody outside of either company knows if this is an idea being seriously considered inside corporate headquarters. Maybe yes, maybe no—but there’s no maybe about the fact that this is an intriguing proposal. Stranger things have happened, indeed.

Homepage image: ©Pattarisara/Adobe Stock


Warren Shoulberg is the former editor in chief for several leading B2B publications. He has been a guest lecturer at the Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and been cited by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. His Retail Watch columns offer deep industry insights on major markets and product categories.

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