Bed Bath & Beyond Settles Sale of PersonalizationMall.com
Bed Bath & Beyond Inc. BBBY has agreed to a settlement with 1-800-FLOWERS.COM regarding the divestment of PersonalizationMall.com, provided some working capital and other closing conditions are fulfilled. The deal is likely to be completed by Aug 3. The company had entered into a definitive agreement in February to sell the PersonalizationMall.com business to 1-800-Flowers.
The deal worth $252 million was supposed to be closed on Mar 30 but 1-800-Flowers.com was short of resources due to COVID-19. Following the completion of the sale, management will withdraw its litigation against 1-800-FLOWERS.COM and 800-FLOWERS, INC., which was earlier undertaken in response to the latter’s actions to delay the deal.
This move is in sync with the company’s plans to streamline its portfolio and focus on core businesses, including Home, Baby and Beauty categories. 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 105% in the past three months, outperforming the industry’s growth of 29.1%.
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