The company spending $65 million to revive Bed Bath & Beyond as a brick-and-mortar chain is now slashing its costs, downsizing its corporate footprint by selling its large Utah headquarters for $55 million, and cutting 20% of its workers.
Beyond — owner of the Bed Bath & Beyond, Overstock and Zulily online brands — is under contract to sell Peace Coliseum, a 260,000-square-foot office property at 799 W. Coliseum Way in Midvale. The buyer is Salt Lake County, with the local government planning to relocate is headquarters to the 18.6-acre corporate campus from Salt Lake City.
Beyond held an investor day event in New York on Thursday, where company officials discussed not only the headquarters sale but this week's announced cuts of roughly 150 workers, including Chief Product Officer Carlisha Robinson. Those job cuts will result in annual savings of roughly $20 million, the company said in a securities filing.
"These actions were taken to strategically create a more variable, leverage-able cost structure and create a more streamlined organization to align to its asset-light business that supports an affinity and data monetization model with a strong technology focus," Beyond said in its 8-K.
Beyond, formerly known as Overstock.com, is doing the belt-tightening after announcing two deals to bring Bed Bath & Beyond back to life in stores and reporting a roughly 17% drop in third-quarter revenue, to $311.4 million compared with the prior-year period. During the investor event, Beyond Executive Chairman Marcus Lemonis stressed the importance of Bed Bath & Beyond having a physical retail presence — in terms of winning clout with vendors and visibility and validity with consumers — when he discussed the company's two new partnerships relating to that brand.
Earlier this week, Beyond said it had struck a deal with Nashville, Tennessee-based Kirkland's, a chain with 325 stores in 35 states, for that retailer to open small-format Bed Bath & Beyond stores, kicking off with five pilot locations. In turn, Beyond will invest $25 million in Kirkland's. And just last week, in a separate deal Beyond announced it was investing $40 million in Texas-based The Container Store, which will begin carrying some Bed Bath & Beyonds products.
Much smaller headquarters
"We know that consumers forget their table cloth and need a blender and need something right now," Lemonis said at the investor presentation. "And while Amazon is unbelievably competitive in that space, nobody filled the white space that Bed Bath left behind."
Beyond acquired Bed Bath & Beyond's intellectual property rights last year after the home goods retailer filed for Chapter 11, ending up liquidating and closing all its stores. Beyond is selling the defunct chain's products online, but Lemonis said some consumers believe the brand is totally out of business and even question if the Bed Bath & Beyond website that Beyond operates is a scam.
While Beyond is looking to reestablish a physical presence for Bed Bath & Beyond, it is significantly slashing its corporate office space with the pending sale of its headquarters. The contract is in a 60-day due diligence period with prospective buyer Salt Lake County, which authorized the purchase Oct 10. A public hearing on the deal is scheduled for Tuesday.
Under the agreement, Beyond will continue to lease and occupy the headquarters’ data center, at about 5,000 square feet, from the county after the sale closes. But the company will move its headquarters offices to "much smaller B Class space," Lemonis said.
Beyond is in final negotiations to lease 34,000 square feet at the Security National Life building at 5300 South Interstate 15 in Salt Lake City, Kip Paul, vice chairman of investment sales at Cushman & Wakefield, said in an email to CoStar News. Cushman is Beyond's broker on the lease and its headquarters sale.
"We are a Salt Lake City-based business with the necessity to be physically together," Lemonis said, while acknowledging the company needs less space because it has fewer employees now.
East Coast pilots
Beyond has a $34.5 million balance due on a loan on the headquarters from Loancore Capital Markets. That balance will be repaid through a defeasance process on or near the closing date, Beyond said in a securities filing.
Several executives from Kirkland's,including CEO Amy Sullivan, were at Beyond's investor day and spoke, saying that the first Bed Bath & Beyond pilot stores will likely be on the East Coast, in places like New Jersey.
Lemonis said that Bed Bath & Beyond being an omnichannel outlet will give it more clout with vendors — and lower prices — than strictly selling online.by offering them more distribution, shelf presence and the ability to buy products.
"It is our belief, and we validated that already, that if you sit with a Conair or a Cuisinart or any vendor that you can think of that was historically part of the Bed Bath assortment, and you can bring them retail assortment back ... you're going to be able to negotiate, like Kirkland's would or like Container Store would, or like Bed Bath would, an appropriate wholesale price for taking in the product and taking on the risk and putting it in the warehouse," Lemonis said.
He also professed his faith in physical retail.
"I still believe, to my core, that properly sized, with the right [operating expenses] model, with the right properly trained labor model, the brick-and-mortar model is still viable — not 40,000 square feet and not 2,000 stores," Lemonis said, adding that national vendors "need a place to be sold on a daily basis."
For the record
The listing brokers for Beyonds' headquarters include Cushman & Wakefield's Kip Paul, Michael King, J.T. Redd, Kathey Hart and Chris Fiander-Carr.