In a deal announced last week, Stock Advisor selection Bed Bath & Beyond
buybuy BABY currently has eight stores in four states and specializes in infant and toddler merchandise, including bedding, bath, furniture, and car seats. You might say it's Bed Bath & Beyond for the little ones. While there may be concern that Bed Bath & Beyond is stretching itself too thin, I really don't think that's the case with this deal. The product mix isn't really all that different from what you would find in its existing stores. Sure, it's for infants and toddlers, rather than adults, but that just means the products are smaller. The basic concept is the same.
Another factor that should make this a smooth transition is the fact that the players involved are familiar with one another. The founders of buybuy BABY are the sons of one of Bed Bath & Beyond's co-chairmen, and they were also both once employed with Bed Bath & Beyond.
The one thing that struck me as odd was that Bed Bath & Beyond failed to present any details of how the deal will improve its business. Sure, it had the typical statements about satisfying customers in new ways and having new growth opportunities, but the financial impact went unsaid. Actually, it was a bit worse than unsaid. The company said the purchase will not have a material effect on the overall results of fiscal 2007. While that may simply be because the transition will still be ongoing, I would expect Bed Bath & Beyond to shed some light on what it hopes to achieve through the acquisition from a financial perspective.
Still, I think the deal makes sense for Bed Bath & Beyond. The acquisition should enable the retailer to expand on its already broad customer base. Oftentimes, customers shopping for items for the home will also have little ones to buy for. The opportunity to offer a larger product mix with limited risk makes sense.
For more on Bed Bath & Beyond, check out:
- Dueling Fools: Bed Bath & Beyond
- Slower Bathing at Bed Bath & Beyond
- Fool on Call: Bed Bath & Beyond's Tub Not Full Yet