Bed Bath & Beyond's Latest E-Tail Purchase Seems Too Little, Too Late

Image source: Bed Bath & Beyond.

Bed Bath & Beyond (BBBY) recently announced the purchase of e-retailer PersonalizationMall.com, which specializes in personalized products for your home. The home goods retailer stated the acquisition will grow its Product Personalization category, as well as support its existing online store. The newest addition to the Bed Bath & Beyond family is in line with management's stated goals, but efforts to fight stagnating sales have not paid off yet.

Details of the deal

Bed Bath & Beyond parted with about $190 million in cash to add PersonalizationMall.com to its arsenal. The company used cash on hand to fund the purchase, so the deal won't have an effect on the current quarter's bottom-line profit. Bed Bath & Beyond doesn't expect any impact to show up until the fourth quarter, which won't be reported on until early 2017.

Indications from the company's news release are that PMall.com's operations will be left alone to operate as they did prior to the transaction. Bed Bath & Beyond hopes to provide support to help PMall.com continue to grow as its own company under the Bed Bath & Beyond umbrella of companies. Bed Bath & Beyond's next earnings call is scheduled for Dec. 21, so investors should tune in to that for further details.

How it helps with Bed Bath & Beyond's mission

PMall.com sells a wide variety of customizable products on its website. The company currently offers personalization of these products through a variety of processes like embroidery, engraving, and digital printing.

Besides bolstering much-needed online sales, Bed Bath & Beyond made the move to expand its lineup of personalized products. CEO Stephen Temares had this to say about the deal:

We view personalization as a significant opportunity for us to create additional differentiation and enable us to do more for and with our customers. At the same time, we are excited by the opportunity to leverage [PMall.com's] advanced personalization and production capabilities to create additional omni-channel offerings across all of our concepts.

In other words, the company is trying to fight its stagnating sales problem by differentiating the products it offers customers from the rest of the retail world. Bed Bath & Beyond has also ramped up online sales, which increased over 20% last quarter, but to date those efforts are merely offsetting declines in physical-store sales.

Data source: Bed Bath & Beyond quarterly earnings reports.

The addition of PMall.com joins the acquisition Bed Bath & Beyond made earlier in the year of One Kings Lane, an online purveyor of curated home décor. "We believe the home furnishing space provides tremendous opportunity to build a large curated assortment of differentiated product to engage with our customers in a meaningful way and to provide inspiration across various lifestyles," Temares said in the company's September conference call. In a digital world where making a sale often comes down to price, Bed Bath & Beyond is looking to merge unique items with a competitive online presence. So far, the efforts haven't moved the needle.

Probably not enough

Bed Bath & Beyond operates over 1,500 stores in the US. In addition to the namesake stores, the company also owns Cost Plus World Market, buybuy Baby, and Christmas Tree Shops, among other names. The diverse number of brands has not helped reverse a trend of declining foot traffic that has plagued the company and other bricks-and-mortar retailers.

Bed Bath & Beyond is arriving late to the digital store format, and while it has reported success in driving consumer interest to the growing list of websites it operates, it is still highly dependent on in-store purchases, I don't think the purchase of the PMall.com business will be enough to make a big impact on the company's efforts.