What happened
Shares of Overstock.com (OSTK 4.79%) were up 19% as of 3:04 p.m. ET on Thursday after the company announced it acquired brand assets, including trademarks, patents, and domain names, from Bed Bath & Beyond, which is going through a bankruptcy process.
The deal provides some hope that Overstock can turn around its struggling retail business. The stock had fallen almost 40% over the last year before the jump in the share price today. The shares are now up 56% year to date.
NYSE: OSTK
Key Data Points
So what
Overstock is buying the retailer's website and domain names, brand trademarks, patents, customer database, loyalty program data, and other brand assets for $21.5 million with cash on hand. Overstock CEO Jonathan Johnson called the transaction "a significant and transformative step," and the market seems to agree.
One obvious reason why the deal could be very profitable for Overstock is that it appears to be getting all the good stuff from Bed Bath & Beyond (its brand) and avoiding the bad (the money-losing brick-and-mortar business).
In the next week, Overstock said it will relaunch the Bed Bath & Beyond website in Canada, with a separate site launching for U.S. customers.
Now what
Overstock has seen profits erode over the last year, so the jury is still out on the company's prospects. Over the last four quarters, Overstock reported a net loss of $55 million. Falling revenue was the main problem, down 29% year over year in the first quarter.
Overstock seems to be expecting the acquisition of Bed Bath & Beyond's brand assets to help it increase market share and bring in new customers. It's got a lot of ground to make up, as active customers declined by 35% to 4.8 million in the first quarter.
There will understandably be those who are skeptical that acquiring a struggling home goods retailer's brand assets will magically turn things around. Investors might want to stay on the fence and see if Overstock actually reports better numbers before pulling the trigger on a potentially cheap e-commerce stock.
