Through a strategic business partnership with Beyond Inc., based in Midvale, Utah, Kirkland’s Inc., a retailer of home furnishings and décor, has become the sole brick-and-mortar operator and licensee for smaller format Bed, Bath & Beyond stores across the country.
The first five actual “neighborhood format” businesses will be between 7,000 and 15,000 square feet in size. The agreement also includes a non-exclusive license for shop-in-shops operating under the Bed, Bath & Beyond moniker at unspecified Kirkland’s sites.
As per the agreement, Kirkland’s will get $17 million in debt financing from Beyond Inc., the parent company of Bed, Bath & Beyond, Overstock, and Zulily. The funding will consist of two notes, worth $8.5 million and $8.5 million convertible each. If approved by Kirkland’s shareholders, a portion of the latter will be converted into Kirkland’s common stock at a price of $1.85 per share. The loan is secondary to one that Kirkland already has with Bank of America and is backed by Kirkland’s assets.
In addition to paying transaction fees related to its credit agreement, Kirkland’s is using the loan from Beyond to pay off its current loan to Gordan Brothers, boost liquidity, finance capital expenditures, and for other company purposes.
“After years of familiarity with the iconic Bed, Bath & Beyond brand, we are excited to collaborate with Marcus Lemonis, Executive Chairman of Beyond Inc., and the entire Beyond team to revive the brick-and-mortar strategy,” stated Amy Sullivan, CEO of Kirkland’s. Kirkland’s Home has 58 years of experience in the home décor industry, and merchandising and retail operations are the foundation of our brand and company.
We are a merchant-led company that prioritizes excellent product design and development with a robust and varied sourcing strategy, as we have shown this year. We are also business owners that use our physical presence and channel knowledge to provide customers with an unforgettable experience.
According to Sullivan, the Beyond investment will not only provide financial support but also serve as a way to reach new clients and reconnect with existing ones via a variety of media. “We intend to take advantage of the Beyond team’s core competencies by utilizing its technological and digital know-how,” she stated.
“The key to Bed Bath & Beyond’s success is an omnichannel strategy,” Lemonis stated. We have evaluated Kirkland’s Home’s management team and infrastructure as a perfect fit to help revive the venerable Bed Bath & Beyond brand because we recognize that retail is both an art and a science.
“The secret to retail is efficiency in sourcing, merchandising, assortment, and space management, all while realizing that a winning formula is smaller, more condensed footprints with much lower fixed cost models. As we revitalize the Bed Bath & Beyond brand, we are thrilled to collaborate with Amy and her whole management team as well as the Kirkland’s board.
A subscription agreement has been signed by the parties, according to which, with Kirkland’s shareholders’ consent, Beyond will buy an extra $8 million of Kirkland’s common stock at the conversion price. By issuing all of the shares required by the agreement, Kirkland’s common stock will belong to Beyond up to forty percent.
Following the completion of the purchase of common stock, Beyond will have the ability to propose two independent directors to Kirkland’s board. Two directors on the present six-member board would be replaced by the two. Additionally, Beyond would be able to designate one observer to the Kirkland’s board who would not be able to vote.
A seven-year collaboration agreement was also signed by the parties, according to which Beyond will receive an incentive fee equal to 1.5% of Kirkland’s incremental growth in e-commerce revenue and a collaboration fee equal to 0.25% of Kirkland’s quarterly retail and e-commerce revenue beginning in Kirkland’s first fiscal quarter of fiscal 2025.
Beyond will receive a store royalty fee under a separate trademark license agreement equal to 3% of net shop sales made under the Bed Bath & Beyond name. If the locations are still open at the end of the partnership agreement, that rate will rise to 5% of net store sales.
