Can Bed Bath & Beyond Benefit From Its Acquisition Of One Kings Lane?

Recently, Bed Bath & Beyond (NASDAQ:BBBY) announced that it had acquired One Kings Lane- a home decor & design company known for its flash sales, for an “immaterial” purchase price. In early 2014, One Kings Lane raised $225 million in venture capital and was valued at $ 900 million. However the once “hot” e-commerce start up subsequently struggled to grow revenues and its acquisition by Bed Bath & Beyond at an non-material price suggests a significant decline in its valuation.  While Bed Bath & Beyond believes that this acquisition will bolster its offerings in furniture and home decor, the rationale to purchase a struggling business is being questioned by several experts. We believe Bed Bath & Beyond needs to take bold steps to improve its revenues.  The acquisition of a flourishing business in the home furnishing segment might have made more strategic sense.  One Kings Land can enhance the company’s  product portfolio, but it might not make a significant difference to its revenues in the near term.

See our complete analysis for Bed Bath & Beyond

Enhancing Furniture And Home Décor Product Range

While Bed Bath & Beyond stated that the acquisition of One Kings Lane will help the company to expand its product range and reach more customers, the acquisition of a smaller player in this segment might not help the company much. According to Keybanc Capital Markets, One Kings Lane saw only a 3% increase in revenues last year compared to a 71% increase in revenues of its competitor Wayfair. However, Bed Bath & Beyond appears to have acquired One Kings Lane at a very low price, which implies that the downside of this acquisition will be limited and the company can benefit from its wide range of products. One Kings Lane works directly with home furnishing brands, vintage dealers, designers and taste-makers to offer a curated merchandise assortment. They also deliver design inspiration and expert style advice. And they offer complimentary interior design service at two studios in San Francisco and New York, respectively.  These services should fit well in Bed Bath and Beyond’s business and enhance its offerings.  However the troubled start up might not have much to offer in terms of a broad customer base.

Bed Bath & Beyond is exploring several ways to boost its revenues and while the acquisition of One Kings Lane appears to be part of a long term growth strategy, we don’t believe it will have any significant impact the company’s revenues in the short term. More bold acquisitions of leading players in niche segments might be the answer to its woes.

View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research