Bed Bath & Beyond's Push to Make Homeownership More Affordable

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1:45Carol Massar:Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. Today, though, Bed Bath & Beyond is very different than it was as a mall staple in the 90s. Earlier this month, it inquired InstalledRight and SFV Services to Detroit-based home installation and renovation companies. That was an all-stock transaction. A week ago, it bought Fathom Holdings, a tech-driven real estate services platform, in an all-stock deal. When we last spoke to her in early April, she had just been named president. We're talking about Amy Sullivan.

2:20She's back with us. She's the president of Bed Bath & Beyond. She's the former CEO of the retail chain Kirkland's, now also being integrated into Bed Bath & Beyond.

2:28Carol Massar:So great to have you back with us. Hi. Joining us again from Nashville. Hello, hello. Congratulations. I'm sure you're getting settled in. Yes. What do you want Bed Bath & Beyond to be? Because, you know, we were on our planning call this morning, and you guys are picking up a lot of different companies. What's the plan here? Yeah, I think for us, our mission really is to make homeownership more simple and affordable to the consumer. And that could be anything from our retail brands that are the essentials for your home or furnishing your home to the process of how you buy and sell and transact in your home.

3:03And then, as you mentioned earlier, the SFV acquisition that we're working on really goes hand in hand with cabinets to go and lumber liquidators and how we think about bringing services into the consumer's home in an affordable way. that's really all tied to a brand that, let's be honest, the Big Blue Coupon is the brand that everyone has loved for so many years and has a lot of affinity and trust for. I imagine you're not done with acquisitions, Amy? We're still building what we want to build for the future. Yeah. So what is that? Well, to Carol's point, what does that ultimately look like? And what are the other types of companies that you'd bring into the Bed Bath & Beyond family?

3:40You know, I think when you think about what we've done so far and the retail businesses you mentioned sort of at the kickoff, the Fathom transaction and the things in that space are really around, you know, the financial services and the buying of selling of homes. And then that last home services piece, the foundation is there. And so as we think about potential other acquisitions or additions to our business, we want to stay really close to the consumer's neighborhood. And so I would think of anything else that comes in the future as fitting into one of those three sort of pillars of our business.

4:10The retail business feels really solid at this point. We feel like we have brands that really service all facets of the home. The Fathom deal was a very big one in terms of the beginning of us thinking about how we help customers transact on their homes. But the home services part is the one where you can really get local and you can get closer to the consumer in their neighborhoods. And so I would think of that home services, any way we can service the consumer's home, you know, a man in a van, as we call it, that can be sort of the person on call. we would probably continue to round out that part of our business and really localize how people see our company.

4:46Carol Massar:So help me understand, though, Fathom Holdings. As you said, it was a big deal,$53.38 million stock deal, all stock deal, an implied equity value of about, again,$53.3 million. They are a technology-driven real estate services platform. What exactly do they do and how does that fit in? And where will it fit into the financial picture? Where are on your balance sheet? You know, I'm also curious about where the growth is going to ultimately be here. Sure. I would think of our whole company, and I'm glad you mentioned sort of the technology foundation, because honestly, that's even when you think back to when Beyond and the overstock e-commerce business was sort of the beginning part of the foundation of our company.

5:26We've always had this intention of being a very tech-driven organization. And so using that technology, we want to be able to not only continue to service the customer in terms of understanding. If you think of the home ownership journey or the life of sort of how a customer thinks about their home, customers tend to move into a new home or sell or buy a home every 11 years. And so when we think about what that transaction piece brings into our business, it's a marker. So if someone's buying a home, that's a big indicator to us of what they're going to do next or what they need right before that transaction.

5:58And so all of these things sort of come together with Fathom being really at the center of that home transaction part to begin to give us those benchmarks and milestones around the home.

6:08Carol Massar:So, Amy, so Fathom, which does mortgage, residential brokerage, title insurance, the idea is you're working with a customer or an individual or a family. They buy a home. You're involved in that early process. And then, of course, they've got to do some renovation because you guys own container store, alpha and closet workers, lumber liquidators, cabinets to go. So the idea is you need your floors redone. You need this redone. You need closets. So here, let's get you to the next step. That's the idea? It is. And I would say, you know, part of the appeal of being involved with a large brokerage is that's another army of salespeople out there that how awesome would it be if you were walking a new home with your real estate agent and they could solve for you some of those things.

6:55Many of us that buy homes, the first person you call when you need to do something and you're in a new city or a new neighborhood, you call your realtor and say, hey, do you know a guy? Do you know someone that can do this? And so we really want for the consumer to be able to arm that customer with the whole menu of options. And even if you think about a sales team or an agent, we want to give them other ways to earn as we think about the potential of all the things they could sell when they have that direct customer connection to a potential home buyer. Amy, that thesis sounds really great in an environment where the housing market is absolutely booming, but that's not the environment that we're in right now.

7:27And we haven't been in that environment for years. How is your customer doing? Yeah, I would say, first of all, we're kind of intentional about putting all of this together in a low point and in a trough of a season because we believe if we can build this and we're very much on a path to profitability, if we can do this at a low point, then the opportunity on the upside is really huge for us. In terms of the consumer and how he or she is interacting with us, I would say certainly there's price perception and there is sensitivity still. I mean, and people are tight. It's the summertime, people want to travel, and so the consumer's feeling a lot of pressure.

8:03But when you think about the brands on the retail side in particular that we're putting together, Bed Bath & Beyond really serviced a wide variety of demographic and socioeconomic sort of breadth of customers out there. And we really think that halo effect of that brand being accessible to everyone is how we want to sort of revive how people think about Container Store and how people think about these other brands. The Container Store brand is awesome. We love it. But it has a little bit of a price perception issue. And so we've recently announced to that customer that Bed Bath & Beyond is here.

8:35And we've gone and fought really hard to get better costs on our products. And so we're rolling back some prices in Container Store as well. And so we want to be that sort of value player that does not sacrifice quality, that can service all of middle America so that we really deliver a home product to him or her in a very affordable way.

8:54Carol Massar:I have to say, we used to have a container store just walking outside our office, and I went there at least probably once a week, and I miss it a lot. Tell us about this sweepstakes that you guys, the legendary coupon hunt and sweepstakes to find America's oldest coupon. Yeah, I think last time I talked to you guys, I shared a little bit about those first few stores that we opened. And the thing that stood out to me the most, even the small format sort of pilot stores that we did in the Nashville market was people were already coming in with them on their own. And people, when we handed out a brand new version of it that looks just like the coupon we all kept in our junk drawer and our glove compartment, there were literally people lining up taking selfies with the coupon.

9:37And so it was such an icon of the brand that we really just felt like people, it's a pop moment, pop culture moment sort of in the history of retail. And so, so many people on their own were like, I saved my coupon because the rumor is they never expire. Will you still honor it? So we started honoring them and then just got to this point where let's have a little fun with this and let's put a contest out there. Now that we're rolling out Bed Bath product to all the container stores and we have a physical footprint more broadly across the country, we've got a place for customers to sort of come in and interact.

10:07And it's been really fun.

10:09Carol Massar:I grew up with coupons. Big family. That's what we did. But, I mean, I would have gone to coupons. My husband would drive me. He's like, what do you know? Now I'm like really upset because I know I toss them. No, you definitely didn't. No, you didn't throw them away. I know they're not at home. Because when the Bed Bath & Beyond that was like a minute away from my home closed, yeah, I kind of moved on. Can I just say the oldest surviving Bed Bath & Beyond Coupon America is going to give customers a chance to win$100 ,000 home transformation. That's what I'm saying. Check under the floorboards.

10:41John, are you listening? Check under the floorboards. Check under the floorboards. Tell your husband you were right. Well, Amy, what is... I do often. Well, we spoke about this last time, but I'm curious how it's evolved in the last few months and just the way you are thinking about your retail strategy. Because as I mentioned, and when I say retail, bricks and mortar retail strategy. Because when we think about this as a mall staple of the 90s, this was one of the anchor tenets. And that's no longer the way that retail works.

11:09Carol Massar:But look at Wayfair that started as an online and now they're doing these mega stores. But they're few and far between still, right? But they're opening several this year. They're on an expansion thing. But forgive me, Tim brings up a good point. Yeah, I would say I would think about it, both the Wayfair version of this, and I think they're definitely doing the right thing for their brand. Omnichannel is the best of both worlds. And whether you think about the e-commerce part of your business being your store's billboard, the stores are equally the billboard for your brand. And so the more times you can get that in front of the customer, obviously, the better.

11:45But honestly, over the past, I would say, two years, we've seen a resurgence of brick and mortar traffic improving again. I think as people want to be less reliant on technology at times or their phones, I would say, at times, you see this return to shopping. You even see this Gen Z behavior of sort of returning to a mall culture, which I thought was really cool to sort of read about. But we're definitely moving forward aggressively with a brick and mortar strategy, both with our existing fleet of stores that will convert to a combination of our brands. But we're also signing new leases right now.

12:18And so we believe both channels of the business are part of how we grow.

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