Retailer Kirkland plans to close or convert underperforming stores to other brands, potentially creating brick-and-mortar locations for once-defunct Bed Bath & Beyond and Buy Buy Baby.
Nashville, Tennessee-based Kirkland's, a home decor specialty chain, on Tuesday unveiled a multipronged strategy for boosting its profitability that includes rejiggering its store footprint. It will entail measures involving roughly 6% of its 317-store fleet, or about 19 locations, that Kirkland's said it has determined don't meet performance standards in their current format.
As a result, the retailer said it will be "strategically converting stores to a more margin-accretive brand, augmenting the assortment strategy to drive improved profitability through the term of the lease, and closing select locations to ensure our real estate investments align to our new standards."
Through a partnership with Utah-based Beyond, Kirkland's has the ability to open both Bed Bath & Beyond and Buy Buy Baby stores, chains that were liquidated in 2023 as part of a bankruptcy. In October, for example, Kirkland's announced plans to roll out five small-format Bed Bath & Beyond locations this year as part of a deal it struck with Beyond.
"We have the rights and are considering anything from a Kirkland's Outlet assortments to Bed Bath & Beyond, Buy Buy Baby and Overstock," Kacy Fabie, Kirkand's vice president of marketing & e-commerce, said in an email to CoStar News about the planned store conversions. "We believe all of these brands have the potential for a brick-and-mortar presence."
In pursuit of bigger sales and profits, national retail chains like Kirkland's are taking steps to optimize their store portfolios. Macy's will be shuttering 66 stores in a round of closings this year, while Kohl's will close 27. Pharmacy giants Walgreens and CVS Health have been closing hundreds of stores. The cost-cutting comes as retailers continue to face headwinds such as greater costs due to inflation and high interest rates, and consumers tightening their purse strings.
Expanded portfolio
"As part of our ongoing transformation, we will continue to eliminate or convert underperforming assets to drive revenue growth and improve the profitability of the company," Kirkland's said.
Kirkland's released preliminary results for the fourth quarter of fiscal 2024 on Tuesday. It expects net sales of about $148 million and a consolidated comparable sales decline of roughly 0.6%, including comparable store growth of 1.6% and an e-commerce decline of 7.9% compared to the prior-year quarter.
"As we enter our next chapter with new assets through our partnership with [Beyond], we are positioned to leverage our collective family of brands as we drive towards our path to profitability," Kirkland's CEO Amy Sullivan said in a statement.
The retailer has expanded its portfolio of brands and e-commerce reach through its partnership with Beyond, formerly known as Overstock.com and the owner of the intellectual property rights to Bed Bath & Beyond. Last fall, Beyond said it would invest $25 million in Kirkland's. In exchange, Kirkland's would become the exclusive brick-and-mortar operator and licensee for new, small-format "neighborhood" Bed Bath & Beyond locations nationwide. It would kick off with five of them.
New Buy Buy Babies
Then earlier this month, Beyond acquired some Buy Buy Baby assets — including databases, domains, intellectual property and vendor relationships — for $5 million. Beyond said both it and its omnichannel partner Kirkland's believed that the Buy Buy Baby brand has a strong future online and in brick-and-mortar.
"Kirkland’s will have full flexibility, from integrating Buy Buy Baby into Bed Bath & Beyond stores, to opening standalone locations under each legacy banner," Beyond said in a statement at the time. "The Buy Buy Baby in-store experience will be a destination for parents, offering curated selections of the best brands for every stage of childhood."
However, a prior effort to resurrect Buy Buy Baby as a chain failed. New Jersey-based Dream on Me Industries acquired the IP rights for Buy Buy Baby and relaunched the chain, opening just under a dozen stores. But it closed those locations at the end of last year.
E-commerce improvements
Kirkland's new initiatives include improving its online performance and expanding its private label Kirkland's Home line.
"Through our collaboration with Beyond, we intend to leverage their expertise and partnerships to enhance site experience and improve conversion, while our internal team prioritizes profitability," the retailer said.
Kirkland's also plans to leverage the Kirkland's Home brand as the exclusive private label assortment for basics and decor in Bed Bath & Beyond stores "expanding the reach of the brand to new customers," according to the company.
"In addition, we are exploring opportunities to expand e-commerce distribution in furniture, patio and rugs driving average-order value through Kirkland's, Overstock and other marketplaces," Kirkland's said.
Neil Saunders, a retail analyst and managing director at analytics firm GlobalData, said Kirkland's plans are a step in the right direction.
"Kirkland’s has been in the red for quite some time and it looks like this fiscal year will be another one where a net loss is chalked up," Saunders said in an email to CoStar News. "While the company has not been helped by the slump in demand for home furnishings, it needs to take corrective action to put the business on a firmer financial footing and to rebuild its balance sheet. Closing or rebranding stores that lose money is an obvious step to accomplishing this. It is also the case that some stores are not optimal in terms of driving traffic and generating sales."
Kirkland's declined to comment on Saunders' remarks.