Kirkland’s agrees to operate brick-and-mortar Bed, Bath & Beyond stores

A Bed, Bath & Beyond neighborhood stores strategy will emerge from a new partnership between Beyond Inc. and home decor retailer Kirkland's.

Kirkland’s agrees to operate brick-and-mortar Bed, Bath & Beyond stores

NASHVILLE, Tenn. — Kirkland’s Inc., a home décor and furnishings retailer, has entered into a strategic business relationship with Midvale, Utah-based Beyond Inc., becoming the exclusive brick-and-mortar operator and licensee for smaller format Bed, Bath & Beyond locations nationwide.

An initial five “neighborhood format” physical stores will be in the 7,000- to 15,000-square-foot range. There is also a non-exclusive license in the deal for shop-in-shops under the Bed, Bath & Beyond nameplate at yet-to-be-determined Kirkland’s locations.

Under terms of the deal, Beyond Inc., which owns Bed, Bath & Beyond, Overstock and Zulily, will provide $17 million in debt financing to Kirkland’s, which includes an $8.5 million promissory note and an $8.5 million convertible note. A portion of the latter will convert into Kirkland’s common stock at a price of $1.85 per share upon approval by Kirkland’s shareholders. The loan is being secured by Kirkland’s assets and is secondary to an existing loan Kirkland’s has with Bank of America.

Kirkland’s is using the loan from Beyond to pay off its existing loan to Gordan Brothers, as well as to pay transaction fees in connection with its credit agreement, increase cash, finance capital expenditures and for general corporate purposes.

“Having known the iconic Bed, Bath & Beyond brand for years, we are thrilled to partner with (Beyond Inc. Executive Chairman Marcus Lemonis) and the entire Beyond team to bring the brick-and-mortar strategy back to life,” said Amy Sullivan, CEO of Kirkland’s. “Kirkland’s Home has a 58-year legacy in the home décor sector, and the core strength of our brand and this organization lies in merchandising and store operations.

“As we have demonstrated this year, we are a merchant-led organization focused on great product design and development with a strong and diverse sourcing strategy. We are also operators who leverage our brick-and-mortar footprint and channel expertise to create a memorable customer experience.”

Sullivan added she expects the investment from Beyond to not only be a financial aid, but also a means to introduce Kirkland’s to new customers and re-engage core customers across multiple formats. “We plan to leverage the core strengths of the Beyond team by accessing its digital and technical expertise,” she said.

“An omnichannel approach to Bed Bath & Beyond is quintessential to its success,” said Lemonis. “We understand that retail is both an art and a science and have vetted the management team and infrastructure of Kirkland’s Home as an ideal organization to help bring the iconic Bed Bath & Beyond brand back.

“The key to retail is efficiency in assortment, space management, sourcing and merchandising, all while recognizing that smaller, tighter footprints with significantly lower fixed cost models is a winning recipe. We are very excited to work with the Kirkland’s board and Amy, along with her entire management team, as we reinvigorate the Bed Bath & Beyond brand.”

Under terms of the deal, the parties have entered into a subscription agreement in which Beyond will purchase an additional $8 million of Kirkland’s common stock at the conversion price upon the approval of Kirkland’s shareholders. If Kirkland’s issues the full amount of shares under the agreement, Beyond will own up to 40% of Kirkland’s common stock.

Beyond will be able to nominate two independent directors to Kirkland’s board following the closing of the common stock purchase. The two would replace two directors on the current six-member board. Beyond would also have the right to appoint one non-voting observer to the Kirkland’s board.

The parties also entered into a seven-year collaboration agreement under which Beyond will earn a collaboration fee equal to 0.25% of Kirkland’s quarterly retail and e-commerce revenue starting in Kirkland’s first fiscal quarter of fiscal 2025 for the remaining term of the collaboration agreement and an incentive fee equal to 1.5% of Kirkland’s incremental growth in e-commerce revenue.

Under an additional trademark license agreement, Beyond will earn a store royalty fee equal to 3% of net store sales generated under the Bed Bath & Beyond banner, with that rate increasing to 5% of net store after the collaboration agreement has terminated, if the locations are still operating.