Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Beyond Inc reported a year-over-year revenue increase in Q1, driven by a 26% growth in active customers and a 27% increase in orders delivered.
- The company successfully completed the sale of Wamsutta for $10.25 million, nearly half of the original purchase price of the acquisition of the entire Bed Bath & Beyond intellectual property pool.
- Beyond Inc announced new strategic technology partnerships, including a significant relationship with Salesforce, aimed at enhancing customer relationship management and data analytics.
- The company is making progress in its strategic priorities, including assortment curation and focusing on life events, which are expected to drive customer retention and increase lifetime value.
- Beyond Inc has launched a new platform for Overstock, starting from scratch, which has shown encouraging early numbers and is expected to help the brand return to its historical performance.
Negative Points
- Average Order Value (AOV) declined by 21% year-over-year, primarily due to sales shifting into lower-margin categories like bedding and bath.
- Gross margin decreased significantly by 720 basis points compared to the same period last year, driven by increased discounting and higher shipping costs.
- The company reported an adjusted EBITDA loss of $48 million, with a margin decline of 1,300 basis points year-over-year, half of which was driven by gross margin pressure.
- Beyond Inc is still in the process of renegotiating freight rates and improving vendor relations, which are ongoing efforts to manage costs and improve profitability.
- The company's strategic shift and focus on building foundational stability for its brands mean that achieving a $2 billion revenue target for 2024 is no longer a priority, as it would require spending that is not deemed prudent.
Q & A Highlights
Q: What gives you confidence you're acquiring customers whose lifetime value exceeds the related customer acquisition costs for Bed Bath & Beyond, more recently Overstock and then looking ahead Zulily?
A: Marcus A. Lemonis, Executive Chairman of Beyond, Inc., explained that the company had previously struggled with analyzing customer acquisition costs effectively. However, with new data analytics capabilities and a platform that segregates transactions by customer, they can now better understand customer behaviors and indicators. This enhanced analysis helps identify customers likely to provide long-term value, distinguishing them from those merely seeking one-time deals.
Q: In the earnings release, you indicate that all three brands have the potential to generate $1 billion or more of revenue. Focusing on Zulily, which had a high watermark of $1.8 billion in 2018, what gives you confidence you could surpass $1 billion in revenue for Zulily? How should we think about the relative profitability of those sales versus those from Bed Bath and Overstock?
A: Marcus A. Lemonis highlighted the unique position of Zulily in the online off-price apparel market, which lacks significant competition. He emphasized the potential for high volume and margin opportunities in serving the mid-level price tier market, particularly for working moms. Lemonis also noted the importance of improving customer service and delivery times, which were historical challenges for Zulily. He expressed confidence in achieving higher margins and a revenue target of over $1 billion by focusing on these areas.
Q: You had previously talked about profitability in the back half of the year. Should we still expect Beyond to be profitable in 3Q and 4Q? And as you look out to '25, do you think low single-digit EBITDA margins is a realistic level for the business?
A: Marcus A. Lemonis indicated that after reviewing the first 100 days and the investments required to build the three stand-alone brands, he does not expect positive contributions through the end of the year. The focus will be on building a solid foundation rather than chasing unprofitable transactions. He emphasized the importance of investing in technology, customer experience, and talent to build a sustainable business model.
Q: It sounds like the Overstock soft launch is proceeding on plan. How should we think about the contribution of Overstock in the second quarter and then for the year?
A: David J. Nielsen, Co-Principal Executive Officer & CEO of Overstock, expressed optimism about the performance and contribution margin of Overstock, noting that it has been accretive to the total margin even in the early stages of the launch. He highlighted the strong performance in core categories such as patio, furniture, and area rugs.
Q: Just trying to dig in a little deeper on what you're seeing with customer acquisition. Does the growth reflect legacy Bed Bath customers coming back or Overstock customers, or just completely new people and where do you see the opportunity ahead?
A: Chandra R. Holt, Co-Principal Executive Officer & CEO of Bed Bath & Beyond, mentioned growth from reengaging historical Bed Bath & Beyond customers and acquiring new customers through performance marketing. Marcus A. Lemonis added that while there was significant customer growth, the focus would be on retaining customers who show potential for long-term engagement rather than those attracted solely by discounts.
Q: I was wondering about the $2 billion revenue target for 2024. As you're getting Bed Bath & Beyond growing and ramping Overstock, now you have Zulily, how do you feel about that $2 billion target for this year at this point?
A: Marcus A. Lemonis revised his outlook on the $2 billion revenue target, stating that while it is possible, the cost of achieving it recklessly does not seem prudent. He emphasized managing the business to drive towards profitability and foundational stability rather than focusing solely on hitting revenue targets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
