Buy Buy Baby and Harmon Face Value stores to reopen

bed bath and beyond It may never return to its brick-and-mortar heyday, but the doors of former corporate siblings Buy Buy Baby and Harmon are poised to reopen, CNBC has learned.

The group that bought the Buy Buy Baby intellectual property in a bankruptcy auction in June, the owners of baby goods retailer Dream on Me, plans to reopen 11 stores in the Northeast as soon as this fall, the chief marketing officer said. of Dream on Me, Avish Dahiya, told CNBC.

But the group does not stop there.

An ambitious plan is being launched to return the brand to its glory years, with 100 to 120 stores in the next one to three years, said the head of marketing, who is also an official on Buy Buy Baby’s transition team.

“We definitely see the merit in expanding that number in the US,” Dahiya told CNBC in the company’s first interview since its acquisition. “Just like what we’ve done in the Northeast, it’s going to be more group-based rather than unique.”

Dahiya added: “We believe that omnichannel is critical to the success of the business and stores play a role, so it is important for stores to arrive as soon as possible.”

Meanwhile, private investor Jonah Raskas, who brought the dog-walking app to Wag! public through a special purpose acquisition company in 2022, plans to reopen five Harmon stores in the New York, New Jersey and Pennsylvania tri-state area and potentially more in the future.

“This business never failed. This business was shut down because Bed Bath was failing,” Raskas told CNBC. “We have the luxury of deciding which stores to reopen…we have the ability to focus on the right places at the right time where customers really want us to come back.”

When Bed Bath & Beyond filed for bankruptcy on April 23, it paid off its creditors by auctioning off parts of its broken empire to investors. No one was willing to buy the entire company, but some saw the value in their individual assets and managed to snag them for a song.

Overstock bought the IP for Bed Bath’s namesake brand for $21.5 million, a price Bank of America Internet analyst Curtis Nagle bluntly described to CNBC as “pretty cheap.” Meanwhile, the owners of Dream on Me have a chance to rebuild Buy Buy Baby after it received its trademark, data and 11 of its store leases for around $16.7 million, well below what the chain could have. Sought as a going concern. (The new Buy Buy Baby will work independently of Dream on Me.)

Raskas, on the other hand, bought Harmon’s trademark for just $300,000 when the chain could have been between $5 million and $10 million, he said.

New traders in Buy Buy Baby and Harmon have an opportunity to capitalize on failing businesses, thanks to better balance sheets and less exposure to underperforming locations, according to Neil Saunders, retail analyst and CEO of GlobalData.

“People have picked up the corpse of Bed Bath & Beyond and they’ve managed to get some pretty good bargains in terms of the value they’ve paid for the intellectual property and the business,” he said.

When Buy Buy Baby’s doors reopen, shoppers can expect smaller stores, national brands and a focus on experiences, community building and learning, said Dahiya, Dream on Me’s chief marketing officer.

About 80% of the staff, including the merchandise, technology and marketing teams, previously worked at Buy Buy Baby, and the company has chosen Bed Bath veteran Glen Cary to be its head of stores, Dahiya said. Cary spent about two decades at BB&B, overseeing stores at Buy Buy Baby and Bed Bath’s eponymous sign, according to his LinkedIn profile.

The revamped Buy Buy Baby features registration events and product showcases that will allow new parents to meet, learn from one another and try out big-ticket items like travel strollers before making a purchase.

A physical presence is important to the company’s overall strategy because it will give it a competitive advantage that will better differentiate it from mass retailers like Aim and walmart, which would be more difficult to do if the business was online only. Big box stores have leaned heavily into the baby category, but they lack the expertise and focus that comes with a specialty store.

“[Mass retailers] have a hall or two baby halls. We have a baby store. That’s the difference, right?” Dahiya said. “We’re very focused on the category we’re in.”

When it comes to baby gear, especially higher-priced items that are more technical, consumers need more “hand-holding” that’s more suited to an in-store experience than online, said Melissa Gonzalez, a principal at the firm. of architecture and design MG2 and founder of the Lionesque Group.

“There is a combination of so much education that is needed that you can’t really fulfill it online in a way that doesn’t feel overwhelming and intimidating,” González told CNBC. “On average, when someone spends more than, say, $200, then it’s a different price point of consideration where they’re going to need multiple touch points before they can make a decision, and on average, there’s not as much comfort to do that. online only.”

Dream on Me has been in the baby business since the 1990s. While its manufacturing capabilities and experience make it ideal for competition, busy families need convenience and are already comfortable doing their baby shopping at Walmart and Target. . To survive this time, Buy Buy Baby will need to focus on offering a unique value proposition, said Saunders of GlobalData.

“It’s not just Buy Buy Baby that failed. There was also Babies R Us before, and Toys R Us, which used to have baby stuff, failed. So it’s a tough model to hit,” Saunders said.

“You really need to focus on specialization and that means having products that other retailers don’t have, having services that other retailers don’t have and being recognized for really strong advice and expertise in the baby segment and having really good locations as well.”

Raskas, who bought the intellectual property from Harmon, had been a long-time customer of the chain when he heard that its 50 stores were closing.

Immediately, her curiosity was piqued and she began reaching out to a board member to find out if there was a problem with the business.

“There was nothing. There was no red flag,” Raskas, 37, said during an interview with CNBC. “The exact line was: ‘There are so many fires here to put out every day, it was just something we needed to get over.'”

When Bed Bath filed for bankruptcy a few months later and investors began to invade his namesake sign and Buy Buy Baby, Raskas began asking about Harmon, who had almost been lost in the noise.

He learned that the company had done about $150 million in sales in 2022, had been profitable every year for the past two decades, and that seven out of 10 customers who walked into the store bought something.

“I went and discussed with my lawyers and we said, ‘Okay, what is the kind of minimum offer that we can rule out?'” Raskas recalled. “And that was what we did”.

With a $300,000 offer, he secured the rights to Harmon’s trademark and plans to reopen five of his best-performing locations in New York and New Jersey, hopefully by the end of the year. More could come in the future, Raskas said.

David Abrams, founder and chief executive of the brokerage and advisory firm Masonre, has been advising Raskas and scouting locations for the stores, one of which could open in Manhattan.

“There’s probably no better time to be a renter,” Abrams said, adding that he’s looking for storefronts with better rents and visibility.

At its core, Harmon is a drugstore chain that sells many of the same products that cvs and Walgreens do, but it’s earned a cult following with its wide variety, travel-size products, low prices, and beloved private-label face values.

Standing outside a now-shuttered Harmon’s location in New Rochelle, New York, where Raskas and his family used to shop about an hour north of Manhattan, he pressed his face against the glass and remembered what the store was like in better days.

“The thing that stood out was the wide aisles, the great lighting, the employees were super friendly,” Raskas said. “In today’s era, where shopping in person is often good, painful, or hellish, it was refreshing. I knew I would get what I needed…and it would be out fast.”

The location, situated at the end of the North Ridge shopping center next to an Italian restaurant and a smoothie shop, was one of Harmon’s best-performing stores and one that Raskas is considering reopening.

Jennifer Kiggins, a trainer at the Rumble Boxing studio a few steps away, can’t wait.

“I think they had great prices and they had everything you need from toilet paper and paper towels to sunscreen and makeup, anything random,” said Kiggins, 28, who grew up shopping in Harmon with her mother. “I feel like she was always there.”

Fortunately, aside from a few optimizations and tweaks, Raskas plans to keep everything the same.

“I’m not just buying a retailer, I’m buying something that was a favorite community store that they went to for their entire lives and through all these different life cycle journeys… That’s why I think this is so exciting. Raskas said.

“Everyone loves a comeback story and everyone loves going back to something they thought was gone and now it’s back.”