Beyond(US:BYON)2024-05-07 16:45Financial Data and Key Metrics Changes - Gross margin for the quarter landed at 19.5%, a 720-basis point decrease year-over-year, primarily due to increased discounting, welcome rewards redemptions, and higher shipping costs [23][24] - Adjusted EBITDA was a loss of $48 million, representing a negative margin of 12.5%, a 1,300 basis-point decline year-over-year, with approximately 50% of the decline driven by gross margin pressure [24] - Reported GAAP EPS loss was $1.62 for the first quarter, with an adjusted diluted loss per share of $1.22, excluding losses from equity market securities [24] Business Line Data and Key Metrics Changes - Bed Bath & Beyond's GMV for Q1 was up triple digits for bedding, bath, and kitchen categories, indicating strong performance in legacy categories [19] - Overstock's soft launch exceeded initial expectations, with site visits and average order size aligning with expectations, indicating a positive trajectory for the brand [21][45] - Zulily is expected to soft launch in the third quarter, focusing on working moms and providing a curated shopping experience [22] Market Data and Key Metrics Changes - Active customers increased by 26% year-over-year, with a corresponding 27% growth in orders delivered [46] - Average order value (AOV) declined by 21% year-over-year, primarily due to a shift in sales towards bedding and bath categories [46] - The company is focused on closing a $47 year-over-year gap in AOV through a more curated assortment and the relaunch of Overstock [46] Company Strategy and Development Direction - The company aims to leverage the Overstock brand as a leader in excess, factory-direct liquidations, and reverse logistics, establishing a moat by improving vendor supply chains [2] - Bed Bath & Beyond is focusing on assortment curation, life events, and enhancing customer experience to drive long-term profitable growth [19][43] - The management team is committed to building three standalone brands with a focus on profitability and sustainable growth, avoiding reckless spending [62] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the potential for all three brands to generate over $1 billion in revenue, emphasizing the importance of customer retention and lifetime value [7][10] - The company is not expecting positive contribution margins through the end of the year, focusing instead on building a strong foundation for future growth [31][32] - Management acknowledged the need for a slow and methodical revenue ramp, particularly with apparel, to ensure a positive customer experience [29] Other Important Information - The company has a strong balance sheet with a cash balance of $222 million and is focused on reducing fixed costs by $45 million [48] - Recent strategic hires include a new Chief Merchandising Officer for Bed Bath & Beyond and a Chief Information and Digital Officer to modernize e-commerce technology [19][43] - The company is actively working on monetizing non-performing assets and improving vendor relations for better product costs [48] Q&A Session Summary Question: What gives confidence in acquiring customers whose lifetime value exceeds acquisition costs? - Management highlighted the importance of data analytics and understanding customer behavior to identify long-term prospects, moving away from unprofitable transactions [26][27] Question: Should we expect profitability in Q3 and Q4? - Management does not expect positive contribution margins through the end of the year, focusing on intelligent capital allocation and building a strong foundation [31][32] Question: How should we think about Q2 revenues given the pullback on promotions? - Management aims to secure a revenue outcome similar to Q1 but with improved profitability, focusing on understanding the business in a vacuum before ramping up [63][65] Question: What is the potential for improvement in sales and marketing spend as a percentage of sales? - Management indicated that gross margins across the three brands will normalize over the next three to six months, with a focus on transparency in reporting [68]