Is Overstock An Off-Price, Opportunity Buy?

The announcement last month that wants to sell its retail business should surprise few.

Overstock’s third quarter sales decline and net loss all but validate Wall Street pundits believing retail prospects for the company as it is currently constituted have peaked.

A determined investment in blockchain businesses and cryptocurrency technology had already signaled the redirection of Overstock eyed by CEO Patrick Byrne.

Ambitious Schedule

Byrne told CNBC in mid-December he wants to divest Overstock’s retail business within 60 to 90 days. That’s an ambitious schedule, suggesting suitors might already be lining up for a significant e-retail business that could be had at relative discount.

Byrne specified possible options for Overstock’s retail business. They include a sale to a traditional brick-and-mortar retailer; and private-equity investment.

Overstock’s sagging retail performance could stunt its valuation by private-equity investors that would seek a bigger payday on a flip and might be stingy when it comes to pouring funds into a business requiring constant technology and distribution upkeep.

A brick-and-mortar retailer needing an immediate boost to its e-commerce development, on the other hand, might be more inclined to pay a higher price for Overstock’s retail platform.

Many observers initially thought Walmart overpaid last year for a business barely out of its diapers. That’s working out pretty well for Walmart.

Overstock comes with a more established retail brand to go with sturdy e-commerce infrastructure, experienced talent and a rich database of consumers across multiple generations. Despite its blockchain buildup and recent operating losses, Overstock continued to invest in state-of-the art e-retail technology, including a new augmented reality app allowing 3D, in-room views of furnishings through mobile devices.

Potential Bidders

While it has become harder for Overstock to distinguish its off-price, opportunity-buy positioning from Amazon, eBay and other online marketplaces, its sales base should remain compelling to traditional retailers looking to strengthen their e-commerce foundations quickly and decisively.

A leading housewares executive recently suggested two potential Overstock bidders: Macy’s, an early omnichannel proponent and strategist, and Bed Bath & Beyond, working diligently to catch up on e-commerce after its One Kings Lane acquisition in 2016. Of course, maybe that’s just wishful thinking by an executive concerned about the future of such core customers as Macy’s and Bed Bath & Beyond.

Better Fit

TJX Companies, which is only beginning to explore an e-commerce strategy to complement its thriving off-price store operation, seems like an even better fit for Overstock.

Target? The Home Depot? There could be any number of possible suitors for Overstock among traditional retailers if they can negotiate and finance a deal at a fair price.

There is a reason HomeWorld Business this past fall picked as a Retailer To Watch in 2018.

Just watch.