Photo: Bonobos
Is Bonobos Better Off Without Walmart?
Bonobos is changing owners again.
The menswear brand will become the property of the brand management firm WHP Global and Express Inc. (EXPR) after the companies signed a definitive agreement with Walmart in a deal valued at $75 million.
Bonobos, founded in 2007, was acquired by Walmart in 2017 for $310 million. The deal is expected to close in the current quarter. Walmart’s sale of Bonobos marks an end to its Marc Lore (former Walmart U.S. e-commerce head) chapter that included deals for ModCloth and Moosejaw, businesses that the retailer later sold.
WHP, which took a 60 percent stake in EXPR earlier this year, is paying $50 million to acquire the Bonobos brand. EXPR will pay the remaining $25 million for Bonobos’ operating assets and related liabilities.
The menswear line will continue to be led by CEO John Hutchison, who will become brand president of Bonobos and report to EXPR CEO Tim Baxter.
“Bonobos is delivering double-digit sales growth and we plan to continue that momentum while also realizing operating synergies and other economies of scale,” Mr. Baxter said in a statement.
EXPR, which also operates in the menswear space, expects the Bonobos deal to help it leverage its existing strength in the category and use marketing to increase awareness and customer acquisition for it and Bonobos.
The retailer also expects to find synergies and achieve economies of scale in numerous departments including but not limited to logistics, product & sourcing, real estate and technology.
Bonobos, which began its business selling chinos before branching out to other menswear segments, will continue to operate its guide shop showrooms where customers can try on clothes and order them online for delivery.
“This is an exciting moment for Bonobos as we embark on the next phase of our growth,” said Mr. Hutchinson. “Born a digitally native vertical brand, we plan to build on our strength in eCommerce and customer loyalty, leverage EXPR’s expertise in omnichannel retailing and scale through WHP Global’s partnerships in licensing and distribution.”
WHP owns the Anne Klein, Joseph Abboud, Joe’s Jeans, Isaac Mizrahi, Toys”R”Us and Babies”R”Us brands.
“Bonobos is an ideal first acquisition for our new partnership with EXPR and will be a terrific addition to our fashion vertical. Post-closing, WHP Global’s portfolio will include more than ten powerful consumer brands approaching $7 billion in total retail sales,” said Yehuda Shmidman, WHP Global chairman and CEO.
Discussion Questions
DISCUSSION QUESTIONS: Will Bonobos fare better under WHP Global and Express than it did as part of Walmart? What do you make of the Marc Lore era at Walmart now that Bonobos is being sold?
Poll
Loading …BrainTrust
Liza Amlani
Principal and Founder, Retail Strategy Group
Carol Spieckerman
President, Spieckerman Retail
Walmart got its value as it bought expertise around digital through Marc Lore bringing in the Bonobos team. Under a smaller banner, Bonobos stands to benefit as they will get more attention. The fit with Express also makes more sense so WHP Global will build both brands.
The better question may be, is Walmart better off disassembling its portfolio of Marc Lore-era acquisitions? The answer is clearly “yes” as brands get picked off one by one. That isn’t to say that Walmart’s stable of digital-native brands didn’t serve a purpose early on. No doubt much was learned, yet Walmart must maintain its focus as new challenges and opportunities are on the horizon. In the meantime, WHP seems to have digested its mega “R” Us deal and is back in portfolio-building mode.
Walmart is getting to back basics and focusing on its core business.
Other than learning from and experimenting with Bonobos, Walmart ultimately didn’t really know what to do with the brand and didn’t have all that much ambition to develop it.
Bonobos will have a better home under WHP Global and Express, both of which have deeper expertise to enhance and grow the business. Through its global connections, WHP will be able to expand the brand overseas, while Express will take care of running the U.S. operation under license. For Express, this is a welcome diversification from its core business which is far too exposed to the sluggish middle market.
That said, both companies will need to work hard to move Bonobos out of its niche and to increase awareness and traction with male consumers.
Yes! Bonobos has a new lease on life. I was always curious about whether or not Bonobos was ever profitable. The marked down sale price would suggest not very, if at all. Bonobos has a powerful wholesale equation with placement at Nordstrom, so that’s a very muscular start. There is every reason to believe that with all the synergies available to Express, and with the possibility of extensions into womenswear, they indeed can make Bonobos the home run it is capable of being.
Mr. Lore had some notable experiments, but it seems that the assets of Walmart are best deployed in building out the many avenues available to Walmart’s core business of providing value in both physical and e-commerce channels, and providing Amazon very stiff competition in the process.
This seems like a better fit to me. Bonobos will benefit from ownership by a group that has more experience in specialty retail.
Definitely. Bonobos needs to partner with an apparel brand that has significant success across the U.S. A merchandising strategy that is able to leverage data and insights from WHP Global and Express brands will be a win for Bonobos. Bonobos was lost under the Walmart umbrella and needs more hand-holding in order to fuel their strategic growth initiatives.
Most certainly Bonobos will fare much better under WHP Global than under Walmart. Marc Lore’s buying spree provided some good learnings for Walmart, and perhaps one of the most important takeaways was–stick to your core business. WHP has tremendous retail/fashion expertise and can leverage numerous economies of scale it has in place with its many other portfolio brands. I expect Bonobos to flourish.
The arranged marriage between Bonobos and Walmart always struck me as a poor fit. The product is sold at walmart.com but I’m not sure about its presence in Walmart’s physical stores — and is the Bonobos customer also a Walmart customer anyway? Walmart took a big markdown on this one.
Going forward, the relationship with Express is a better match and it offers Bonobos more physical real estate (including inside Express stores) with which to grow the brand and to return to its original quality standards.
“Bonobos is delivering double-digit sales growth…” yet lost over $200 million in enterprise value? Over the last five years, there was something very wrong with this company. Was Walmart that wrong with the projection of what this company could do?
The acquisitions made by the Marc Lore team seemed to have some rationale at the time. The Walmart business is mature. Growth beyond population growth would be surprising for Walmart. In retrospect, the fit was very awkward. Walmart’s skills would be hard to fit into Bonobos. Besides being an investment source (over $100 million more post-acquisition), The two companies could not leverage each others’ skills.
Bonobos had no future with Walmart. With WHP Global, they are just a blip in the WHP portfolio. If Bonobos needs management talent, perhaps WHP could offer that. What is more likely is that in five years we will be talking about what happened to the Bonobos brand as it becomes deeply integrated into Express.
If Mr. Baxter is to be believed – “it’s delivering double digit sales growth” – it was (already) doing well under WalMart; so I will interpret the question as “will they do really well?” I have trouble seeing it; it’s not the brand, nor is it the separation form WalMart: it’s that dress clothing has been on a slow decline for years (with that decline kicked up a few notches by the Pandemic) Perhaps line extensions can pick up the slack – no pun intended – or maybe they can take advantage of “dressing down” trends that a pure business attire purveyor like Men’s Wearhouse would struggle with. But it will be a challenge.
As for WalMart, they tried to buy themselves into fashion, and I guess the results were underwhelming. Much of the problem. methinks is the environment of a typical WalMart – it just screams “cheap!” – and tweaking the product mix can only do so much.
‘.. the environment of a typical WalMart – it just screams “cheap!” ‘ As it should.
I do not “get” the devaluation of Bonobos from purchase to sale. At all. I have all sorts of Bonobos clothing in my closet–this is a GREAT company. The stuff fits, it is reasonably priced, AND they have incredible customer service. Not to mention the styles are pretty much timeless.
As to the question, I predict a brighter future…
Agreed on your product assessment. It’s still good quality, design and value for the money. Hopefully the team is given the resources to build forward and not absorbed into the new ownership group.
I have always love the Bonobos model and wondered why it had not been copied. Perhaps being owned by a traditionally focused retailer has been a constraint for it? But on the other hand if the model resonated with customers why has it not been copied and replicated elsewhere? It certainly would be difficult to apply to an established brand – and perhaps that is the issue – it requires the establishment of a new retail brand.
There were questions surrounding Walmart’s Bonboos acquisition back in 2017. Walmart has made its apparel and fashion ambitions known, and certainly, they have benefited from all the capabilities and institutional knowledge shared by the Bonobos core team. The brand helped to expand Walmart’s assortment and expertise in Menswear. However, it appears Walmart will focus on its core business operating model by offloading Bonobos.
Bonobos diminished market value also reflects how the brand lost touch with its core customers. The changing consumer behaviors around corporate casual clothes have impacted Bonobos’ growth trajectory. Additionally, the versatility that activewear retailers such as Lululemon offer have disrupted their market positioning.
I believe that Bonobos has the potential to thrive with its new ownership. Since both Express and Bonobos are fashion brands, they have the opportunity to align their strategies in the same direction.
Additionally, the fact that the two brands share a similar “ideal customer profile” means they could form a fantastic collaboration to offer customers appealing clothing options.