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Finanzas: Wal-Mart: Bonobos Acquisition To Boost Growth

Finanzas: Wal-Mart: Bonobos Acquisition To Boost Growth
Junio 19, 2017

Autor/Fuente: Fuente: Seeking Alpha 👤Periodista: María Luisa Ayala 🕔19.Jun 2017

 

Summary

  • Wal-Mart Stores has agreed to acquire online apparel retailer Bonobos for $310 million in cash.
  • The deal brings in-house another apparel retailer in the fastest growing online segment.
  • Wal-Mart is executing its strategy of acquiring digital retailers and expertise, but it may not be fast enough to fend off Amazon’s ambitions.

Quick Take

Retailing giant Wal-Mart Stores (WMT) has announced an agreement to acquire Internet apparel company Bonobos for $310 million in cash.

Bonobos will provide Wal-Mart’s e-commerce initiative with a well-regarded apparel brand in a growing space, along with management expertise from Bonobos’ founder Andy Dunn.

The deal appears to be a smart move, but I fear Wal-Mart may not be moving fast enough to fend off competitors such as Amazon (AMZN).

Target Company

New York-based Bonobos was founded by CEO Andy Dunn in 2007 and sells men’s clothing and accessories primarily online.

The firm has since expanded to a current total of 37 offline Guideshopstores. These locations don’t actually have inventory to sell; rather they assist customers in determining the clothing they want and facilitate the purchase which is then delivered directly to the customer.

Below is a brief demo video highlighting the Guideshop concept:

(Source: GeekWire)

Bonobos raised nearly $128 million in private financing from venture capital and strategic investors such as Accel Partners, Lightspeed Venture Partners, Coppel Capital, and Nordstrom (JWN), with its most recent round of $55 million finalized in July 2014 at a reported $300 million valuation.

Acquisition Terms and Rationale

Wal-Mart intends to pay $310 million in cash, which may represent little comfort for late stage investors who may have invested at roughly the same valuation.

Early stage investors in the company such as Accel, Lightspeed, and Forerunner Ventures may have a blended valuation much lower than the final private round, so may have had a ‘base hit’ return scenario of perhaps 2x their combined investment.

As of Wal-Mart’s current 10-Q filing, the company had $6.5 billion in cash and equivalents as of April 30, 2017, so has ample resources to close the transaction.

I previously wrote about the possibility of a Wal-Mart/Bonobos combination in my article, Wal-Mart May Acquire Bonobos Menswear Retailer.

In that article, I highlighted Wal-Mart’s recent acquisition activity buying various online apparel retailers such as MooseJaw, ShoeBuy, and ModCloth.

The strategy appears to be part of its original acquisition of Jet.com and the installation of founder Marc Lore to head up Wal-Mart’s expanding e-commerce group.

Lore has since stated that they intend to pursue acquisitions to build out the company’s online offerings and develop in-house expertise to better market to a younger, online audience.

As Lore commented in the Bonobos deal announcement,

We’re seeing momentum in the business as we expand our value proposition with customers and it’s incredible to see how fast we’re moving. Adding innovators like [Bonobos’ CEO] Andy [Dunn] will continue to help us shape the future of Wal-Mart, and the future of retail. I’m thrilled to welcome Andy and the entire Bonobos team. They’ve created an amazing product and customer experience, and that will not change. In fact, Andy will be a great influence on the company, especially in leading our collection of exclusive brands offered online.

Wal-Mart continued, stating emphatically,

The addition of Bonobos is part of a broader e-commerce strategy to enhance the customer value proposition, including:

  • Offering customers low prices and convenient ways of getting the items they buy every day, like food and consumables;
  • Offering a vastly expanded assortment while building expertise in key long-tail categories, like apparel and home; and
  • Adding best-in-class owned, vertical consumer brands to be sold on those brands’ properties, and over time, Jet.com.

Apparel is the fastest-growing online retailing segment, so Wal-Mart and e-commerce head Lore are prioritizing acquisitions that hold the promise of stimulating growth while bringing in expertise to enable the company to fend off increasing competition from Amazon.

So, the Bonobos deal is part of an ongoing strategy that Wal-Mart is patiently executing.

The main question is whether Wal-Mart is executing fast enough in the face of Amazon’s momentum, and especially as Amazon’s pending acquisition of Whole Foods (WFM) provides it with a significant footprint in the offline, retail space.

I’m in agreement with Wal-Mart’s approach but wonder if it is moving fast enough to create economies of scale, which is Amazon’s strength.

I write about M&A deals and IPOs. Click the Follow button next to my name at the top or bottom of this article if you want to receive future articles automatically.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Fuente: Seeking Alpha

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