Cost Plus adorns dining rooms and picnics with wicker, wine, and cheese. The retailer's nearly 260 Cost Plus World Market, Cost Plus Imports, and World Market stores sell furniture, rugs, baskets, ceramics, and other home decor, as well as exotic food and beverages (about 40% of sales). Designed to resemble upscale world markets, Cost Plus's stores are often located near major malls in some 30 states. The company targets women ages 25 to 55. Much of what it sells is imported from more than 50 countries; many of its 10,000-plus items are proprietary and are sold under its World Market private label. Cost Plus was acquired by its larger rival Bed Bath & Beyond for $495 million in cash in mid-2012.
The deal follows an 18-month partnership between the two retailers during which specialty food departments were added to some Bed Bath & Beyond (BBB) stores. Home-goods-giant BBB looks to generate more in-store traffic and fend off competition from online and discount retailers by adding food and drink to its merchandise offering. A tender offer for the shares of Cost Plus was completed in late June and the retail chain became a subsidiary of BBB. Cost Plus's executive management is expected to remain in place and no store closings are planned.
The purchase followed two years of improved financial results for the company, which stumbled during the deep recession and decline in demand for furniture and pricey victuals. In fiscal 2012 (ends January) sales rose about 5% vs. the previous year, while net income soared 477% over the same period, marking two consecutive years of profitability for the chain. The retailer credited strong sales (same-store sales rose more than 5%) and margin performance, combined with expense control for its improved financial health. The retailer's sales mix of home furnishing vs. consumables shifted slightly in favor of furnishings (61%), in line with Cost Plus's strategy. The company seeks to differentiate itself from the retail pack by offering a broad selection of distinctive casual home furnishings and entertainment items.
Investment firm Red Mountain Capital Partners owns about 14% of the company's shares, and has board representation. Stephens Investment Holdings also holds about 12% of the company's shares. – less