The Brand House Collective, Inc. (TBHC)

Executive Summary / Key Takeaways

• The Brand House Collective (TBHC) is undergoing a profound multi-brand omnichannel transformation, pivoting from its Kirkland's Home legacy to leverage the iconic Bed Bath & Beyond, Overstock, and buybuy BABY brands through a strategic partnership with Beyond, Inc. .
• A core investment thesis revolves around the capital-light store conversion strategy, with initial Bed Bath & Beyond Home store openings demonstrating strong early results in traffic and average ticket, validating the brand's power and potential for significant revenue uplift.
• Despite recent financial headwinds, including a Q2 2025 net loss of $20.2 million and a 12.2% decline in net sales, the company is strategically liquidating non-go-forward inventory to unlock liquidity and fund conversions, while store comparable sales showed a slight positive increase.
• Operational technology, including e-commerce re-platforming, new pricing tools, and planned unified loyalty programs, is central to enhancing efficiency and customer engagement across the evolving brand portfolio.
• Significant risks include substantial doubt about the company's ability to continue as a going concern, ongoing macroeconomic pressures, and the impact of tariffs, though management is actively implementing mitigation strategies and has secured additional financing.

A New Collective Emerges: Reimagining Home Retail

The Brand House Collective, Inc. (TBHC), formerly Kirkland's, Inc., is embarking on a transformative journey to redefine its position in the competitive home décor and furnishings market. Founded in 1966, the company initially built its legacy on the Kirkland's Home brand, focusing on curated, affordable home goods. This foundation is now evolving into a multi-brand merchandising, supply chain, and retail operator, strategically leveraging a partnership with Beyond, Inc. (BYON) to revitalize iconic brands such as Bed Bath & Beyond Home, Overstock, and buybuy BABY. This strategic pivot aims to capture broader market segments and drive sustainable, profitable growth through an omnichannel approach.

The competitive landscape for home furnishings is diverse and intense, featuring a mix of online giants, specialty retailers, and luxury brands. TBHC's traditional Kirkland's Home brand has historically competed on value and accessibility. Against online-focused players like Wayfair (W), TBHC's blend of physical stores and e-commerce offers a tangible shopping experience, potentially fostering stronger local customer loyalty. However, Wayfair's vast online selection and advanced digital tools provide significant scale and personalization. Compared to premium retailers like Williams-Sonoma (WSM) and RH (RH), TBHC targets a more value-conscious demographic, allowing it to compete effectively on price point and broad appeal. While Williams-Sonoma and RH command higher pricing power and focus on design innovation, TBHC's strategy emphasizes accessible style. Similarly, against other value-oriented retailers like At Home, TBHC's evolving multi-brand portfolio could offer a more diversified appeal, potentially enhancing customer loyalty through varied offerings. The company's smaller scale, however, remains a vulnerability compared to larger e-commerce players, potentially leading to higher operating costs and impacting profitability.

Central to TBHC's transformation is its commitment to enhancing operational technology and omnichannel capabilities. The company is actively working on re-platforming its e-commerce infrastructure, leveraging the expertise of its partner, Beyond, Inc. This initiative aims to modernize its digital presence and create a seamless "buy online, pick up in store" experience, which is critical for meeting the demands of today's omnichannel shopper. Furthermore, TBHC has implemented a new pricing tool for its e-commerce merchants, particularly for drop-ship assortments, to better analyze the marketplace and optimize value propositions. Future plans include developing unified loyalty and credit programs with Beyond, Inc., which could significantly enhance customer acquisition efficiency by tapping into Beyond's larger customer database. These technological advancements are designed to improve efficiency, deepen customer engagement, and ultimately bolster profitability across the expanding brand portfolio.

Financial Performance: A Transformative Period Amidst Headwinds

The Brand House Collective's recent financial performance reflects a company in the midst of a significant, albeit challenging, transformation. For the 26-week period ended August 2, 2025, the company reported net sales of $157.3 million, an 11.7% decrease from $178.0 million in the prior year period. The 13-week period ended August 2, 2025, saw net sales decline by 12.2% to $75.8 million. This top-line pressure was largely driven by a 9.7% decrease in comparable sales for the 13-week period and a 9.3% decrease for the 26-week period. E-commerce comparable sales experienced a substantial decline of 38.5% in the second quarter, significantly impacted by a tornado that damaged the Jackson, Tennessee distribution center in May 2025, leading to operational disruptions and an estimated 750 basis point negative impact on e-commerce sales.

Despite the overall sales decline, the company's physical stores showed resilience, with comparable store sales increasing by 0.4% for the 13-week period ended August 2, 2025. This was attributed to increased store traffic and conversion, partially offsetting lower average transaction values due to strategic liquidation efforts. Gross profit margin, however, faced considerable pressure, decreasing by 420 basis points to 16.3% of net sales in Q2 2025. This decline was primarily due to unfavorable merchandise margins, including a 100 basis point impact from tornado-damaged inventory, and sales deleverage on fixed store occupancy costs. Operating expenses also rose as a percentage of net sales, partly due to $1.3 million in tornado-related costs (net of insurance proceeds).

The company reported a net loss of $20.2 million for the 13-week period and $32.0 million for the 26-week period ended August 2, 2025. Adjusted net loss for Q2 2025 was $17.8 million. While these figures represent a widening of losses year-over-year, the adjusted loss per share saw an improvement, primarily due to an increased share count from the Beyond transaction. Notably, the company achieved a $6 million year-over-year improvement in adjusted EBITDA for fiscal year 2024, and a return to positive adjusted EBITDA in Q3 2024, demonstrating some effectiveness in its cost-savings initiatives.

Liquidity remains a critical focus. As of September 16, 2025, TBHC had $10.8 million available for borrowing under its revolving credit facility and an additional $20 million available under the Beyond Delayed Draw Term Loan Commitments. Net cash used in operating activities for the 26-week period ended August 2, 2025, improved to $10.1 million from $26.4 million in the prior year, partly due to the dissolution of a collateral trust and declining inventory levels. The company's going concern assessment, however, indicates "substantial doubt about its ability to continue as a going concern for a period of at least 12 months" due to projected cash flow uncertainties, a risk that led to a covenant violation in May 2025, for which waivers were subsequently secured.

Strategic Initiatives: The Multi-Brand Playbook Unfolds

TBHC's strategic narrative is centered on its multi-brand omnichannel transformation, spearheaded by the partnership with Beyond, Inc. A cornerstone of this strategy is the "capital-light" conversion of existing Kirkland's Home stores into Bed Bath & Beyond Home locations. The first such store in Brentwood, Tennessee, opened in August 2025, has "exceeded expectations," driven by significant increases in traffic and average ticket. Management views this as validation of the Bed Bath & Beyond brand's power. These conversions are remarkably cost-effective, with the Brentwood store costing approximately $30,000 in CapEx, and future conversions projected to be less than $100,000 per store. This efficiency enables rapid scaling, with plans to convert all Kirkland's Home stores over the next 24 months, aiming for 250 to 275 existing locations to remain in the portfolio. The goal is to complete a substantial number of conversions by the back-to-campus season of 2026 to improve profitability in the first half of the year.

Beyond Bed Bath & Beyond Home, TBHC sees "tremendous opportunity" in the Overstock brand, envisioning it as a dedicated off-price concept offering a "treasure hunt of deals" and a more profitable solution for liquidating returns. A fully dedicated Overstock store is expected to deliver at least twice the revenue of a current Kirkland's Home store. The company is also "incredibly excited" about buybuy BABY, planning to build this omnichannel initiative from the ground up, with the first new store anticipated in 2026. Furthermore, TBHC is exploring an expansion of Kirkland's Home into the wholesale market, aiming to create a new growth channel, enhance scale, and improve supply chain efficiency.

The e-commerce channel, despite recent declines, remains an "important part of our omni-channel vision." Management is intentionally shifting focus and funding towards brick-and-mortar operations, accepting that e-commerce sales may normalize to earlier decline rates as the channel has been less profitable, particularly in higher-ticket, drop-ship categories. The strategy involves aggressive SKU rationalization and optimizing inventory allocation to maximize "buy online, pick up in store" capabilities. This disciplined approach is a necessary step to unlock liquidity by converting inventory into cash, which is then redeployed into the new brand assortments.

Outlook and Risks: A Path Forward Amidst Uncertainty

The Brand House Collective's outlook is characterized by a blend of strategic ambition and significant challenges. Management anticipates continued promotional activity and expects incremental tariff costs to impact Q3 2026 gross margins by approximately 100 basis points, with limited impact in Q4 2026. However, no additional significant expenses related to the tornado damage are expected. The company's long-term goal is to achieve $600 million in revenue and an adjusted EBITDA margin in the mid-to-high single-digit range by the end of fiscal 2028, with the Beyond transaction potentially accelerating this timeline.

Despite these aspirations, substantial risks persist. The explicit "going concern" warning in the latest 10-Q highlights the company's liquidity challenges. The "uncertain macroeconomic environment," marked by inflationary pressures, high interest rates, and reduced consumer spending, continues to materially impact performance. Tariffs, particularly the 145% duty on Chinese imports, pose a significant threat, making it difficult to forecast sufficient liquidity to maintain debt covenant compliance. Management is actively mitigating this through cost negotiations, resourcing from other countries (e.g., Cambodia, India, Vietnam), and strategic price increases, but acknowledges potential margin pressure and impacts on seasonal product availability. Litigation, including wage and hour class actions and a breach of contract suit, also presents ongoing legal and financial uncertainties.

Conclusion

The Brand House Collective is undergoing a profound transformation, moving beyond its Kirkland's Home roots to embrace a multi-brand omnichannel future. The strategic partnership with Beyond, Inc., marked by capital-light store conversions and the revitalization of iconic brands like Bed Bath & Beyond Home, forms the core of its investment thesis. Early successes in the first converted store underscore the potential for significant revenue and traffic growth, driven by a compelling brand proposition and efficient operational execution.

While the company faces considerable headwinds, including macroeconomic uncertainty, tariff pressures, and liquidity concerns, management's decisive actions in strategic inventory liquidation, cost control, and securing additional financing are critical. The long-term vision of achieving $600 million in revenue and mid-to-high single-digit adjusted EBITDA margins by fiscal 2028, accelerated by its strategic alliances and technological enhancements, presents a compelling narrative for investors. The successful execution of its multi-brand strategy and the effective management of its financial and operational risks will be paramount in determining TBHC's ability to disrupt the value home sector and deliver on its ambitious growth targets.