Is Walmart Chasing Another Online Retailer?

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Continuing on the path that brought e-commerce sites like Jet.com, Bonobos and ModCloth into its tent, mega-retailer Wal-Mart Stores Inc. (NYSE: WMT) is reported to be discussing another acquisition. This one involves beauty product subscription service Birchbox.

The cosmetics/beauty industry hauled in an estimated $62.5 billion in revenues in the United States last year. According to marketing expert Brandon Gaille, women spend an average of $144 annually on beauty products, and 57% of women have purchased skin care products (the largest subcategory of beauty products) at Walmart or Target stores. Just 10% of women generate 80% of the industry’s revenues.

Birchbox, launched in 2010, offers a monthly sampler of products for $10 to its subscribers. The idea is to get subscribers to make full-price purchases at Birchbox of sample items they like.

To date the company has received more than $80 million in investor capital and now generates some $200 million in annual sales, about 35% of which comes from full-price sales. A report at Recode also noted previously undisclosed venture debt secured in 2015 that comes due next year.

The company reportedly has “multiple offers” to restructure the debt so it may not be interested in being acquired. Recode reports, however, that “several people close to the company [say] that they believe a sale is more likely.”

According to Statistic Brain, personal care products accounted for 14.5% of Walmart’s sales last year, second in size only to electronics. Women accounted for 10.5% of sales. Walmart rolls consumables like health and beauty products in with grocery sales, which accounted for 56% of U.S. sales in 2016.

Neither Birchbox nor Walmart commented on the Recode report.

Walmart stock traded up about 0.3% in the afternoon Wednesday, at $81.88 in a 52-week range of $65.28 to $81.92, a new high posted earlier this afternoon. The stock’s 12-month consensus price target is $80.97.