Walmart's Fashion Flop: Bonobos Sold for $75 Million, a $235 Million Loss from Purchase Price?
Walmart's sale of Bonobos, its menswear line, for $75 million, which is $235 million less than what it paid for the business in 2017, highlights the retail giant's struggles and setbacks in the fashion industry.
Walmart's foray into the fashion industry has been marked by a series of missteps and challenges. In 2010, Walmart vowed to "go back to basics" and focus on customers' "everyday needs" after a failed attempt to go more upscale. The following year, Walmart even closed its New York apparel office as part of its retrenching efforts, stating, "We don't need to be on Broadway to sell socks and underwear and T-shirts." However, the rise of e-commerce and changing consumer preferences prompted Walmart to make acquisitions in the fashion space.
In 2017, Walmart acquired Bonobos, a men's clothing brand that started as an online retailer, for a reported $310 million. Bonobos was known for its stylish and well-fitted clothing targeted towards millennial customers. Walmart's acquisition of Bonobos was seen as a move to expand its assortment and expertise in menswear, as it aimed to compete with e-commerce giant Amazon and establish itself as a fashion destination.
However, the integration of Bonobos into Walmart's operations faced challenges. The founder of Bonobos, Andy Dunn, who initially oversaw the brand after the acquisition, left Walmart in 2019, raising questions about the future direction of the brand. Walmart's attempts to make its fashion acquisitions profitable also faced headwinds, as the fashion industry is known for its competitive landscape, fast-changing trends, and evolving consumer preferences.
In 2020, Walmart announced the sale of its footwear website, Shoes.com, and its lingerie brand, Bare Necessities, as part of its efforts to streamline its fashion portfolio. The previous year, Walmart had also announced the sale of ModCloth, a women's fashion apparel business that it had acquired in 2017.
Walmart's sale of Bonobos to WHP Global and Express Inc. for $75 million, significantly lower than its purchase price, adds to the list of fashion-related setbacks for the retail giant. WHP Global, the owner of brands such as Anne Klein and Joseph Abboud, will pay $50 million to acquire the Bonobos brand, while Express Inc., partially owned by WHP, will acquire the Bonobos operating assets and related liabilities for $25 million.
Despite these setbacks, Walmart has not abandoned its aspirations in the apparel category, as it remains an important part of the company's selection of merchandise. Walmart has made efforts to sell more stylish clothing, including hiring fashion designer Brandon Maxwell and unveiling new sleepwear and underwear lines. Some brands that Walmart has acquired, such as plus-size label Eloquii, remain available on the company's website.
The Bonobos deal is expected to close in the summer, and John Hutchison, the current head of Bonobos, will stay on as brand president and report to Tim Baxter, the CEO of Express Inc. Baxter expects the transaction to contribute to operating income and generate cash in fiscal 2023, creating further shockwaves in the fashion industry.
Following the announcement of the deal, Walmart's stock was little changed, while Express shares surged 19%. However, as of the close of trading, Express's stock had fallen more than 30% in 2023, reflecting the challenges and uncertainties in the fashion industry. Walmart's struggles in the fashion space highlight the complexities and risks associated with operating in the ever-changing and competitive world of fashion retail.