Walmart offloads Bonobos as it shifts away from D2C ecommerce

The news: Walmart sold direct-to-consumer (D2C) menswear brand Bonobos to retailer Express and brand management company WHP Global for $75 million, per a press release.

• That’s considerably less than the $310 million it paid (in cash) to acquire the brand in 2017.
• The sale marks Walmart’s latest retreat from D2C ecommerce, after divesting outdoor retailer Moosejaw to Dick’s Sporting Goods in late February.

Walmart recalibrates: Bonobos was part of a wave of D2C acquisitions Walmart made to grow its ecommerce business and push back against Amazon dominance. But the company struggled to integrate those brands into the rest of its assortment, creating dissonance with shoppers and limiting their growth potential.

• While those big bets largely failed to pay off, Walmart is seeing more success with its third-party marketplace, which has enabled it to grow its assortment considerably to over 400 million SKUs and generate significant revenues from seller fees and advertising.

Express looks for growth: The acquisition makes perfect sense from Express’ perspective as the company looks to avoid delisting from the New York Stock Exchange and revitalize slumping sales.

• Bonobos generated roughly $200 million in revenues last year, with margins around 60 percent, per Business of Fashion. The brand’s sales are expected to continue growing by double digits, and give Express a needed income and cash flow boost.

The bigger picture: Walmart’s shift away from D2C reflects the challenges digitally native D2C brands are facing as funding opportunities dry up and acquisition costs rise.

• We expect US ecommerce sales from digitally native D2C brands to grow just 1.8% this year, with growth remaining in the single digits until 2027.
• But D2C ecommerce sales from established brands will grow much faster at 16.2%, increasing the pressure on digitally native brands to expand into wholesale and physical retail.