Neighborhood Intelligence (NXH) Q3 2026 earnings review
Neighborhood Intelligence's web sales rise, while its stores lose money
Neighborhood Intelligence, the former Bed Bath & Beyond, grew its online shops while its newly bought store chains lost money. Revenue nearly doubled, almost all of it from the Kirkland's and The Container Store chains. Chief executive Marcus Lemonis said online sales grew 9%, the best in years. The chains lifted gross margin to 34%, but their rent and payroll deepened the loss.
| Sales from businesses owned a year ago | +9% +3% last quarter, by our math |
|---|---|
| Total revenue | $509.3M +98% from a year ago, mostly from acquisitions |
| Loss before depreciation and one-offs (adjusted EBITDA) | −$26.5M −$4.9M a year ago |
| 2027 revenue outlook | New: $2.0–2.1 billion about $2.1 billion for the combined company in 2026, by our math |
⚖️ Verdict: 🔴 Bearish
The story got worse, because the store chains, almost half of sales, lose money faster than cost cuts arrive. Cash held steady only through new shares and loans, and the company raised more in October. The good news: online sales grow again, and management has stopped buying companies.
The question now is whether cost cuts can stop the cash drain before another share sale. Either the extra $40 million of yearly savings arrives in time for positive cash flow in late 2027, or more dilution follows. The fourth-quarter results will give the first reading.
🐂 Bull Case
Online Sales Grew 9%, Best in 19 Quarters
Before this year's deals, the company was two websites, Overstock and Bed Bath & Beyond, that sell home goods. Chief executive Marcus Lemonis said that online business grew about 9%, its fastest pace in 19 quarters. Overstock carried most of the gain.
Interim finance chief Paul Kosturos said a 7.4% rise in the average order drove it, and orders rose 1.5%. Lemonis added that the business broke even on adjusted EBITDA, a profit measure before depreciation and one-offs. Overstock, he conceded, is "up over a small base", and Bed Bath & Beyond online is "flat to growing".
What to watch: growth outside the acquisitions in the fourth-quarter results. Lemonis expects "continued growth in the core e-commerce business", so a rate near this quarter's would show the gain lasts.
Store Chains Lifted Gross Margin to 34%
Gross margin, the share of sales left after paying for the goods, reached 34%, against a plan of about 30%. Kosturos credited "the mix benefit of The Container Store and Kirkland's, which carry structurally higher gross margins". Both chains, a storage retailer and a decor seller, joined this year.
Cost of goods fell to 66% of revenue, almost 9 percentage points below a year ago. Bears point to a $14 million accounting gain on acquired inventory. The release said the "elimination of dated, obsolete and underperforming inventory" mostly offset it, without a figure. By our math, the margin was still 31% without the gain.
What to watch: fourth-quarter gross margin, the first without the inventory gain. A reading at or above 31% would show the step comes from the new mix, not from accounting.
Positives this quarter didn't test
Several parts of the bull case got new plans this quarter but no figures. Each one needs a reported number before it can carry real weight in the case.
- Elfa closet systems plus SFV installation: Lemonis says the pair "is a 60% margin business"; a home-services revenue figure would test it.
- Bed Bath & Beyond goods in more than 75 former Container Store and Kirkland's stores: signs finish in early 2027; sales in fully stocked stores would test it.
- Kirkland's buying team: President Amy Sullivan expects "meaningful benefits from new sourcing and assortment programs beginning in the middle to latter part of 2027"; the 2027 gross margin will test it.
- Store returns of online orders: Lemonis sees 1% to 1.25% of extra online margin over 12 to 24 months; no figure yet.
- The three-pillar plan behind the new name, covering retail, home services and home ownership: no pillar reports revenue yet.
🐻 Bear Case
Acquired Store Chains Deepened the Loss
This year Neighborhood Intelligence bought Kirkland's, a home-decor chain, The Container Store, a storage retailer, and SFV, an installer. Lemonis said he was "quite surprised" by "the lack of rigor and discipline that existed in The Container Store".
The chains brought heavy fixed costs. General and administrative expense, which now holds store costs "including rent and store payroll", took 26% of revenue, 21 percentage points more than a year ago. Together, the three deals lost $47 million in the quarter.
- Adjusted EBITDA, before depreciation and one-offs: −$26.5 million, from −$12.2 million last quarter
- The Container Store: $30.1 million net loss on $156.4 million of sales
- Net loss without a derivative gain and a tax benefit: about $65 million, by our math
One-time gains hid most of that damage. Bulls see cheap brands bought at the bottom of the housing market. Management has also dropped the pending F9 and Fathom deals, and Lemonis said: "We are not pursuing any additional acquisitions." So the work narrows to fixing the three chains already owned.
What to watch: fourth-quarter adjusted EBITDA, the first holiday season under the new owner. A smaller loss would show the cost cuts outpace the chains' losses.
Cash Held Steady Only Through New Shares
Cash has been the main worry since the company began buying chains that lose money. Kosturos said cash, including restricted cash, ended September at $127 million, about $1 million more than in June. By our math, free cash flow was minus $76 million in the quarter.
Neighborhood Intelligence covered the gap by selling $18 million of new shares and borrowing against the chains' inventory. It also took over $19 million of cash with The Container Store. In October it raised $43 million more and issued warrants, rights to buy 16.1 million more shares later.
- Debt: $260 million owed, including $111 million of convertible notes
- Average share count: up 57% from a year ago
Two pressures eased: shareholders approved the convertible notes, so their interest rate will not double, and BMO extended its credit line by a year. But the 10-Q says the October money will go "to accelerate merger synergies and build inventory", so it will not sit in the bank.
What to watch: cash at the end of December, after the holiday season. A drop while losses continue would point to another share sale before cash flow turns positive.
2027 Plan Leaves the Combined Company Smaller
"What gives me confidence is that we're not relying on a housing recovery to make this business work," Lemonis said. His plan for next year, which he calls "deliberately measured and assumes a continued depressed housing market", puts revenue at $2.0 billion to $2.1 billion.
The 10-Q restates sales as if all three chains were owned from January 2025. By our math, that combined business sells about $2.1 billion this year. Next year's middle sits about 2% lower, partly because the plan closes about 50 stores. Lemonis said the plan includes growth of "call it, 5%", so closures remove more than growth adds.
What to watch: the revenue the store closures remove, a figure management has not given. It will show whether the remaining stores grow at all.
Risks this quarter didn't answer
Four standing concerns got no new numbers this quarter. Each still depends on a disclosure the company has not made, so none moved in either direction.
- Results by business: asked about online margins, Lemonis said "We don't report that separately"; figures for each chain and for Elfa would show where losses sit.
- Finance leadership: Brian LaRose resigned as finance chief on October 5, and Paul Kosturos holds the job on an interim basis; a permanent hire would settle it.
- Blockchain holdings: Neighborhood Intelligence owns about 36% of tZERO, a blockchain investment, and intends to lead up to $10 million of new funding; any cash it puts in would show the cost.
- Three-year forecast: promised early this year and never published; the 2027 range is still the only figure.
👓 Other Themes
Tariff Refunds Are Now Finished
The Supreme Court ruled in February that an emergency law did not let the president impose many import tariffs. Neighborhood Intelligence then claimed refunds and received $9.6 million with interest, most of which it booked against the cost of goods earlier this year. It collected the last payment in October, so no further refunds will lift gross margin.
A Credit Union Partnership for Home Buyers
In September, the company and Alliant Credit Union announced Journey Home, a program designed to "help consumers save for a down payment, purchase a home, and manage the transition into homeownership". The partners also plan Beyond Credit Union, powered by Alliant, for early 2027. Neither carries a revenue figure yet.
💲 Other KPIs
The average order fell to $125 from $205 a year ago. The drop comes from adding the store chains, whose orders run smaller than online ones. It eased slightly from last quarter's 41% fall. Orders rose 217% to 4.0 million, so volume more than made up for the smaller tickets.
Inventory, the goods held for sale, grew to $228 million from $52 million in June. The Container Store brought $140 million of it at purchase. Stock on hand now equals 45% of the quarter's revenue, so the holiday season has to turn much of it into cash.
Lease obligations, the rent owed on stores and warehouses, jumped to $443 million from $7 million at the start of the year. Payments due in 2027 total $122 million. Lemonis called this quarter's lease cost "the high watermark", because store closures and lease exits are under way.
🔮 Guidance
New. Lemonis said the plan has fourth-quarter revenue about 5% above the third quarter, or about $535 million by our math. That is about 96% above a year ago, almost all from the acquired chains. He called the figure conservative and said the chains have no comparable sales history.
New. The middle of the range, $2.05 billion, sits about 24% above this year by our math. Most of that rise comes from owning the chains for a full year. The range includes store closures and assumes housing stays weak. Per quarter it averages about $513 million, below the fourth-quarter plan, which carries the holiday season.
Unchanged. The plan narrows last quarter's low-to-mid-30s view to 33% to 34%, just under this quarter's level. It includes no repeat of the inventory gain. Lemonis sees "a clear path to 37%" over a longer period, through Kirkland's sourcing team and Elfa closet systems.
Raised. The company says it has already removed more than $50 million of yearly costs, the full earlier target. It now adds more than $40 million, from merging warehouses, cutting duplicate jobs and closing stores. It expects the full benefit within six to nine months, so most should reach 2027 results.
Unchanged. Management still points to positive cash flow in 2027, now placed in the second half. It ties that goal to mid-single-digit growth, lower costs and more home-services sales. None of those three conditions has a reported figure yet, so the date rests on the savings plan.
New. Management believes about 5% yearly growth is possible without a housing recovery. It adds that each extra $100 million of such sales should yield about $30 million of operating profit. Lemonis said staff bonuses take the rest of the gross profit, so the math assumes no new fixed costs.
❓ Key Questions
How much revenue will the store closures remove?
The 2027 range includes about 50 closures, but the company gave no revenue figure for them. Without it, readers cannot tell whether the stores that stay open are growing or shrinking.
How large was the write-off of old inventory?
The release says clearing old stock mostly offset a $14 million accounting gain, but it gave no number. The size decides how much of this quarter's gross margin will hold next quarter.
What do Elfa and home services earn today?
Lemonis calls Elfa and installation a 60% margin business and a key to the 37% gross margin goal. Revenue and profit figures for home services would show how far away that goal is.
What do the store chains lose before one-offs?
The 10-Q gives each chain's net loss but not its adjusted EBITDA. That figure would show how much of the new $40 million savings target must come from The Container Store.
When will a permanent finance chief be named?
Brian LaRose resigned in October, three months after The Container Store deal closed. A permanent hire matters because the company is raising money and merging three businesses at once.