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From Home Furnishing Business

Container Store, Inc. Files for Chapter 11 Protection

December 23, 2024  by Karen Parrish in Business Strategy, Industry   

The company reached an agreement with 90% of its term lenders to provide it with $40 million in new money financing. For the quarter ended Sept. 28, 2024, The Container Store listed total liabilities of $836.4 million against $969 million in total assets.

CEO Satish Malhotra, a former Sephora executive who took over atop The Container Store in 2021, is confident the maneuver will allow the 46-year-old company to stick around, "The Container Store is here to stay." Malhotra added that it is taking these necessary steps in order to advance the business, strengthen customer relationships, expand its reach, and bolster its capabilities. It plans to lean into custom space offerings, "which continue to demonstrate strength," he said.

The bankruptcy process is expected to last several weeks, with the reorganization anticipated to happen within 35 days. The bankruptcy does not include the company’s Elfa home goods business in Sweden.

The business will operate as usual across all stores, online, and in-home services. The company operates 102 stores across 34 states, all customer deposits are safe and protected, and vendors will get paid in full. There are no planned layoffs.

There are also no planned store closures, but that may be a possibility in the future as the company goes through the reorganization process.

The Container Store — a chain founded in 1978 that rose to fame for its nifty home organizational goods in the 1990s — was delisted from the New York Stock Exchange on Dec. 9 after it fell below the exchange's standard to maintain a market cap of $15 million over 30 consecutive trading days.

The company has seen its profits plunge following the home remodeling frenzy fueled by the COVID-19 pandemic and competition picked up from Walmart (WMT), Amazon (AMZN), and Target (TGT). It has been unprofitable for the past two fiscal years, with losses tallying about $10 million for the fiscal year ended Sept. 28, 2024.

The Container Store Group is the latest, but not the only, retailer to fall against the rise of better retail operators like Amazon and Walmart, among others. Both Party City and Big Lots also announced that they're officially going out of business this past week.

On Oct. 29, the company reported that revenue fell 10.5% year over year to $196.6 million in the most recent quarter. Net losses narrowed to $16.1 million, compared to a $23.7 million loss last year. It also shared that as of late September, it had roughly $232 million in debt, compared to $173 million a year prior.

In a filing after earnings, the company shared that there was "substantial doubt" about its "ability to continue" as a "challenging retail environment" persists, including "reduced consumer spending in the storage and organization category and increased price sensitivity." It also foreshadowed that it "may need to scale back ... discontinue certain or all of our operations to reduce costs ... or seek bankruptcy protection."

This as the company announced a strategic partnership with Beyond (BYON), which includes brands like Overstock.com and the fallen Bed, Bath and Beyond brand. At the time, Beyond planned to invest $40 million in The Container Store Group through a preferred equity transaction. That partnership now won't come to fruition, according to sources close to the matter.

“The company has been working closely with its lenders to determine a path forward that addressed its balance sheet. While they explored a strategic partnership with Beyond Inc., the deal did not materialize," the sources said.