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The Container Store files for Chapter 11 bankruptcy

The Container Store couldn't keep up as consumers turned to Amazon, focused on essential goods and pulled back on big-ticket items. Read More...

Investors in The Container Store (TCSG) have been sent packing as the struggling home goods chain files for bankruptcy.

The retailer filed for Chapter 11 bankruptcy protection late Sunday, Yahoo Finance learned exclusively. The company said in a press release it is doing this in order to refinance its debt to “bolster its financial position, fuel growth initiatives, and drive enhanced long-term profitability.”

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 said in a statement, adding 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.

Photo of a The Container Store location (Courtesy: The Container Store)
The Container Store has filed for bankruptcy, putting its future in question. (Courtesy: The Container Store)

The business will operate as usual across all stores, online and in-home services. The company operates 102 stores across 34 states.

The company says 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.

Chapter 11 allows companies to “renegotiate the terms of their leases to align their store footprint with market realities and business needs,” sources told Yahoo Finance, adding “if they do not achieve meaningful rent reductions, they may be forced to close a select few locations.”

The filing has been expected by industry experts.

Read more: Why Walmart won the 2024 Yahoo Finance Company of the Year award

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 post 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 Amazon, Walmart, among others.

Both Party City and Big Lots also announced that they’re officially going out of business this past week.

Founded in 1978, The Container Store went public on Nov. 1, 2013, pricing its initial public offering (IPO) at $525 per share. By the close of trading that day, shares closed at $543.

In the last decade, shares have spiraled down to a grisly $0.32 as of the market close on Dec. 19.

In recent years as inflation persisted and competition heated up, the company struggled to drive revenue, especially as customers put off big-ticket items, home remodeling, and focused on essential goods.

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.

An example of The Container Store's custom closet. (Courtesy: The Container Store)
An example of The Container Store’s custom closet. (Courtesy: The Container Store)

Overall same-store sales fell 12.5%. General merchandise sales declined 18.7%. Custom products for home closets, kids rooms, and garages were down 1.5%.

“Results are plagued by continued macro headwinds delaying a return to growth for the category…the company has yet to see green shoots in COVID pull-forward categories and echoed recent hardlines sentiment regarding an increasingly promotional environment and event-driven consumer,” JP Morgan analyst Christopher Horvers said in a note ahead of the results.

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.

Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].

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