Investors in The Container Store (TCSG) have been sent packing as the struggling home goods chain files for bankruptcy.
The retailer filed for bankruptcy protection late Sunday, Yahoo Finance has exclusively learned. The company said in a press release that it is doing so to refinance its debt to “strengthen its financial position, fuel growth initiatives and improve long-term profitability.”
The company reached an agreement with 90% of its term lenders to provide $40 million in new cash financing.
For the quarter ended September 28, 2024, The Container Store recorded total liabilities of $836.4 million, versus $969 million in total assets.
CEO Satish Malhotra — a former Sephora executive who took over The Container Store in 2021 — is confident the 46-year-old company can stay afloat through this maneuver.
“The Container Store is here to stay,” Malhotra said in a statement, adding that it is taking these necessary steps to drive the company forward, strengthen customer relationships, expand its reach and strengthen its capabilities.
It plans to leverage customized space offerings, “which continue to demonstrate strength,” he said.
The bankruptcy process is expected to take several weeks, with the reorganization expected to take place within 35 days. The bankruptcy does not include the company’s Elfa homewares business in Sweden.
The Container Store has filed for bankruptcy, putting its future at stake. (Thanks to: the container shop)
The company 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 secure and suppliers are paid in full. There are no planned layoffs.
There are also no planned store closures, but that could 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 retail footprint with market realities and business needs,” sources told Yahoo Finance. locations.”
The filing was anticipated by industry experts.
Read more: Why Walmart won the Yahoo Finance Company of the Year award in 2024
The Container Store – a chain founded in 1978 that rose to fame in the 1990s for its useful household organizational products – was delisted from the New York Stock Exchange on December 9 after falling below the exchange’s standard to have a market capitalization of $15 million to retain. for 30 consecutive trading days.
The company has seen its profits plummet due to the home remodeling frenzy fueled by the COVID-19 pandemic and increased competition from Walmart (WMT), Amazon (AMZN) and Target (TGT). It has not been profitable for the past two fiscal years, with losses of about $10 million for the fiscal year ending September 28, 2024.
The Container Store Group is the latest, but not the only, retailer to fall under the rise of better retail companies such as Amazon and Walmart.
Both Party City and Big Lots also announced in the past week that they are officially going out of business.
Founded in 1978, The Container Store went public on November 1, 2013, pricing the IPO at $525 per share. By the end of trading that day, shares closed at $543.
Over the past decade, shares have fallen to an eerie $0.32 as of the market close on December 19.
In recent years, as inflation persisted and competition increased, the company struggled to increase sales, especially as customers postponed expensive items and renovations 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 fell to $16.1 million, compared to a loss of $23.7 million last year.
It also said it had about $232 million in debt at the end of September, compared to $173 million a year earlier.
An example of the custom cabinet from The Container Store. (Thanks to: the container shop)
Total same-store sales fell 12.5%. General merchandise sales fell by 18.7%. Custom products for closets, children’s rooms and garages fell 1.5%.
“Results are plagued by persistent macroeconomic headwinds that are delaying a return to growth for the category. JPMorgan analyst Christopher Horvers said in a note ahead of the results.
In a post-earnings filing, the company shared that there was “substantial doubt” about its “ability to continue as a going concern” as a “challenging retail environment” continues, including “reduced consumer spending in the storage and organization category and increased price sensitivity.”
It also predicted that it “may have to scale back… close some or all of our operations to reduce costs… or seek bankruptcy protection.”
This comes after the company announced a strategic partnership with Beyond (BYON), which also includes brands such as 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 stock transaction.
That partnership will not happen now, according to sources close to the matter.
“The company has worked closely with its lenders to determine a path forward that would address its balance sheet. While forming a strategic partnership with Beyond Inc. investigated, 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 bdipalma@yahoofinance.com.
Click here for all the latest retail stock news and events to help you better inform your investment strategy
