Container Store files for bankruptcy

New York
CNN
—

The Container Store has filed for bankruptcy. It is the latest well-known retailer to fall victim to customers cutting back on discretionary spending.

The 46-year-old company said in a statement late Sunday that filing for Chapter 11 bankruptcy protection will help it “strengthen its financial position, fuel growth initiatives and promote improved long-term profitability.” The Container Store disclosed in court documents that it has about $230 million in debt and only $11.8 million in cash on hand, but will receive $40 million in new financing.

The chain’s 102 locations and website will remain open for orders during the process, which is expected to take 35 days to complete.

“The container store is here to stay,” CEO Satish Malhotra said in a statement. “Our strategy is sound and we believe the steps we are taking today will allow us to continue to advance our business, deepen customer relationships, expand our reach and strengthen our capabilities.”

Payments to vendors and suppliers will be made as normal and all customer deposits and orders will be honored and delivered, the company said. The Container Store plans to emerge as a private company once the Chapter 11 process is complete.

The company’s Sweden-based Elfa brand, described as a “premium customized storage system”, is not included in the bankruptcy.

The filing comes a few weeks after a deal with Beyond, the parent company of Bed Bath & Beyond and Overstock.com. The Container Store was expected to bring Bed Bath & Beyond-branded products to some stores, but that deal appears to be in jeopardy. Beyond previously said the financing deal was in doubt because Container Store struggled to reach an agreement with its lenders.

The Container Store’s stock has already been delisted from the New York Stock Exchange because it did not meet the exchange’s financial standards.

The Container Store’s struggles show that the bump many retailers got coming out of the pandemic is over, and retailers now face a much tougher environment. More stores are expected to close this year than any year since 2020, according to Coresight Research. Chains such as Party City, LL Flooring and Big Lots have filed for bankruptcy in recent months and are planning to go bankrupt.

The retailer said earlier in May that it was conducting a strategic review of its business to increase its value and suspended its financial guidance. Sales fell 10.5% during the most recent quarter ended Sept. 28, and the company lost $30.8 million during the quarter.

In addition to several quarterly losses, the company is vulnerable to changes in the housing market. Mortgage rates hit two-decade highs near 8% last year and are still hovering near 7%. High interest rates have kept many people from buying or selling their homes, and the frozen housing market has spilled over into hurting the Container Store.

The retailer also faces competition from other companies with lower prices, such as Amazon, Walmart and HomeGoods. Holiday shopping likely won’t be strong enough to support Container Store, analysts say.

Moody’s Investors Service forecasts overall holiday sales will grow just 1% to 3%, a slowdown from last year. Sales may be weaker for home furnishings, which pressures companies like Container Store and Wayfair, said Christina Boni, a retail analyst at the firm.