The Container Store may be the next home goods chain to file for bankruptcy as the weak housing market and increased prices hurt sales, according to a report.
The Coppell, Texas-based chain enjoyed a pandemic-inspired boost in 2020 and 2021, when consumers, stuck inside their homes, took inspiration from Marie Kondo’s Netflix hit “Tidying Up” and decluttered their spaces.
But due to the weak housing market, fewer people are moving homes – resulting in lower sales of bins and dividers. US consumers have also been hit hard by sticky inflation and have pulled back on discretionary spending, including home renovations and new furniture.
The Container Store – which was founded in 1978 and has expanded to nearly 100 U.S. locations – is frequently ranked by credit rating agencies as one of the most financially distressed companies in the retail industry. According to a CNN report,
There’s a “high chance” that The Container Store will file for bankruptcy next year — joining the ranks of home goods retailers. Big Lots And LL FlooringTim Hines, global head of credit research at Debtwire, told CNN that it has already filed for Chapter 11 protection this year.
“I don’t see any dramatic increase in holiday sales that will change the situation,” Hines said. “They’re already way down the line.”
The Container Store did not immediately respond to a request for comment.
More stores are expected to close this year than in any year since the pandemic, according to Coresight Research.
In May, the retailer showed signs of financial distress when it suspended its earnings outlook and said it would conduct a strategic review of its business to find ways to improve.
In the latest quarter, ending Sept. 28, Container Stores reported a 10.5% decline in sales and a loss of $30.8 million.
The company was set to receive a Hail Mary in the form of a $40 million deal with Beyond, the owner of Bed Bath & Beyond and Overstock.com, to stock Bed Bath & Beyond products on store shelves.
Last week, Bed Bath & Beyond said it may have to close the investment after a regulatory filing by The Container Store showed it did not expect it would be able to meet the financing terms included in the deal.
The company — which once welcomed a flood of consumers wanting “feng shui” in their homes — has fallen out of popularity in 2021 since its pandemic-era decline.
Mortgage rates were near 8% last year – a two-decade high – and remain near 7%. High interest rates are just beginning to come down and are keeping many people from purchasing new homes.
“When people move, they buy a lot of things related to storage and organization. Without this incentive, The Container Store has struggled,” GlobalData retail analyst Neil Saunders told CNN. “The weakening of the housing market has reduced demand for most of the products sold by The Container Store.”
Record-high prices and prolonged inflation have caused consumers to cut back on non-essential spending. Walmart has emerged as the sole beneficiary, Reporting revenue and earnings that beat expectations And its year-round forecast is up, as consumers prioritize good deals. The discount chain has gained a larger market share of households earning more than $100,000 annually as consumers at all income levels feel the pain from high price tags and look for cheaper alternatives.
And The Container Store isn’t known for offering low prices. Instead, it is seen as a more expensive, “go-to” version that has all the bins a buyer needs.
“There will always be a cheaper alternative to the plastic bin. Our aim is not to compete there because we do not have the scale and purchasing power to do so,” said Satish Malhotra, CEO of The Container Store. modern retail In July. “It’s kind of a white glove experience that we offer.”
Shoppers are turning to cheaper options like Amazon, Walmart, HomeGoods, and even online retailers like Teemu.
The holiday shopping season is already here expected to be a tremendousWith lower sales growth than last year.
“The household goods category has been a difficult category to get into,” Moody’s retail analyst Christina Boni told CNN. “It’s not going to be a great holiday home goods thing.”
