The Container Store could be the next household goods chain to file for bankruptcy after a weak housing market and rising prices hit sales, according to a report.
The Coppell, Texas-based chain enjoyed a pandemic-driven economic boom in 2020 and 2021. That's because consumers stuck at home took inspiration from Marie Kondo's Netflix hit Tidying Up and went crazy cleaning up their spaces.
However, due to the downturn in the housing market, fewer people are moving, and as a result, sales of trash cans and dividers have declined. U.S. consumers have also been hit hard by persistent inflation, cutting back on discretionary spending such as home improvements and new furniture.
Founded in 1978 and with approximately 100 stores in the United States, Container Store is frequently ranked by credit rating agencies as one of the most financially distressed companies in the retail industry. According to a report from CNN.
Tim Hynes, Debtwire's global head of credit reporting, said it was “likely” that The Container Store would file for bankruptcy next year, as well as Big Lots and Big Lots, which have already filed for Chapter 11 protection this year. The company says it will join household goods retailers such as LL Flooring. he told CNN.
“We don't see a dramatic increase in holiday sales that would change things,” Hines said. “They're already pretty far along.”
Container Store did not respond to requests for comment.
More stores are expected to close this year than in any year since the pandemic, according to Coresight Research.
The company suspended its earnings outlook in May, saying it was showing signs of financial distress and would conduct a strategic review of its business to find ways to improve.
In its most recent quarter, which ended Sept. 28, The Container Stores posted a loss of $30.8 million on a 10.5% decline in sales.
The company receives a Hail Mary in the form of a $40 million deal with Beyond, owner of Bed Bath & Beyond and Overstock.com, to put Bed Bath & Beyond products on precarious store shelves. It was planned.
Bed Bath & Beyond last week called off its investment after a regulatory filing from The Container Store revealed that it does not expect to be able to meet financing conditions associated with the deal. He said it may have to be cancelled.
The company once welcomed an influx of consumers seeking “feng shui” for their homes, but its popularity has declined since its pandemic-era popularity in 2021.
Mortgage rates approached 8% last year, above a 20-year high, and remain close to 7%. High interest rates are just starting to come down, and many people are holding off on buying a new home.
“When people move, they buy a lot of things related to storage and organization. Without this driver, Container Store has struggled,” GlobalData Retail analyst Neil Saunders told CNN. . “The downturn in the housing market has reduced demand for most of the products sold by Container Store.”
Record prices and prolonged inflation are causing consumers to cut back on unnecessary spending. Walmart emerged as the lone beneficiary, reporting better-than-expected sales and profits and raising its full-year forecast as consumers prioritized deals. The discount chain is gaining larger market share among households with annual incomes of $100,000 or more, as consumers of all income levels are frustrated by high price tags and look for cheaper options.
And The Container Store isn't known for offering low prices. Instead, it's considered a more expensive “go-to” version with all the containers a shopper might need.
“There are always cheaper alternatives to plastic bins,” said Container Store CEO Satish Malhotra. modern retail In July. “What we offer is a little bit of a superlative experience.”
Shoppers are turning to cheaper options such as Amazon, Walmart, HomeGoods, and even online retailers like Temu.
The year-end sales season is already expected to be a disappointing one, with sales growth slowing compared to last year.
“The household goods category has been a difficult category to enter,” Moody's retail analyst Christina Boni told CNN. “It’s not going to be a great vacation to buy household goods.”
