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The Container Store filed for Chapter 11 bankruptcy protection on Sunday in an effort to save the business and ensure future profitability.
The move was expected by Wall Street analysts as the retailer’s financial problems continued to grow. The Texas-based company with 103 stores in 34 states and the District of Columbia sells high-end products and custom apparel.
The Container Store said this does not mark the end of the retailer. The company said it has filed for voluntary protection under Chapter 11 in the bankruptcy court of the Southern District of Texas as it plans to “undertake financial restructuring to strengthen its financial position, fuel growth efforts, and improve long-term profitability.”
At least 90% of the company’s creditors have agreed to support its bankruptcy plan, which will provide the company with $40 million in new financing, help it reduce its debt by at least $45 million and reduce debt payments and extend its tenure. pay off outstanding bills.
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The company said it will continue to operate its business as usual and provide products and home services to customers “without interruption.” Additionally, its stores and website will “continue to operate as normal.” The company also said that all deposits and customer orders will be honored and delivered as usual.
However, a source close to the matter told FOX Business that the process “allows companies to renegotiate the terms of their leases to adapt their store space to market realities and business needs.” If the company fails to “achieve a reasonable rent reduction, it could be forced to close several locations,” the source said.
The Container Store on Santana Row in Silicon Valley, San Jose, California, Jan. 3, 2020. (Smith Collection/Gado/Getty Images)
“The Container Store is here to stay,” said CEO Satish Malhotra, adding that the bankruptcy process will help the company improve its business and strengthen its capabilities.
“We are very excited about the future of our custom space, which continues to show strength,” said Malhotra. “We intend to keep our employees strong and remain committed to delivering an exceptional experience to our customers during this renewal and for many years to come.”
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The retailer known for its organizing solutions quickly gained fame with the success of the Netflix series “Tidying Up”, which premiered in 2019.
Today, it has been battling a weak housing market and the growing availability of cheaper alternatives. Earlier this month, shares of The Container Store were suspended on the New York Stock Exchange as it prepares to issue stock, which has since fallen below the NYSE’s continuous listing level. This standard requires listed companies to maintain an average global market capitalization of at least $15 million over 30 consecutive trading days.
Shopping carts at the Container Store in New York, on Nov. 4, 2013. (Jin Lee/Bloomberg via/Getty Images)
Eric Snyder, a partner at New York City-based Wilk Auslander LLP, previously told FOX Business that housing market conditions and increased competition “made this brick-and-mortar company… an unnecessary acquisition.”
The company doesn’t benefit from holiday sales because its products aren’t considered discretionary, which compounds its problems, according to Snyder.
“Because of this, and Beyond’s loss of $40 million, bankruptcy and a quick sale are the only options,” Snyder said. Beyond Inc., which owns Bed Bath & Beyond and Overstock.com, has struck a deal to invest $40 million in The Container Store Group as part of a new partnership.
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In addition, it was planned to invest in the company and use part of the real estate of the Furniture Store to advertise its range of kitchen, bathroom and bedroom products, which will be co-branded. But the CEO of Beyond Inc. Marcus Lemonis said last month that the company is concerned that The Container Store may not be able to reach an agreement with its lenders on terms to meet. financial requirements of the agreement.
Latham & Watkins LLP acted as legal counsel to The Container Store. Investment bank Houlihan Lokey acted as its financial advisor. FTI Consulting served as its financial and communications advisor, and A&G Realty served as its real estate advisor.
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