Burdened by debt and diminished customer demand over the past few years, The Container Store has been pulling different levers to stay afloat. The latest is a deal with another big name in the home furnishings business.
Beyond Inc. agreed to invest $40 million in The Container Store, the companies announced Oct. 16. Beyond Inc. — formerly Overstock.com Inc. — is the same company that bought the Bed Bath & Beyond name out of bankruptcy in 2023. “We believe [the partnership’s] benefits will further our strategic initiatives, including deepening our relationship with customers, expanding our reach and strengthening our capabilities while accelerating our return to positive same-store sales growth and profitability,” The Container Store CEO Satish Malhotra said in a news release.
As part of the deal, The Container Store will sell co-branded Bed Bath & Beyond products at its 102 locations. In exchange, Beyond will help The Container Store improve its business in a handful of ways. That includes offering a loyalty program, payment services and ancillary insurance/protection services at The Container Store; bringing The Container Store’s custom closets and storage business onto Beyond’s e-commerce websites; and integrating The Container Store with its data platform.
This comes as the Texas-based home storage retailer faces several financial hurdles. The Container Store’s earnings peaked in 2021 — at the height of the pandemic home goods boom — when the retailer reported a full-year profit of more than $81 million on revenue that surpassed $1 billion for the first time in the company’s 46-year history. But like other home improvement brands, higher interest rates and costs of living, plus weaker home sales have hurt the company’s performance. In 2023, the company’s full-year sales fell below pre-pandemic levels to just under $848 million. In its most recent quarter, which ended in June, sales were still down 12.2% from a year before.
To offset the changing economic climate, The Container Store has focused on its more premium custom closets and storage design offering, which saw year-over-year growth of 1.9% last quarter while general merchandise sales fell 22%, per financial filings.
Despite these efforts, the Container Store faces increased competition from all sides. EMarketer forecasts predict Amazon’s share of the broader U.S. home decor, housewares and small appliances market will have grown from under about 9% in 2019 to 22.9% in 2026. Lower-priced e-commerce players like Temu have also arisen and big-box retailers have also grown their presence in the space.
“I think it’s kind of hoping to ride out and wait out [the macroeconomic environment] with its emphasis on the more premium, custom offerings that it’s talked about focusing on a bit more,” said Sky Canaves, principal retail and e-commerce analyst for eMarketer. Still, she said, “It’s really hard to turn that around when you’re competing with the likes of Amazon that has such a diversified product base.”
In July, S&P Global Ratings downgraded the company’s credit rating from “B-” to “CCC+.” S&P’s analysts cited continued revenue declines since Covid-19 and weak demand from customers, as well as $264 million in debt coming due in late 2025 and early 2026.
In an August earnings call, Malhotra said the company is working on plans to refinance its debt and is reviewing strategic alternatives. The S&P analysts said they believe the debt will be difficult to refinance, but Beyond’s investment is contingent on that happening, per the news release.
Meanwhile, Florida investor Amit Agarwal amassed a large stake in the company over just a few months, from about 6% in August to 19% in October. He told Bloomberg he was especially drawn by the Elfa line of custom shelving and wardrobe organizers. “There’s a gem inside this pile of mess,” Agarwal told the outlet.
The Container Store adopted a poison-pill provision in early October to ward off the activist investor, making it more difficult for an activist to take over the company. The provision will offer shares to other investors at a 50% discount if Agarwal or any other investor buys more than 20% of the company.
Neil Saunders, managing director and retail analyst for GlobalData Retail, described the Beyond deal as an “act of desperation” after the moves by an activist investor and its other financial challenges. “Would they have done it if they weren’t in trouble? Honestly, I don’t think they would,” he said. “I don’t think it’s a terrible partnership, but I think Container Store has been nudged into this because of its difficulties.”
The Container Store is “dealing with a lot of problems at the moment, and I think the collaboration with Beyond is a way of resolving, or trying to resolve, a number of them,” Saunders said. “It will help dilute the shareholding of the party, building up an interest in the stock. It also gives some confidence because [Beyond] is a new investor in the stock.”