Dive Brief:
- Beyond Inc. plans to invest $40 million in The Container Store through a strategic partnership. The partnership’s goal is to enable The Container store to return to profitable comparable store growth by leveraging Beyond’s intellectual property, customer data, brand network and affiliate relationships, the companies said in a joint press release on Tuesday.
- Under the deal, The Container Store locations will showcase spaces that feature Bed Bath & Beyond’s assortment for kitchen, bath and bedroom. The move brings the iconic brand back to physical shops about 18 months after the previous iteration of the company filed for bankruptcy and pivoted to e-commerce only under new ownership.
- The deal is contingent on The Container Store refinancing or amending its borrowing terms with lenders. The retailer plans to issue 40,000 shares of a new stock series at $17.25 to Beyond. With shareholder approval, the new stock would convert to common stock, giving Beyond a 40% equity stake.
Dive Insight:
Over the last year, The Container Store has struggled to stay consistently profitable and the retailer’s financial troubles have continued to build.
S&P in March downgraded the company’s issuer credit rating to B-. In May, the New York Stock Exchange warned the company it faced delisting after its stock price dropped below the required level for a sustained period. In May, the company said it had begun a review of strategic alternatives. Then, in August, the retailer reported that its Q1 sales fell 12.2% year over year to about $182 million. The company’s net loss also grew to $14.7 million from $11.8 million from a year ago for the first quarter.
The Container Store sought to remedy its stock issues with a reverse stock split in September. Earlier this month, The Container Store adopted a poison pill — formally known as a stockholder rights plan — after a single stockholder accumulated about 18% of the company’s stock.
Despite those issues, The Container Store’s custom spaces business, which includes its Elfa and Preston closet organization and storage systems, is currently stronger than the company’s general retail business.
“This agreement will enable us to harness Beyond’s data platform and analytics to better identify and target customers at critical points in their purchase journeys and enhance communications with new and existing customers,” Container Store CEO Satish Malhotra said in a statement. “It will allow us to expand our reach across our combined network and position us to leverage Beyond’s e-commerce expertise to further our own omni-channel tools and capabilities.”
Additional aspects of the partnership include Beyond’s offer of a global loyalty program through The Container Store’s physical and online stores, with the intent of increasing conversion of design leads. Beyond will also integrate The Container Store’s custom spaces product lines across its e-commerce banners.
The Container Store, in turn, will join Beyond’s data platform and focus on improving conversion and traffic while reducing customer acquisition and retention costs. Beyond will also support The Container Store by offering new and expanded e-commerce platforms and strategies. Beyond also owns Overstock, Zulily and other home-focused retail brands. The Container Store operates about 100 stores in 34 states.
Marcus Lemonis, Beyond’s executive chairman, said in a statement that The Container Store’s high margin custom spaces business is a “tremendous whitespace.” And by licensing the Bed Bath & Beyond brand, The Container Store stands to benefit by growing its assortment with a more comprehensive product offering.
Earlier this year, Lemonis said the company did not plan to bring the Bed Bath & Beyond brand back if it involved spending money to sign leases and open locations, saying that model wouldn’t work in the U.S. But the company is planning to open stores internationally through a licensing program announced in September.
Although Beyond’s Q2 net revenue fell 5.7% to $398 million from $422 million, it shrunk its net loss to $43 million from $73 million. The company said at the time that it hit its second quarter revenue goal and improved net income by about 25%.
