The Container Store has begun a formal review process to evaluate "strategic alternatives" including possibly selling the business, executives said, after noting its stock market valuation does not reflect its "intrinsic value."
The Dallas-area organizational retailer with 102 U.S. stores reported fourth-quarter sales down more than 20% year over year, matching the full-year results. The retailer has not posted a full-year profit since 2021, when it exceeded $1 billion. The Container Store CEO and President Satish Malhotra told investors he expects sales of general merchandise in the store to remain challenged as an uncertain economy and increased competition from other retailers affect sales.
"We ended the fourth quarter with a 21.8% comp sales decline as customers continue to contend with the macroeconomic pressures affecting their consideration of spend in the home improvement and organization categories," Malhotra told investors during the earnings call. "The challenges in general merchandise remained elevated, contributing to the majority of the sales decline."
Malhotra did not take questions from investors and analysts about the company's decision to investigate potential alternatives for the business.
“The Container Store’s Board and management team are committed to maximizing value for our stakeholders, and to that end, we have commenced a comprehensive process to review potential strategic alternatives for the business," Lisa Klinger, chairperson of The Container Store, said in a statement. "We have established the transaction committee to help oversee the process to ensure that we are maximizing both the potential of the business and returns for stakeholders.”
As The Container Store evaluates strategic alternatives, it has decided to suspend offering financial guidance. The company has given no definitive timetable for completing this review process, with no assurance the process will result in a particular outcome, officials said. The Container Store declined to comment further to CoStar News.
The review comes after The Container Store was notified by the New York Stock Exchange it is not in compliance, with its stock trading below $1 for the past 30 days. If the company is sold, it could become a private company, making a potential de-listing irrelevant.
The retailer has been shaking up its business, seeking to bring smaller stores to its portfolio. In the fourth quarter, the company added two more smaller stores. In fiscal 2024, the company plans to open four new stores built-to-suit for its business.
For the Record
The Container Store's financial adviser is J.P. Morgan Securities. Latham & Watkins is its legal adviser.