Home Container Store Ponders Strategic Alternatives As It Confronts Delisting Notice
May 14, 2024

Container Store Ponders Strategic Alternatives As It Confronts Delisting Notice

Posted In: Retail Articles

Despite beating Wall Street estimates in the fourth quarter, The Container Store Group announced that it is seeking strategic alternatives for the business in the face of losses.

The company also announced that it had been notified by the New York Stock Exchange that it is not in compliance with the organization’s listing requirements because the average closing price of the company’s common stock was less than $1 over a consecutive 30 trading-day period. The notice does not result in an immediate Container Store delisting, however. The company’s stock traded at 89 cents mid-morning on May 14.

The Container Store board of directors stated it has initiated a formal review process to evaluate strategic alternatives for the company. It indicated that the board and company management don’t believe the Container Store’s current market value reflects its intrinsic value and will act in the best interests of the company and its stakeholders.

“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. 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,” said Lisa Klinger, Container Store chairperson.

As it weighs strategic alternatives, the company is suspending financial guidance. It has not set a timetable for the strategic alternatives review process and does not intend to comment further about it until disclosure is necessary or advisable, the board asserted.

Net loss was $61.4 million, or $1.24 per diluted share, versus a net loss of $189.3 million, or $3.85 per diluted share, in the year-previous quarter, Container Store reported. Adjusted for one-time events, net loss was $2 million, or four cents per diluted share, versus net income of $8.8 million, or 18 cents per diluted share, in the year-before period.

A Yahoo Finance-published analyst consensus estimate called for a loss per adjusted diluted share of 12 cents and earnings of $204.3 million.

Net sales were $206 million versus $259.7 million in the year-prior quarter. 

Net sales in the Container Store retail business were $195.3 million, down 20.4% in the quarter year over year, with comparable sales declining 21.8%. General merchandise slipped 26.7%, contributing a decrease of 1,620 basis points to comparable store sales. Custom Spaces+ sales decreased 14.2% in the period year over year, negatively impacting comps by 560 basis points.

Online sales decreased 30.8% in the quarter year over year, while Elfa third-party came in at $10.7 million, down 24.6%. With the impact of foreign currency translation excluded, Elfa’s third-party net sales were down 25.3%, primarily due to a revenue decline in Nordic markets.

For the full fiscal year, net loss was $103.3 million, or $2.09 per share, versus a net loss of $158.9 million, or $3.21 per diluted share, in the year-previous, Container Store noted. Adjusted net loss was $15.9 million, or 32 cents per diluted share, versus net income of $37.2 million, or 75 cents per diluted share in the year before.

Net sales were $847.8 million versus $1.05 billion in the year prior.

In announcing the financial results, Container Store president and CEO Satish Malhotra said, “We ended fiscal 2023 with continued pressure on our general merchandise assortment while experiencing relative strength in our premium Custom Space offering. I am grateful to our team members across the organization for their role in exercising strong cost discipline, resulting in positive free cash flow for the fiscal year and in delivering superior customer service, reflected by our retail net promoter score of 80 for the fourth quarter. Looking ahead, while we anticipate continued challenges within our general merchandise offerings, we continue to lean into Custom Spaces through enhancing our assortment, strengthening our in-home design service and building awareness through impactful marketing campaigns that highlight our complete offerings. We plan to push forward on all of our market share-driving initiatives to ensure we are poised to capitalize on the significant opportunities for the business and the brand when the backdrop normalizes.”

On May 14, after receiving the delisting notification, Container Store notified the NYSE that it intends to cure the stock price deficiency and return to compliance with listing standard. The company pointed out that it would consider options to cure the listing deficiency and restore compliance using any of several remedies, including a reverse stock split, subject to stockholder approval no later than the company’s next annual meeting of stockholders, if necessary.

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