The Container Store may be the next home goods chain to file for bankruptcy as a weak housing market and inflated prices hurt sales, according to a report.
The Coppell, Texas-based chain enjoyed a pandemic-induced boost in 2020 and 2021 when consumers, stuck inside their homes, took inspiration from Marie Kondo's Netflix hit "Tidying Up" and de-cluttered their spaces in a frenzy.
But a weak housing market has resulted in fewer people moving houses – resulting in smaller sales of bins and dividers. American consumers have also been hit hard by sticky inflation and have pulled back on discretionary spending, including house renovations and new furniture.
The Container Store – which was founded in 1978 and has grown to around 100 US locations – is frequently ranked as one of the most financially distressed companies in the retail industry by credit rating agencies, according to a CNN report.
There's a "high probability" the Container Store will file for bankruptcy next year – joining home goods retailers like Big Lots and LL Flooring, which have already filed for Chapter 11 protections this year, Tim Hynes, the global head of credit research at Debtwire, told CNN.
"I don't see any dramatic increase in holiday sales that will change the situation," Hynes said. "They are already pretty far down the line."
The Container Store did not immediately respond to a request for comment.
More stores are expected to close this year than any year since the pandemic, according to Coresight Research.
In May, the retailer showed signs of financial trouble when it suspended its earnings outlook and said it would conduct a strategic review of its business to find ways to improve.
In the latest quarter ended Sept. 28, The Container Stores posted a sales decline of 10.5% and losses of $30.8 million.
The company was set to receive a Hail Mary in the form of a $40 million deal with Beyond, the owner of Bed Bath & Beyond and Overstock.com, to stock Bed Bath & Beyond products on the flailing stores' shelves.
Last week, Bed Bath & Beyond said the investment might have to be called off after a regulatory filing from The Container Store revealed it does not expect it will be able to meet the financing conditions involved in the deal.
The company – which once welcomed floods of consumers looking to "feng shui" their homes – has fallen out of favor since its pandemic-era popularity in 2021.
Mortgage rates neared 8% last year – topping two-decade highs – and remain close to 7%. High interest rates have only just started to come down and have kept many people from buying new homes.
"When people move, they buy a heck of a lot of things related to storage and organization. Without this impetus, Container Store has struggled," GlobalData Retail analyst Neil Saunders told CNN. "The weakening of the housing market has pushed down demand for most of the products the Container Store sells."
Consumers have cut back on non-necessity spending due to record-high prices and long-lasting inflation. Walmart has emerged as a sole beneficiary, reporting revenue and earnings that beat expectations and hiking its yearlong forecast, as consumers prioritize good deals. The discount chain has gained a larger market share of households earning more than $100,000 annually as consumers at all income levels feel pain from high price tags and search for cheaper options.
And The Container Store is not known for offering low prices. Instead, it is seen as the pricier, "go-to" version that has any and every bin a shopper could need.
"There will always be a cheaper alternative to a plastic bin. Our objective is not to compete there because we don't have the scale and buying power to do so," Container Store CEO Satish Malhotra told ModernRetail in July. "It's a bit of a white glove experience we offer."
Shoppers are turning to cheaper options, like Amazon, Walmart, HomeGoods and even online retailers like Temu.
The holiday shopping season is already expected to be an underwhelming one, with less sales growth compared to last year.
"The home goods category has been a difficult category to be in," Moody's retail analyst Christina Boni told CNN. "It's not going to be a great home goods holiday."
