Bed Bath & Beyond Parent Invests $40M in Struggling Container Store
Vicki M. Young
5 min read
Bed Bath & Beyond parent Beyond Inc. and The Container Store have found a way to help each other.
Through a strategic partnership, Beyond Inc. will invest $40 million in the struggling organization and storage specialty retailer. In exchange for the financial boost, The Container Store will allocate floor space at some of its stores for a line of co-branded products in the kitchen, bath and bedroom categories. Jefferies analyst Jonathan Matuszewski said Beyond gains physical distribution without capital expenditure outlays for new store construction, and it can continue to operate as an “asset-lite entity.” The Container Store, among other benefits, gets access to a broader general merchandise offering where it can broaden its customer base beyond those focused just on the organization market.
The $40 million investment will be through a preferred equity transaction, subject to certain conditions including a refinancing of The Container Store’s credit facilities under terms acceptable to Beyond. If certain other conditions are met, the preferred stock would convert to common stock at $17.25 per share, which would give Beyond a 40 percent ownership stake of The Container Store’s common equity.
“The companies intend for the partnership to position The Container Store to return to profitable comparable store growth over time by utilizing and benefiting from Beyond’s intellectual property, customer data, network of brands, and affiliate relationships,” the two firms said in a joint statement. The Container Store’s Custom Spaces offering, including its Elfa and Preston product lines, will be available across Beyond’s e-commerce banners. Beyond also owns the Overstock, Zulilly, and other online retailer brands.
“We are excited about the opportunities this partnership unfolds for us. We believe its 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’s CEO Satish Malhotra said. “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. 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.”
Beyond’s executive chairman Marcus Lemonis said he sees “tremendous whitespace for The Container Store’s best-in-class, solution-based offerings across the entire Beyond portfolio” through its proprietary Elfa and Preston lines. He also said that through the licensing of the Bed Bath & Beyond brand, The Container Store will offer customers a “more comprehensive product offering” for their home and organizational needs.
“Partnerships like this further support the value of iconic brands leveraging each other’s assets and core competencies while improving customer conversion and retention, enhancing margins, and optimizing marketing expenses which are the principal drivers in delivering value creation and profitable growth,” Lemonis said.
Lemonis, a retail veteran best known for reviving struggling businesses on CNBC’s “The Profit,” became Beyond’s executive chairman this past February. One of his first moves one month after joining the company was to acquire the defunct Zulily brand for $4.5 million. Last month, Beyond said it had started a global licensing program with the Bed Bath & Beyond name. In addition to stores in Mexico, it also inked a category license with PEM America, a home textiles manufacturer, for fashion bedding, bath linens and accessories and window and soft home décor.
Beyond, formerly Overstock.com before its rebranding, acquired certain assets, including intellectual property assets, of bankrupt Bed Bath & Beyond for $21.5 million in June 2023. The company this summer relaunched its legacy Overstock.com site.
“It is our vision, particularly with many off-price retailers leaving the e-commerce space, to become the North American leader where companies big and small can utilize the platform to reduce inventory in their own businesses and improve their turns and margins. They are essentially our vendors and suppliers,” Lemonis told investors during an earnings call in August regarding plans for Overstock.com.
Lemonis also told investors that in addition to traditional vendors, the company was in the “early innings of entering the true liquidation reverse logistics and closeout business. We have formed material relationships with liquidators, jobbers, wholesalers and reverse logistics companies and are finalizing a formal agreement with a large-scale closeout and reverse logistics company.”
Lemonis must be doing something right. Beyond in the second quarter narrowed its net loss to $42.6 million, or 93 cents a diluted share, from a net loss of $73.5 million, or $1.63, in the year-ago period. Net revenue fell 5.7 percent to $398.1 million.
Beyond’s narrowing of its losses comes against a backdrop where the home sector remains in distressed mode. On Monday, True Value Co. LLC filed a Chapter 11 petition to effect a sale of itself to its rival Do It Best. A wholesaler, True Value serves 4,500 independently-owned stores that rely on it for its products. Its the latest bankruptcy this year that saw the Conn’s banner, flooring retailer LL Flooring, and closeout home retailer Big Lots all file their respective Chapter 11 petitions. Last year saw the mega Bed, Bath & Beyond and Tuesday Morning filings, among other home retail bankruptcies and liquidations. The year was particularly tough for the struggling home sector, which saw the closure of 1,228 doors, including 896 attributed to the Bed Bath & Beyond bankruptcy.
