The Container Store Expands Its Custom Closet Offering With the Acquisition of Closet Works

Rhea-AI Summary

The Container Store (TCS) announced its acquisition of Closet Works for $21.5 million, aimed at enhancing its manufacturing capabilities and expanding premium wood-based product offerings. This strategic move is expected to position TCS for growth in the estimated $6 billion custom closet market by offering more customization options, improving quality control, and increasing profit margins. The deal closed on December 30, 2021, and Tom Happ, Closet Works' former co-owner, will lead the integration as President of Closet Works.

Positive

• Acquisition of Closet Works for $21.5 million expands TCS's manufacturing capabilities.
• Expected growth in the $6 billion custom closet market with enhanced product offerings.
• Increased quality control and profit margins from direct manufacturing to installation.
• More design customization options for customers, including premium spaces.

Negative

• None.

Announces Participation in the 24th Annual ICR Conference

COPPELL, Texas--(BUSINESS WIRE)--

The Container Store (the “Company”), the leading specialty retailer of storage and organization solutions and custom closets, today announced the acquisition of Chicago-based home storage solutions and closet organization company, Closet Works for $21.5 million. This strategic acquisition will expand The Container Store’s manufacturing capabilities to include wood-based spaces and enhance its premium wood-based product offering. The Company already manufactures its popular and affordable component-based systems through its wholly owned subsidiary Elfa.

The acquisition provides access to quality equipment and facilities located centrally in the United States and will allow the Company to control the process from product manufacturing to installation. This will give the Company opportunities for increased quality control and expanded profit margins. Additionally, The Container Store expects to offer more design customization options to customers and premium wood-based spaces including closets, garages, home offices, pantries, laundry rooms and murphy beds. An enhanced garage offering is a specific area the Company has identified as an opportunity for growth.

“As part of our effort to double our sales over time, I am thrilled to announce our strategic acquisition of Closet Works,” said The Container Store President and CEO, Satish Malhotra. “This acquisition allows us to meet the growing consumer demand for premium wood-based spaces and expand our capabilities, in an effort to gain a larger share of the estimated six-billion-dollar custom closet market – particularly in spaces above $2,000 – with expanded profit margins. We look forward to working with the talented team at Closet Works to strengthen our leadership position in this category.”

Closet Works President and previous co-owner, Tom Happ, has joined The Container Store as President of Closet Works and will assist with the integration. The transaction closed on December 30, 2021.

ICR Conference

The company also announced that management will present at the 24th Annual ICR Conference on Tuesday, January 11, 2022, at 1:30 p.m. Eastern Time.

The presentation will be webcast live over the internet and can be accessed at investor.containerstore.com. An online archive will be available for a period of 30 days following the event.

About The Container Store

The Container Store Group, Inc. (NYSE: TCS) is the nation’s leading specialty retailer of storage and organization products, custom closets, and in-home services – a concept they originated in 1978. Today, with locations nationwide, the retailer offers more than 11,000 products designed to transform lives through the power of organization.

Visit www.containerstore.com for more information about products, store locations services offered and real-life inspiration.

Follow The Container Store on Facebook, Twitter, Instagram, TikTok, YouTube, Pinterest and LinkedIn.

About Closet Works

Founded in 1987, Closet Works is a designer, manufacturer, and supplier of wood-based custom home storage and organization solutions. From walk-in closets to home offices, wine storage, wall beds and garages, Closet Works has developed custom spaces that have been tested and refined for over three decades. Customizations include more than 40 finish options, lighting, hardware, countertops, trim, and their Rotating 360 Organizer. The company is based in Chicago and services the entire United States. It operates a 60,000 square foot facility in Elmhurst, IL, that includes the company’s office, manufacturing and warehouse facilities, in addition to a 2,800 square foot design showroom on the north side of Chicago.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including statements regarding expectations for our business and the effect of the acquisition of Closet Works on our business. In some cases you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. These statements are neither promises nor guarantees, and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such risks include, but not limited to, the following: the COVID-19 pandemic and the associated impact on our business, results of operations and financial condition; our ability to continue to lease space on favorable terms; costs and risks relating to new store openings; quarterly and seasonal fluctuations in our operating results; cost increases that are beyond our control; our inability to protect our brand; our failure or inability to protect our intellectual property rights; overall decline in the health of the economy, consumer spending, and the housing market; our inability to source and market new products to meet consumer preferences; failure to successfully anticipate consumer preferences and demand; competition from other stores and internet-based competition; vendors may sell similar or identical products to our competitors; our and our vendors’ vulnerability to natural disasters and other unexpected events; disruptions at our Elfa manufacturing facilities; deterioration or change in vendor relationships or events that adversely affect our vendors or their ability to obtain financing for their operations, including COVID-19; our payment terms for goods and services, and our negotiation of alternative terms for lease payments and other business contracts, each as a result of COVID-19; product recalls and/or product liability, as well as changes in product safety and other consumer protection laws; risks relating to operating two distribution centers; our dependence on foreign imports for our merchandise; our reliance upon independent third party transportation providers; our inability to effectively manage our online sales; effects of a security breach or cyber-attack of our website or information technology systems, including relating to our use of third-party web service providers; damage to, or interruptions in, our information systems as a result of external factors, working from home arrangements, staffing shortages and difficulties in updating our existing software or developing or implementing new software; our indebtedness may restrict our current and future operations, and we may not be able to refinance our debt on favorable terms, or at all; fluctuations in currency exchange rates; our inability to maintain sufficient levels of cash flow to meet growth expectations; our fixed lease obligations; disruptions in the global financial markets leading to difficulty in borrowing sufficient amounts of capital to finance the carrying costs of inventory to pay for capital expenditures and operating costs; changes to global markets and inability to predict future interest expenses; our reliance on key executive management; our inability to find, train and retain key personnel; labor relations difficulties; increases in health care costs and labor costs; violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery and anti-kickback laws; impairment charges and effects of changes in estimates or projections used to assess the fair value of our assets; effects of tax reform and other tax fluctuations; significant fluctuations in the price of our common stock; substantial future sales of our common stock, or the perception that such sales may occur, which could depress the price of our common stock; risks related to being a public company; our performance meeting guidance provided to the public; anti-takeover provisions in our governing documents, which could delay or prevent a change in control; and our failure to establish and maintain effective internal controls. These and other important factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, (the “SEC”) on June 3, 2021 as updated from time to time in our other reports filed with the SEC, could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release.

Any such forward-looking statement represents management’s estimates as of the date of this press release. Because forward-looking statements are inherently subject to risks and uncertainties, you should not rely on these forward-looking statements as predictions of future events. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220103005120/en/

Investors:

ICR, Inc.

Farah Soi/Caitlin Churchill

203-682-8200

Farah.Soi@icrinc.com

Caitlin.Churchill@icrinc.com

Media:

The Container Store Group, Inc.

Katelyn Clinton, 972-538-6000

publicrelations@containerstore.com

Source: The Container Store

FAQ

What was the acquisition value of Closet Works by The Container Store?

The acquisition value of Closet Works by The Container Store was $21.5 million.

What market is The Container Store targeting with the Closet Works acquisition?

The Container Store is targeting the estimated $6 billion custom closet market with the acquisition.

When did The Container Store acquire Closet Works?

The Container Store acquired Closet Works on December 30, 2021.

Who will lead Closet Works after the acquisition?

Tom Happ, former co-owner of Closet Works, will lead the company as President.

What are the expected benefits of the Closet Works acquisition for TCS?

The expected benefits include increased manufacturing capabilities, quality control, expanded profit margins, and more customization options for customers.