The Container Store’s new acquisition is upscale and ‘Made in the USA’

Discussion
Photo: Closet Works
Jan 06, 2022

The Container Store has acquired Closet Works, a closet organization company, for $21.5 million.

The deal announced earlier this week will expand Container Store’s ability to manufacture wood-based products and add to its premium tier portfolio. Container Store is also touting its acquisition of Chicago-based Closet Works as giving it access to equipment and facilities based in the U.S. instead of sourcing outside the country. Retailers have been challenged by disruptions in supplies, primarily from overseas, due to the impact of the pandemic.

The Container Store said the deal for Closet Works will give the company a boost in offering wood-based design customization options for closets, garages, home offices, laundry spaces, murphy beds and pantries. The retailer said it is particularly keen on garage-focused products, seeing that as a significant growth opportunity.

“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,” said  Satish Malhotra, president and CEO of The Container Store, in a statement. “We look forward to working with the talented team at Closet Works to strengthen our leadership position in this category.”

Tom Happ, the previous owner and president of Closet Works, agreed to join The Container Store as part of the deal. He will serve as president of Closet Works and assist in its integration into The Container Store organization.

The Container Store has been on a sales and earnings roll over the past year. The retailer has announced four straight quarters of record highs on both fronts. Net sales for the chain’s second quarter, reported in November, were up 11 percent year-over-year and 16 percent over 2019’s results.

On its second quarter earnings call, Mr. Malhotra pointed to the growth of Container Store’s custom closets business as a key driver, with 22 percent year-over-year growth. Echoing remarks made early this week, he said that he saw “a significant opportunity to drive market share for spaces over $2,000” after sales of the company’s premium Avera closet line almost doubled.

DISCUSSION QUESTIONS: What is your assessment of The Container Store’s acquisition of Closet Works? Do you expect other retailers and consumer direct brands to bring manufacturing sources closer to the U.S. after the experience of the past two years?

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"The Container Store has not strayed from its core mission, and acquiring Closet Works further demonstrates its goal of providing order to an increasingly busy, chaotic world."

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8 Comments on "The Container Store’s new acquisition is upscale and ‘Made in the USA’"


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Mark Ryski
BrainTrust

This is a smart move by The Container Store. They have been a consistently strong performer for a long time, and this acquisition will help bolster and expand their position. Additionally, by acquiring an American-based manufacturer, they minimize supply chain risk. There’s little doubt that the supply chain issues this last year, in addition to the political tensions with China, will spur on more North American manufacturing. That’s a good thing.

Shelley E. Kohan
BrainTrust

The linear supply chain model is in need of great repair. Supply UNchainED should be how retailers are looking at their supply networks or ecosystems. A part of this would be looking at various aspects of sourcing to minimize future disruptions including near-sourcing. The key is building agility and flexibility into supply networks from sourcing raw materials to allocation and distribution of products. The addition of Closet Works to The Container Store is a brilliant move as the ethos of both companies are aligned. There is also a move towards American Made in the U.S. markets which bodes well for this acquisition. The Container Store has not strayed from its core mission, and acquiring Closet Works further demonstrates its goal of providing order to an increasingly busy and chaotic world.

Cathy Hotka
BrainTrust

Consumers have made it clear that they prefer natural products to fabricated ones. This sounds like a winning move for The Container Store!

David Spear
BrainTrust

Outstanding, brilliant acquisition by The Container Store! Small- to medium-sized “organizing” projects will be hot in 2022 and TCS will clearly benefit from Closet Works’ “made in the USA” authenticity and local supply chain access. I don’t see any downside to this move.

Gary Sankary
BrainTrust

One of the key lessons for product managers during the pandemic: diversify sourcing strategies. Moving some production back to the U.S. provides more flexibility and potentially shorter lead times. This is a smart move by The Container Store.

Richard Hernandez
BrainTrust

This makes sense and is a smart move for The Container Store. Lots of space in stores is dedicated to full closet ideas and yes people do prefer natural to fabricated in a lot of cases. Plus “Made in the USA” is great attribute and will hopefully alleviate wait times from overseas product. Good for them.

Jeff Sward
BrainTrust

The pandemic has given us a renewed and heightened appreciation of our home as the center of life, now including school and office life. So anything that can enhance the utility and efficiency of how the home front is organized is going to be a win. And made in the U.S. adds lots of bonus points to that equation for both the customer and the retailer. Re-shoring will be extremely difficult for many businesses but where it’s feasible, full steam ahead.

Liza Amlani
BrainTrust

This is exactly what we need to see – smart moves towards localizing the supply chain through existing partnerships and product experts.

If retailers have learned anything during the pandemic and the constant supply chain disruption over the last two years it’s that you can’t put all your suppliers in one basket. Of course it will cost more to produce and manufacture domestically but this is an opportunity for retailers and manufacturers to work together, to enable technology and digital tools to speed up production, to give back to our communities and economies.

wpDiscuz
Braintrust
"The Container Store has not strayed from its core mission, and acquiring Closet Works further demonstrates its goal of providing order to an increasingly busy, chaotic world."

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