The Container Store’s new acquisition is upscale and ‘Made in the USA’
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.
- The Container Store Expands Its Custom Closet Offering With the Acquisition of Closet Works – The Container Store
- The Container Store Group’s (TCS) CEO Satish Malhotra on Q2 2021 Results – Earnings Call Transcript – Seeking Alpha
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?