The Container Store has always been a bit of a puzzle in the retail business. Consistently ranked by many as both one of the best places to shop and one of the best places to work, the 46-year-old company has still struggled with profitability over its 11-year history as a public entity.
Now, under its first CEO from outside of the company, the retailer is embarking on an aggressive plan to reset its physical footprint while refocusing its merchandise mix. As it prepares to issue its first-quarter results in early August after a disappointing fiscal 2023 performance and a stock price that continues to teeter on the brink of delisting territory, The Container Store seems to be positioning itself better than it has for years. But the proof will still be in those financial results.
![Satish Malhotra, the CEO of The Container Store Satish Malhotra, the CEO of The Container Store](https://businessofhome.com/system/ckeditor/pictures/26914/data/content/Satish_Malhotra_Preferred_Headshot.jpg)
“More than 50 percent of Americans say they are overwhelmed with clutter, and more than a third say their garages are so cluttered they can’t even park their car,” CEO Satish Malhotra tells Business of Home. Malhotra marks a departure from the company’s traditional approach of sticking with internal leadership. He had spent 21 years with Sephora, rising to chief retail officer and chief operating officer before taking his current role in 2021. Back then the pandemic boom was playing to the company’s strengths, but more recently it has had to rethink virtually everything about itself as the entire home category has softened in the years since.
Malhotra has moved aggressively in several areas to get the retailer better positioned in the marketplace. First and foremost is an initiative to open smaller stores; at 12,000 to 15,000 square feet, they’re still sizable, but down from the previous footprint of 20,000 to 25,000. Two just opened in Virginia, bringing 2024 openings to four, on top of five last year, for a total fleet of 104. “With these new stores we’re able to get into the kinds of locations we couldn’t before. It got harder to find those bigger store locations,” says Malhotra.
Beyond this year, The Container Store’s “expansion plans are on hold” until the verdict is in on how these new smaller stores perform, as the company doesn’t want to take on any additional debt right now. “But we have 70 additional locations identified when we’re ready,” adds the CEO. And even as the company has closed several high-profile locations—including next to Bloomingdale’s on Manhattan’s east side and at Fairfax Market in Los Angeles—the larger formats will still be the dominant size throughout the U.S.
Large or small, The Container Store is also making some significant changes in how it merchandises its stores. Custom Spaces, a tentpole initiative built around the brand’s proprietary Elfa shelving and storage program, is the centerpiece of the remerchandising, which aims to display products by room and offer in-house designer services. “Our goal is for someone to walk into one of our stores and it looks like a home,” says Malhotra. Garage is one new category, expanding the company’s different room-based systems, which also spans offices and closets to laundry rooms and kids rooms.
The executive notes that this framework is still a work in progress—but sees it as a key priority moving forward. “Custom Spaces will eventually grow to be 60 percent of our business. It’s very important that we offer assortments in our stores that are complete solutions.”
Even as it builds out that project, The Container Store is working hard to move beyond its namesake product category, and has recently added home fragrance to its offerings, with more to come. Though, Malhotra admits that the store’s push into home decor went a little too far and is being scaled back a bit.
![Custom Spaces is the centerpiece of the remerchandising, which aims to display products by room and offer in-house designer services Custom Spaces is the centerpiece of the remerchandising, which aims to display products by room and offer in-house designer services](https://businessofhome.com/system/ckeditor/pictures/26923/data/content/The-Container-Store-The-Elan-Sudio-113.jpg)
One other initiative the retailer is pursuing is its business-to-business and to-the-trade effort. While that category is growing, it still represents a small part of the company’s overall business.
It's that overall part that remains challenging for the company. Last year, its net loss was $103 million on sales of $848 million, down 19 percent compared to the year before. Comps were down 19.7 percent for the overall store and 15 percent for the Custom Spaces program. The brand will report its first-quarter results on August 6, and Malhotra reiterates what he told analysts earlier this year: “We’re starting to see trends improve.”
In May, the company’s share price fell dangerously close to the 50-cent-a-share threshold and triggered a Securities and Exchange Commission warning about delisting. Though more recently it has spiked up as high as $1.20 a share, the company has already announced it plans a reverse stock split to get its share price out of the danger zone.
With the new smaller stores, fresh merchandising approach and product mix, Malhotra said, “our team is confident for the future.” He adds, “There’s a $20 billion market for organization, and the need for organizing is greater than ever. With these initiatives we’re going to be more accessible than ever to consumers.”
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Warren Shoulberg is the former editor in chief for several leading B2B publications. He has been a guest lecturer at the Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and been cited by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. His Retail Watch columns offer deep industry insights on major markets and product categories.