The Container Store Group, citing a goal to boost customer satisfaction and return to profitability, has entered into a strategic partnership that will make Beyond, Inc. a major minority owner.
The partnership will leverage the Bed Bath & Beyond brand and The Container Store’s real estate assets. In addition to the Bed Bath & Beyond brand, The Container Store will access Beyond intellectual property, customer data, network of brands and affiliate relationships, according to the companies.
The deal falls in line with Beyond Executive Chairman Marcus Lemonis’ strategy, which he recently spelled out at the Piper Sandler Growth Frontier conference, of configuring the company to use its intellectual property and accumulated data as the core of a holding company that will, among other things, provide insights to its own retail operations and those of strategic partners who will use them to strengthen operations. Lemonis envisions a network of operations acting independently but feeding revenues and data upward to be shared across its online retail operation, with partners and across an affiliated, but not owned, network of stores. Beyond already has struck a deal with a partner in Mexico that operates a network of Bed Bath & Beyond stores.
According to a joint announcement, the companies expect key aspects of the partnership to include:
- Benefitting from The Container Store locations and using the Bed Bath & Beyond brand to launch appropriately sized co-branded showcase spaces. The companies expect the collaboration to drive increased Container Store traffic and consumer engagement with the core assortment and high-margin, solution-driven Custom Spaces services business.
- Offering a Beyond-established global loyalty program, multiple payment solutions and ancillary insurance and protection products through The Container Store brick-and-mortar locations and website, in part to capitalize on a whitespace opportunity for Custom Spaces advancement as well as to increase conversion of design leads.
- Integrating The Container Store’s differentiated and proprietary Custom Spaces offering, including its Elfa and Preston product lines, across Beyond’s portfolio of e-commerce banners as well as other ventures where Bed Bath & Beyond future licensed stores exist globally to drive improved revenue, inventory turns and margins, and improved customer experience for both companies.
- Connecting the The Container Store to Beyond’s growing data platform so that both companies benefit from pooled information and customer analytics that retail operations can use to improve conversion, drive traffic and reduce customer acquisition and retention costs.
- Assisting with development of expanded and renewed The Container Store e-commerce platforms and strategies, driving improved customer experience, customer conversion, traffic monetization and profitability.
Under the terms of the partnership, Beyond has agreed to invest $40 million in The Container Store through a preferred equity transaction subject to certain terms and conditions that include an amendment or refinancing of The Container Store’s credit facilities in a manner commercially acceptable to Beyond. Pursuant to the securities purchase agreement and contingent upon refinancing or amending its secured credit facilities, The Container Store will issue approximately 40,000 shares of a newly created series of preferred stock to Beyond for an aggregate purchase price of $40 million.
With a refinancing or amendment of the company’s credit facilities and approval by shareholders in a vote during the fourth quarter of 2024 or the first quarter of 2025, the preferred stock would convert to common stock at a price of $17.25, resulting in 40% Beyond ownership of The Container Store common equity.
“We are excited about the opportunities this partnership unfolds for us,” said Satish Malhotra, The Container Store CEO. “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. 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 enthusiasm for this collaboration is reflected in the investment they plan to make in The Container Store that will strengthen our financial position, allow us to continue to execute on our growth strategy, and deliver a best-in-class experience for our customers. We look forward to sharing more on our upcoming earnings call.”
Lemonis added, “We see tremendous whitespace for The Container Store’s best-in-class, solution-based offerings across the entire Beyond portfolio, particularly within its high-margin Custom Spaces offering through the proprietary Elfa and Preston lines. We will build a lead management and conversion model coupled with various consumer financial products to gain share and tap into a well-oiled, vertically integrated manufacturing platform that has plenty of untapped capacity. Through the licensing of the Bed Bath & Beyond brand, The Container Store will enhance their store format and current general merchandise offering by incorporating the most popular Bed Bath & Beyond products to drive improved financial performance while providing customers a more comprehensive product offering for their home and organizational needs.”
Lemonis emphasized partnerships such as the proposed deal between Beyond and The Container Store “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.”
