The Container Store acquires Closet Works for $21.5M

Dive Brief:

The Container Store on Monday announced it acquired home storage and closet organization company Closet Works for $21.5 million. The deal closed Dec. 30.
The acquisition builds on The Container Store's custom closet offering, and it plans to offer more customization options including for closets, garages, home offices, pantries, laundry rooms and murphy beds, the company said in a press release.
Tom Happ, Closet Works' previous co-owner and president, has joined The Container Store as Closet Works president to help with the integration.

Dive Insight:

The acquisition of Closet Works is part of The Container Store's effort to eventually double its sales, according to CEO and President Satish Malhotra.

In its most recent quarter, the company reported the best second quarter consolidated net sales in its history. Net sales from The Container Store's retail business were up 11.3% year over year to $259.4 million, with a 22.1% increase in its custom closets business.

"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," Malhotra said in a statement.

The company has been leaning further into its custom closet business over the years. The Container Store in 2019 opened a store dedicated to custom closets in Los Angeles and later opened another location in Dallas.

The Container Store benefited at the onset of the pandemic as consumers shifted spending from experiences to purchases on the home as they adjusted to their new normals of working and schooling remotely. The retailer last year was able to notch its first Q1 profit in over a decade, with net income hitting $17.7 million from a net loss of $16.7 million the year prior.

But sales have also been propelled by interest in organization specifically, which has been fostered by Netflix shows like "Tidying Up with Marie Kondo" and "Get Organized with The Home Edit." The Container Store has capitalized on both shows with product partnerships, and last month expanded its assortment with The Home Edit by iDesign, launching products made from paulownia wood.