Two beaten-up home-goods brands are joining forces. This one's stock is rallying.

MW Two beaten-up home-goods brands are joining forces. This one's stock is rallying.

By Bill Peters

Beyond, the parent of Bed Bath & Beyond, plans to invest $40 million in the Container Store

Shares of the Container Store Group Inc. surged after hours on Tuesday after the struggling storage retail chain said it had secured the backing of home-goods seller Beyond Inc., the company that owns Bed Bath & Beyond and Overstock.

Under the deal, in which Beyond $(BYON)$ will invest $40 million in the Container Store (TCS) and potentially land a hefty stake in the company, the two plan to revive growth at the Container Store and "improve customer experience" using Beyond's brand-name recognition, customer data and other relationships.

Shares of Container Store rocketed 35.5% higher after hours on Tuesday. Beyond's stock was up 0.1% after hours.

The deal was announced as both companies try to hold on to shoppers, amid competition and higher homebuying and housing costs that have crimped demand for furniture. Shares of both Beyond and the Container Store are down more than 60% so far this year.

The companies, in a statement on Tuesday, said they planned to use Container Store locations to showcase co-branded Bed Bath & Beyond kitchen and bath items. They also said that Beyond would offer a global loyalty program through the Container Store's locations, and sell the Container Store's custom-spaces offerings across its online sales network.

"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," Beyond Executive Chairman Marcus Lemonis said in a statement.

The Container Store's custom-spaces offerings include shelving, other storage products and home-installation services.

The Container Store will issue around 40,000 shares of a newly created series of its preferred stock to Beyond for $40 million.

The companies also said that following a refinancing or amendment of the Container Store's credit facilities, and shareholder approval, the preferred stock "would convert to common stock at a price of $17.25, which would result in ownership of approximately 40% of the Container Store common equity by Beyond."

Beyond this year has tried to reclaim more loyal customers, and recalibrate after the implosion of Bed Bath & Beyond's physical stores last year and a relaunch of Overstock.com.

The Container Store, meanwhile, has also struggled with losses over the past year, and competition from bigger retailers like Walmart Inc. $(WMT)$ and Amazon.com Inc. $(AMZN)$, as Modern Retail recently noted. The Container Store last week also adopted a stockholder rights plan, or a so-called "poison pill," following the "rapid and significant accumulation of the company's common stock by a single stockholder."

In May, the Container Store said it had started a "a formal review process" of ways to recharge its stock.

"The Container Store's board and management team are committed to maximizing value for our stakeholders, and to that end, we have commenced a comprehensive process to review potential strategic alternatives for the business," Chair Lisa Klinger said at that time.

Tomi Kilgore contributed.

-Bill Peters

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October 15, 2024 18:30 ET (22:30 GMT)

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