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Industry & Trends

Container Store Pays $21.5M for Closet Works

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January 10, 2022 | Bill Esler

Chicago, IL—The Container Store, a Coppell, TX specialty retailer of closets and organization supplies, paid $21.5 million for Closet Works, a Chicago-based manufacturer of closets and home organization systems.

The acquisition expands The Container Store’s existing manufacturing capabilities to include wood-based spaces and enhances its premium wood-based products. The Container Store was already manufacturing its component-based closet systems at Elfa, its wholly owned subsidiary in Sweden.

Satish Malhotra, CEO, The Container Store

“As part of our effort to double our sales over time, I am thrilled to announce our strategic acquisition of Closet Works,” says Satish Malhotra, The Container Store president and CEO since February 2021. “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 $6 billion custom closet market—particularly in spaces above $2,000.”

Felder equipment at Closet Works 60,000-sq.-ft. plant. Recent additions include Biesse CNCs and Homag edgebanders.

With annual sales of nearly $1 billion, The Container Store has traded publicly on the New York Stock Exchange since 2013. Aiming to grow its closet business, The Container Store launched a design center called TCS Closets, at all of its U.S. stores (now numbering 94) in 2016. TCS Closets handles custom projects using components produced by Elfa.

The deal is the first major expansion for CEO Satish Malhotra since joining The Container Store. The acquisition provides access to quality equipment and facilities located centrally in the U.S. and The Container Store says this will allow it to control the process from product manufacturing to installation, improving quality control, and profit margins.

The expansion of manufacturing also puts The Container Store in direct competition with California Closets, which has 120 showrooms and 700+ designers across North America. California Closets says it has 7 percent share of the $6 billion custom closet market, about $420 million in revenue. The company expects to grow to 300 showrooms and 1,600 designers in the next five years, through a combination of company stores and franchises.

The COVID-19 pandemic has increased demand for home organization, as millions of people are either working or attending school at home, or are house bound to provide childcare and avoid infection. IWF 2022 will present a day-long Closets Symposium August 22 in Atlanta on business opportunities in closets and home organization. And the Association of Closets & Storage Professionals will present a two hour session on Closet Design and Certification Training August 24. Learn more and register for these and other sessions at IWFAtlanta.com.

Founded in 1987, Closet Works is a designer, manufacturer, and supplier of wood-based custom home storage and organization solutions including walk-in closets, home offices, wine storage, wall beds, and garages. Customizations include more than 40 finish options, lighting, hardware, countertops, trim, and the Rotating 360 Organizer.

With a 2,800-sq.-ft. design showroom on the north side of Chicago and a 60,000-sq.-ft. facility in Elmhurst, IL that includes the company’s office, manufacturing and warehouse facilities, Closet Works recently expanded with three Biesse CNC routers, two Homag edgebanders, a new doweling machine, and four additional strapping machines added to its existing capabilities. Closet Works also operates and services a sister company, Plus Closets, selling wholesale components and design services nationwide.

Malholtra says The Container Store has more than 10 million shoppers in its affinity program, but most never buy a closet project. Seeing opportunity in the $6 billion custom closets market, Malholtra intends to double business in closets by up-selling closet projects to The Container Store’s retail supplies customers.

A stand-alone sales event in June 2021 for The Container Store Avera premium closets line attracted new customers and successfully sold closet spaces that averaged $6,000 in billings. An “Elfa for the Win” marketing event effort was able to convert general merchandise customers into first-time buyers of Elfa custom closet spaces.

The Container Store now expects to offer more design customization options to customers and premium wood-based spaces including closets, home offices, pantries, laundry rooms, and Murphy beds. In particular, an enhanced garage offering is a specific area identified as a growth opportunity. It is one of the fastest growing niches in the closets segment.

Closet Works President and previous co-owner, Tom Happ, joins The Container Store as president of Closet Works and will assist with the integration. Launched in 1978, The Container Store Group, Inc. (NYSE: TCS) is the nation’s leading specialty retailer of storage and organization products, custom closets, and in-home services. With locations nationwide, the retailer offers more than 11,000 products designed to transform lives through the power of organization.

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