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Container Store turns to reverse stock split after delisting notice, sales declines

Shares have struggled to stay above $1 in recent months with consumers less willing to spend at the retailer

The Container Store is turning to a reverse-stock split after investors and shoppers soured on the retailer.

The Coppell-based company is doing a 15-for-1 split with shares set to trade under the new arrangement starting Wednesday, according to a regulatory filing with the Securities and Exchange Commission. In May, the retailer revealed it had received a noncompliance notification from the New York Stock Exchange after its average closing price was less than $1 over a consecutive 30 trading-day period. A reverse stock split was an option to address the issue, it said at the time.

The Container Store — which helps folks get organized with stackable storage boxes, sturdy shelves and other options — has run into challenges driving growth and wooing customers. Competition has increased in recent years not only from online retail but from storage and organization sections in Walmart, Target and even supermarkets.

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Sales have declined for two straight fiscal years while it ran net losses, and, in May, the company announced it had initiated a review process to evaluate strategic alternatives, which generally includes the possible sale of the company.

Container Store’s stock traded for as much as $46.61 a share shortly after the company went public in late 2013, giving the company a market capitalization of more than $2.2 billion. The Container Store’s stock price dropped as low as 66 cents a share in trading Tuesday and the total sum of the company’s stock is worth about $45.4 million, according to Yahoo Finance.

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At that time, the board did not believe the “market value is reflective of its intrinsic value and are committed to acting in the best interests of the Company and its stakeholders,” the company said in the statement. In the latest quarterly report, sales declines narrowed, falling 12% from the year-ago period after dropping more than 20% in the previous quarter.

The board and management — in addition to working on plans to refinance a credit facility — are continuing to review strategic alternatives to ensure it’s maximizing the potential of the business and returns for shareholders, CEO Satish Malhotra said during its quarterly call, according to a transcript on its site.

“While we cannot control the current macro environment, we are pleased with the progress we are making on our initiatives and continue to believe in the opportunities ahead as more and more customers realize the power of organization,” Malhotra said. “We are controlling the controllables, tightly managing expenses and capital while strengthening our competitive position, all of which will serve us well when the market condition normalizes.”

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The reverse stock follows shareholder approval for a ratio ranging 1-for-10 and 1-for-15 (by whole number) — and the board opted for the upper end of the split. Shares have closed at more than $1 about a half-dozen times since April 16.

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