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Container Store CEO Tells How Employees Benefited From the Company’s Initial Public Offering

The Container Store Inc. (NYSE: TCS) held its Q3 earnings call Tuesday—the first after its initial public offering in early November. Although the company reported a $9.5 million loss (or $1.39 per share) during its fiscal third quarter as a result of expenses related to the IPO, sales at the employee-centric organization-and-storage company are up. Same-store sales have grown for 14 consecutive quarters, most recently by 4.7 percent.

The Container Store is known for its “yummy” corporate culture built on loving values and what its chairman and CEO, Kip Tindell, calls “conscious capitalism.” That’s the practice, in part, of taking care of each person connected to a company. So, not surprisingly, Container Store employees were among those reaping the biggest benefits of the November IPO—despite the cost to the Coppell-based company’s bottom line.

Tindell, Kip - The Container Store
Kip Tindell

“IPOs are kind of—they’re almost like crony capitalism, they’re not conscious capitalism,” Tindell says. “They’re really designed and regulated by the 1932 and 1933 SEC regulations, which are so archaic and cryptic it’s unbelievable. And they really just benefit the big banks and the institutional investors. But, we took all that and we turned it upside-down.”

The Container Store’s employees—and not just the higher-level executives—were given 5 percent of the company at the IPO price in the form of stock options, Tindell explains. Every full-time employee with at least two years of experience was included in the offering, and a friends-and-family directed-share program offered an additional 14 percent of the shares at the IPO price to other employees, vendors, and the company’s longtime friends.

As a result, he says, roughly 20 percent of the IPO went to employees as well as participants in the directed-share program. With most IPOs, he adds, the directed-share figure is “usually like 2 or 3 percent.” He received thousands of letters from those who participated, Tindell says, saying they were “so honored” to be included.

“The IPO price doubled the first day, and we had guys in the distribution center that made like $40,000 in one day,” Tindell says. “That changes their life!”

Care and concern for employees has helped hold The Container Store’s annual turnover rate to a low 6 percent or so, the company has said. If sales stay on the uptick while satisfied employees hold such a large chunk of the company’s ownership, observers believe, that figure could drop even lower.

“One of the reasons we went public is because it’s so much easier to get stock in the hands of employees as a public company, which is kind of standard operating procedure,” Tindell says. “When you’re private, you have to convince your private partners to dilute themselves in order to give stock to [employees]. … So, that’s been a great joy. Every full-time employee with at least two years experience is an owner now.”