The past two weeks have been busy for Kip Tindell, the Container Store's chairman and chief executive. On Oct. 6, the home organization retailer released its second quarter results, reporting earnings that missed analysts' expectations and lowering its sales forecast for the year. The next day, the stock tumbled 25 percent — the same day Tindell released his first book, Uncontainable, about how the Container Store runs its business.
In the days that followed, Tindell found himself in the hot seat, being interviewed about his book but having to talk about his company's performance, what it's like to go public (the Coppell, Tex.-based company did so last year), and his views on the minimum wage. The Container Store has repeatedly landed on Fortune's Best Companies to Work For list, pays its average full-time workers nearly $50,000 a year, grants them stock and has a no-layoff policy.
Yet as the incoming chairman of the National Retail Federation (NRF), Tindell will be helping lead an organization that has vocally opposed an increase in the minimum wage. He recently said he would try to get the NRF to moderate its views, but he was much more, well, contained on this topic when we interviewed him. The conversation has been edited for length and clarity.
Q. What’s it like to do a book tour at a time when your company has lowered its sales forecast for the second time this year?
A. You know it’s not really a book tour. It’s been kind of a two-week-long quarterly call. Comparable store sales were down four-tenths of one percent to last year’s quarter. On the other hand, earnings were up 38.7 percent. Our gross margin is strong. Expenses are excellent, right where we want them. The only thing that’s going on is traffic is about a point to 1.5 percent less than we thought it would be at this point in time. You don’t always succeed in predicting consumer behavior perfectly well, but we’re not sitting around just waiting. We’re turning over every rock, every stone.
Q. Has that been frustrating?
A. It’s different being public, particularly for such a culturally endowed company. People were kind surprised that we did it. But we did it for a lot of good reasons, including the ability to get more stock in the hands of employees, which I’m passionate about. But you know, I think we’re going to have an excellent holiday season. The fourth quarter is what’s important to this business. It’s like a basketball game. You don’t even have to watch the game until the fourth quarter of basketball. Sixty percent of our earnings typically come in the fourth quarter.
Q. You've been quoted as saying that right after you went public you thought it was absolutely the right decision but over time you've questioned it. Do you regret going public?
A. No. I think we just need to keep our feet firmly planted in this direction we’re going. We spent years talking to people about this, and thinking about it. And unless your dad leaves you like $3 billion or something, there’s only a handful of options. The odds of us finding another private equity firm that we love as much as Leonard Green are low. That was such a happy marriage and still is.
Q. Your stock value is below its initial price. (The Container Store went public last November at $18, reached $46 in December and after last week’s forecast dropped to $15.) How do you keep employees, who own stock, from getting distracted by the stock price?
A. [Former Costco CEO] Jim Sinegal is famous for saying “don’t worry about the stock price for 10 years.” And I’m like: “Jim, it’s hard not to notice.” The last week—my God. You have these sweet, dear, wonderful shareholders that love you and believe in you, but they bought at $43 or something. That’s tough. You can’t ignore that. Of course we feel very responsible for it, and we feel very optimistic even medium term.
I’m saying the same thing to employees that they’re saying to me. There’s kind of a rallying cry among all the Container Store people where they proudly say, “Kip, it’s conscious capitalism, it's not quarterly capitalism.” Everybody loves that statement. It’s been crazily volatile, both good and bad here so far. But we’ve never been more confident of our future, our employees, our customers and our strategies.
A. I’m the most transparent guy you'll ever interview, but I’m not going to get into the wage and labor disputes. The Container Store’s philosophy, where we like to hire great people and pay them well and train them well, is about the Container Store. It’s not about the world, and it’s not about the NRF. I love the NRF and respect everything they do. I’m just not going to get into commenting. I support what the NRF stands for and their positions.
Q. But according to Bloomberg, you said you thought it was "unbecoming" to be against raising the minimum wage, and wanted to help the NRF moderate its ideas.
A. There must have been some confusion on that. It’s fine. Everybody’s got a different opinion on it. I think that what works for the Container Store works for the Container Store. And that’s not necessarily the right way for every business or every retailer. So it’s a thorny, difficult issue.
Q. Yet you’re known as an employer that pays well, hands out company stock and has never had a layoff in an industry that’s not known for its generosity. Do you hope your philosophy might wear off on your peers?
A. You hope that you can build a model that is so successful that it gets emulated. That’s something that anybody wants when they build something like this. I know John Mackey at Whole Foods feels that way. And you know what, in spite of the stock hit last week, this is still a business that many people emulate.
People are joining companies where they agree with the business philosophies. Not just millennial kids, either. Baby boomers are starting to care about this stuff. Consumers are starting to vote with their pocketbooks. If you take care great care of your employees, your employees feel better about themselves. They have better self confidence, better fulfillment in life, and they go home and treat their families and their friends and their golden retrievers and the guy at the 7-Eleven better than they would if they felt otherwise.
Q. You said in your book that “women make much better executives than men.” What led you to decide that?
A. Most of our top executives are women. Most of our employees are women. At the Container Store, we think leadership and communication are the same thing. It’s a generalization, but guess who tends to communicate better? Women. I also believe in hiring our customer. The Container Store is primarily a housewares store, and women still buy a lot more housewares than men do. [ED NOTE: Later, he added: We love men too. But retail and men are interesting. How many friends do you have where the guy buys half the Christmas gifts? Zero.]
I believe that running a business — leading a company — has exactly the same skill set as raising a family. Not that the people you manage are children, nothing like that. It’s just that the skill sets are about nurturing and developing, teaching. Some of those things, often times, women do better than men.
Q. What proportion of your top ranks are women?
A. Until very recently, it was like 15 out of the top 20 executives, now it’s down to 13 out of 20. We’re 70 percent female, company-wide.
Q. You think it’s really critical for employees to have stock ownership. Why?
A. Very simply, even your most devoted and passionate employees are even better and even happier and even more productive if they have a little or a big piece of the action. You handle your domicile differently if you own it than if you rent it. You don’t wash your rental car. It makes a difference.
You can’t give equity to every employee. The math just doesn’t work. But we've crossed the line to where any full-time employee with two years of tenure does have stock now.
Q. You spoke about how communication is leadership, and you've described the transparency with which you run your business. How much harder has this been to do as a public company?
A. It is harder to do as a public company because there are certain financial things you can’t share. People crave transparency. When you’re on an airplane and they won’t tell you why they’re not taking off, it’s just infuriating. If you work for a company that’s not transparent with you, it’s infuriating too. I pick friends and employees the same way, based on how transparent they are. Life’s too short for opaque people.
We just believe that communication can solve any problem. More of it is always better. We probably have too many people in a typical meeting. We probably could cut back on the number. But you get more creativity and more of what we call whole brain-ness when there’s multi-departmental viewpoints doing the problem-solving. Everybody laments how in American business everybody’s meeting too much. But I don’t think so. That’s where so much innovation comes from.
Q. You have a no-layoff policy. Have you really never laid off an employee?
A. We’ve never laid off an employee. We do get rid of people all the time because they’re dishonest or they’re not productive. We’re a meritocracy, and we believe in excellence. But we’ve never laid anybody off. You can't go around calling yourself an employee-first company and then lay people off.
Q. What does that job security instill in employees?
A. If your revenues are down, you have to adjust expenses to your now reduced revenues. During the recession, over two years they were down 8 percent and 6 percent, for a total of 14 percent. The quickest and easiest way to fix that is just to reduce expenses 14 percent by laying people off. The harder way to do it is to hold hands like a family around the table and go out there and reduce the cost of everything from toilet paper to computer leasing equipment 14 percent. That’s what we did. Now we’re like a bunch of old guys who went to war together.
Q. You’ve worked with your wife, the company's chief merchandising officer, for 35 years. Any secrets for other husband-and-wife leadership teams out there?
A. I love it. She likes it okay. No, we both love it. You share even more in life.
Give each other a lot of autonomy. I guess the best advice would just be to communicate. Also, blur the distinction between work and play. There doesn’t have to be a rule that when we’re home, we're not going to talk about work. You know, to hell with that. I don’t know about this balance thing. Do something you love, be passionate about it, try to make it the best it is, and don’t count how many hours you’re working versus how many hours you're playing. After enough years it all blurs together.