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Table of Contents

y

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-36161

THE CONTAINER STORE GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware

26-0565401

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

500 Freeport Parkway, Coppell, TX

75019

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (972) 538-6000

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

TCS

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  No

The registrant had 51,722,131 shares of its common stock outstanding as of October 27, 2023.

Table of Contents

TABLE OF CONTENTS

PART I.

FINANCIAL INFORMATION

Item 1.

Financial statements

Unaudited consolidated balance sheets as of September 30, 2023, April 1, 2023, and October 1, 2022

3

Unaudited consolidated statements of operations for the thirteen and twenty-six weeks ended September 30, 2023 and October 1, 2022

5

Unaudited consolidated statements of comprehensive (loss) income for the thirteen and twenty-six weeks ended September 30, 2023 and October 1, 2022

6

Unaudited consolidated statements of cash flows for the twenty-six weeks ended September 30, 2023 and October 1, 2022

7

Unaudited consolidated statements of shareholders’ equity for the thirteen and twenty-six weeks ended September 30, 2023 and October 1, 2022

8

Notes to the unaudited consolidated financial statements

10

Item 2.

Management’s discussion and analysis of financial condition and results of operations

20

Item 3.

Quantitative and qualitative disclosures about market risk

36

Item 4.

Controls and procedures

36

PART II.

OTHER INFORMATION

Item 1.

Legal proceedings

37

Item 1A.

Risk factors

37

Item 2.

Unregistered sales of equity securities, use of proceeds, and issuer purchases of equity securities

37

Item 3.

Default upon senior securities

37

Item 4.

Mine safety disclosures

37

Item 5.

Other information

37

Item 6.

Exhibits

38

2

Table of Contents

PART I.

FINANCIAL INFORMATION

Item 1.

Financial statements

The Container Store Group, Inc.

Consolidated balance sheets

September 30,

April 1,

October 1,

(In thousands)

    

2023

    

2023

    

2022

    

Assets

(unaudited)

(unaudited)

Current assets:

Cash

$

10,195

$

6,958

$

19,814

Accounts receivable, net

 

24,857

 

25,870

 

28,624

Inventory

 

173,438

 

170,637

 

190,142

Prepaid expenses

 

12,986

 

14,989

 

17,474

Income taxes receivable

1,091

858

1,309

Other current assets

 

9,189

 

10,914

 

9,639

Total current assets

 

231,756

 

230,226

 

267,002

Noncurrent assets:

Property and equipment, net

 

158,740

 

158,702

 

147,302

Noncurrent operating lease right-of-use assets

355,863

347,959

356,605

Goodwill

 

 

23,447

 

221,159

Trade names

 

219,558

 

221,278

 

218,882

Deferred financing costs, net

 

123

 

150

 

176

Noncurrent deferred tax assets, net

 

432

 

568

 

471

Other assets

 

3,037

 

2,844

 

2,062

Total noncurrent assets

 

737,753

 

754,948

 

946,657

Total assets

$

969,509

$

985,174

$

1,213,659

See accompanying notes.

3

Table of Contents

The Container Store Group, Inc.

Consolidated balance sheets (continued)

    

September 30,

    

April 1,

    

October 1,

    

(In thousands, except share and per share amounts)

    

2023

    

2023

    

2022

    

Liabilities and shareholders’ equity

(unaudited)

(unaudited)

Current liabilities:

Accounts payable

$

65,275

$

52,637

$

79,892

Accrued liabilities

 

71,362

 

74,673

 

79,447

Current borrowings on revolving lines of credit

 

2,820

 

2,423

 

13,660

Current portion of long-term debt

 

2,060

 

2,063

 

2,066

Current operating lease liabilities

61,533

57,201

56,204

Income taxes payable

 

912

 

1,318

 

218

Total current liabilities

 

203,962

 

190,315

 

231,487

Noncurrent liabilities:

Long-term debt

 

168,321

 

163,385

 

158,465

Noncurrent operating lease liabilities

323,230

314,100

322,830

Noncurrent deferred tax liabilities, net

 

43,790

 

49,338

 

49,804

Other long-term liabilities

 

5,793

 

5,851

 

6,393

Total noncurrent liabilities

 

541,134

 

532,674

 

537,492

Total liabilities

 

745,096

 

722,989

 

768,979

Commitments and contingencies (Note 7)

Shareholders’ equity:

Common stock, $0.01 par value, 250,000,000 shares authorized; 49,591,111 shares issued at September 30, 2023; 49,181,562 shares issued at April 1, 2023; 50,104,829 shares issued at October 1, 2022

 

496

 

492

 

501

Additional paid-in capital

 

873,149

 

872,204

 

875,550

Accumulated other comprehensive loss

 

(35,740)

 

(32,509)

 

(38,451)

Retained deficit

 

(613,492)

 

(578,002)

 

(392,920)

Total shareholders’ equity

 

224,413

 

262,185

 

444,680

Total liabilities and shareholders’ equity

$

969,509

$

985,174

$

1,213,659

See accompanying notes.

4

Table of Contents

The Container Store Group, Inc.

Consolidated statements of operations

Thirteen Weeks Ended

Twenty-Six Weeks Ended

 

September 30,

October 1,

September 30,

October 1,

 

(In thousands, except share and per share amounts) (unaudited)

    

2023

    

2022

    

2023

    

2022

Net sales

$

219,731

$

272,672

$

426,843

$

535,306

Cost of sales (excluding depreciation and amortization)

 

93,064

 

118,242

 

185,627

 

230,788

Gross profit

 

126,667

 

154,430

 

241,216

 

304,518

Selling, general, and administrative expenses (excluding depreciation and amortization)

 

109,270

 

118,655

 

220,650

 

240,564

Impairment charges

23,447

23,447

Stock-based compensation

 

615

 

536

 

1,089

 

1,737

Pre-opening costs

 

549

 

583

 

734

 

619

Depreciation and amortization

 

10,383

 

9,549

 

20,895

 

18,555

Other expenses

 

7

 

 

2,460

 

Loss on disposal of assets

 

220

 

80

 

221

 

81

(Loss) income from operations

 

(17,824)

 

25,027

 

(28,280)

 

42,962

Interest expense, net

 

5,238

 

3,783

 

10,205

 

7,006

(Loss) income before taxes

(23,062)

 

21,244

(38,485)

 

35,956

Provision (benefit) for income taxes

 

591

 

5,497

 

(2,995)

 

9,730

Net (loss) income

$

(23,653)

$

15,747

$

(35,490)

$

26,226

Net (loss) income per common share — basic

$

(0.48)

$

0.31

$

(0.72)

$

0.53

Net (loss) income per common share — diluted

$

(0.48)

$

0.31

$

(0.72)

$

0.52

Weighted-average common shares — basic

49,461,590

50,000,945

49,357,218

49,860,252

Weighted-average common shares — diluted

 

49,461,590

 

50,350,549

 

49,357,218

 

50,324,456

See accompanying notes.

5

Table of Contents

The Container Store Group, Inc.

Consolidated statements of comprehensive (loss) income

Thirteen Weeks Ended

Twenty-Six Weeks Ended

September 30,

October 1,

September 30,

October 1,

(In thousands) (unaudited)

    

2023

    

2022

    

2023

    

2022

    

    

Net (loss) income

$

(23,653)

$

15,747

$

(35,490)

$

26,226

Unrealized gain (loss) on financial instruments, net of tax provision (benefit) of $0, $20, $0 and ($19)

 

 

80

 

 

(33)

Pension liability adjustment

 

15

 

178

 

74

 

392

Foreign currency translation adjustment

 

(1,642)

 

(5,468)

 

(3,305)

 

(11,366)

Comprehensive (loss) income

$

(25,280)

$

10,537

$

(38,721)

$

15,219

See accompanying notes.

6

Table of Contents

The Container Store Group, Inc.

Consolidated statements of cash flows

Twenty-Six Weeks Ended

September 30,

October 1,

(In thousands) (unaudited)

    

2023

    

2022

    

    

Operating activities

Net (loss) income

$

(35,490)

$

26,226

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization

20,895

 

18,555

Stock-based compensation

1,089

 

1,737

Impairment charges

23,447

 

Loss on disposal of assets

221

 

81

Deferred tax (benefit) expense

(4,603)

 

396

Non-cash interest

942

 

942

Other

176

 

492

Changes in operating assets and liabilities:

Accounts receivable

(25)

 

(2,655)

Inventory

(3,827)

 

(935)

Prepaid expenses and other assets

2,539

 

(5,685)

Accounts payable and accrued liabilities

10,776

 

(6,713)

Net change in lease assets and liabilities

5,574

102

Income taxes

(684)

 

(5,600)

Other noncurrent liabilities

(339)

 

(153)

Net cash provided by operating activities

20,691

26,790

Investing activities

Additions to property and equipment

(22,037)

 

(32,047)

Investments in non-qualified plan trust

(177)

(879)

Proceeds from non-qualified plan trust redemptions

472

467

Proceeds from sale of property and equipment

1

 

34

Net cash used in investing activities

(21,741)

 

(32,425)

Financing activities

Borrowings on revolving lines of credit

27,177

 

44,104

Payments on revolving lines of credit

(26,649)

 

(30,855)

Borrowings on long-term debt

20,000

 

15,000

Payments on long-term debt

(16,032)

(16,053)

Payment of taxes with shares withheld upon restricted stock vesting

(140)

(712)

Proceeds from the exercise of stock options

 

340

Net cash provided by financing activities

4,356

 

11,824

Effect of exchange rate changes on cash

(69)

 

(627)

Net increase in cash

3,237

 

5,562

Cash at beginning of fiscal period

6,958

 

14,252

Cash at end of fiscal period

$

10,195

$

19,814

Supplemental information:

Purchases of property and equipment (included in accounts payable)

$

3,014

$

6,223

Cash paid for amounts included in the measurement of operating lease liabilities

$

47,160

$

44,980

Additions to right-of-use assets in exchange for operating lease liabilities

$

36,066

$

34,938

See accompanying notes.

7

Table of Contents

The Container Store Group, Inc.

Consolidated statements of shareholders’ equity

Accumulated

Additional

other

Total

(In thousands, except share amounts)

Par

Common stock

paid-in

comprehensive

Retained

shareholders’

(unaudited)

    

value

    

Shares

    

Amount

    

capital

    

(loss) income

    

deficit

    

equity

Balance at April 1, 2023

$

0.01

 

49,181,562

$

492

$

872,204

$

(32,509)

$

(578,002)

$

262,185

Net loss

 

 

 

 

 

 

(11,837)

 

 

(11,837)

Stock-based compensation

 

 

 

 

474

 

 

 

 

474

Vesting of restricted stock awards

209,320

2

(2)

Taxes related to net share settlement of restricted stock awards

(140)

(140)

Foreign currency translation adjustment

 

 

 

 

 

(1,663)

 

 

 

(1,663)

Pension liability adjustment

 

 

 

 

 

59

 

 

 

59

Balance at July 1, 2023

$

0.01

 

49,390,882

$

494

 

$

872,536

$

(34,113)

$

(589,839)

 

$

249,078

Net loss

(23,653)

(23,653)

Stock-based compensation

615

615

Vesting of restricted stock awards

200,229

2

(2)

Foreign currency translation adjustment

(1,642)

(1,642)

Pension liability adjustment

15

15

Balance at September 30, 2023

$

0.01

49,591,111

$

496

$

873,149

$

(35,740)

$

(613,492)

$

224,413

8

Table of Contents

Accumulated

Additional

other

Total

(In thousands, except share amounts)

Par

Common stock

paid-in

comprehensive

Retained

shareholders’

(unaudited)

    

value

    

Shares

    

Amount

    

capital

    

loss

    

deficit

equity

Balance at April 2, 2022

$

0.01

 

49,635,447

$

496

$

874,190

$

(27,444)

$

(419,146)

$

428,096

Net income

 

 

 

 

 

 

10,479

 

10,479

Stock-based compensation

 

 

 

 

1,201

 

 

 

1,201

Stock options exercised

73,594

1

339

340

Vesting of restricted stock awards

232,295

2

(2)

Taxes related to net share settlement of restricted stock awards

(712)

(712)

Foreign currency translation adjustment

 

 

 

 

(5,898)

 

 

(5,898)

Unrealized gain on financial instruments, net of $39 tax benefit

 

 

 

 

(113)

 

 

(113)

Pension liability adjustment

 

 

 

 

214

 

 

214

Balance at July 2, 2022

$

0.01

 

49,941,336

$

499

$

875,016

$

(33,241)

$

(408,667)

$

433,607

Net income

 

 

 

 

 

15,747

 

15,747

Stock-based compensation

 

 

 

536

 

 

 

536

Vesting of restricted stock awards

163,493

 

2

 

(2)

 

 

 

Foreign currency translation adjustment

 

 

 

(5,468)

 

 

(5,468)

Unrealized gain on financial instruments, net of $20 tax provision

 

 

 

80

 

 

80

Pension liability adjustment

 

 

 

178

 

 

178

Balance at October 1, 2022

$

0.01

50,104,829

$

501

$

875,550

$

(38,451)

$

(392,920)

$

444,680

See accompanying notes.

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The Container Store Group, Inc.

Notes to consolidated financial statements (unaudited)

(In thousands, except share amounts and unless otherwise stated)

September 30, 2023

1. Description of business and basis of presentation

These financial statements should be read in conjunction with the financial statement disclosures in our Annual Report on Form 10-K for the fiscal year ended April 1, 2023, filed with the Securities and Exchange Commission (“SEC”) on May 26, 2023 (the “2022 Annual Report on Form 10-K”). The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). We use the same accounting policies in preparing quarterly and annual financial statements. All adjustments necessary for a fair presentation of quarterly operating results are reflected herein and are of a normal, recurring nature. Certain items in these consolidated financial statements have been reclassified to conform to the current period presentation.

All references herein to “fiscal 2023” refer to the 52-week fiscal year ending March 30, 2024, and “fiscal 2022” refer to the 52-week fiscal year ended April 1, 2023.

Description of business

Our operations consist of two reportable segments:

The Container Store, Inc. (“TCS”): The Container Store, Inc. was founded in 1978 in Dallas, Texas, as a retailer with a mission to provide customers with storage and organization solutions to accomplish their projects through an assortment of innovative products and unparalleled customer service. In 2007, The Container Store, Inc. was sold to The Container Store Group, Inc. (the “Company”), a holding company, of which a majority stake was purchased by Leonard Green and Partners, L.P. (“LGP”), with the remainder held by certain employees of The Container Store, Inc. On November 6, 2013, the Company completed the initial public offering (the “IPO”), of its common stock at which time LGP held a controlling interest in the Company as the majority shareholder. During fiscal 2020, LGP sold some of the common stock of the Company, reducing their ownership to less than 50% of the Company’s outstanding common stock. Although LGP is no longer the majority shareholder, LGP continues to have significant influence over the Company.

Today, TCS includes The Container Store Custom Spaces (“Custom Spaces”) consisting of our elfa® Classic, elfa® Décor, Avera® and PrestonTM systems, which are wholly-owned and manufactured by TCS. Custom Spaces includes metal-based and wood-based custom space products and in-home installation services. Our vision is to deepen our relationship with our customers, expand our reach and strengthen our capabilities, all while transforming lives through the power of organization.

The Container Store, Inc. consists of our retail stores, website and call center (which includes business sales), as well as our in-home services business. As of September 30, 2023, we operated 98 stores with an average size of approximately 24,000 square feet (18,000 selling square feet) in 34 states and the District of Columbia. The Container Store, Inc. also offers all of its products directly to its customers, through its website, responsive mobile site and app, call center, in-home design specialists and in-home design organizers. We operate the C Studio manufacturing facility in Elmhurst, Illinois, which designs and manufactures the Company’s premium wood-based custom space product offering, and is included in the TCS reportable segment.

Elfa: The Container Store, Inc.’s wholly-owned Swedish subsidiary, Elfa International AB (“Elfa”), designs and manufactures component-based shelving and drawer systems and made-to-measure sliding doors that are customizable for any area of the home. elfa® branded products are sold exclusively in the United States in The Container Store retail stores, website and call center, and Elfa sells to various retailers on a wholesale basis in approximately 30 countries around the world, with a concentration in the Nordic region of Europe.

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Seasonality

Our unique offering of organizing solutions, custom spaces, and in-home services makes us less susceptible to holiday season shopping patterns than many retailers. Our quarterly results fluctuate, depending upon a variety of factors, including our product offerings, promotional events, store openings, the weather, remodeling or relocations, shifts in the timing of holidays, timing of delivery of orders, competitive factors and general economic conditions, including economic downturns as a result of unforeseen events such as pandemics, inflation, and supply chain disruptions, among other things. Accordingly, our results of operations may fluctuate on a seasonal and quarterly basis, relative to corresponding periods in prior years. In addition, we may take certain pricing or marketing actions that could have a disproportionate effect on our business, financial condition and results of operations in a particular quarter or selling season.

2. Goodwill and trade names

The estimated goodwill and trade name fair values are computed using estimates as of the measurement date, which is defined as the first day of the fiscal fourth quarter or as of an interim assessment date. The Company makes estimates and assumptions about sales, gross margins, selling, general and administrative percentages and profit margins, based on budgets and forecasts, business plans, economic projections, anticipated future cash flows, and marketplace data. Assumptions are also made for varying perpetual growth rates for periods beyond the long-term business plan period and our estimated weighted average cost of capital. There are inherent uncertainties related to these factors and management’s judgment in applying these factors. Another estimate using different, but still reasonable, assumptions could produce different results.

Due to certain indicators identified during the second quarter of fiscal 2023, we completed an interim assessment of our goodwill balance as of September 30, 2023 in accordance with the Financial Accounting Standard Board Accounting Standards Codification (ASC) Topic 350, Intangibles – Goodwill and other, to identify if the fair value of the reporting unit’s goodwill was less than its carrying value. In connection with our interim assessment, we determined there was an impairment of goodwill in the TCS reporting unit and recorded a non-cash goodwill impairment charge of $23,447. The charges were primarily the result of continued macroeconomic impacts on our business which led to a decline in customer demand.

We also conducted an interim assessment of our trade name balances on September 30, 2023 in accordance with ASC 350 which did not result in an impairment.

    

Goodwill

    

Trade names

 

Balance at April 1, 2023

Gross balance

 

428,811

252,812

Accumulated impairment charges

 

(405,364)

(31,534)

Total, net

$

23,447

$

221,278

Foreign currency translation adjustments

(1,720)

Balance at September 30, 2023

Gross balance

 

428,811

251,092

Impairment charges

(23,447)

Accumulated impairment charges

 

(405,364)

(31,534)

Total, net

$

$

219,558

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3.  Detail of certain balance sheet accounts

September 30,

April 1,

October 1,

    

2023

    

2023

    

2022

Accounts receivable, net:

Trade receivables, net

$

15,350

$

18,269

$

18,191

Credit card receivables

 

7,670

 

6,165

 

8,779

Other receivables

 

1,837

 

1,436

 

1,654

$

24,857

$

25,870

$

28,624

Inventory:

Finished goods

$

163,024

$

160,108

$

181,422

Raw materials

 

9,213

 

9,289

 

8,175

Work in progress

 

1,201

 

1,240

 

545

$

173,438

$

170,637

$

190,142

Accrued liabilities:

Accrued payroll, benefits and bonuses

$

19,985

$

24,224

$

21,658

Unearned revenue

18,339

15,700

22,124

Accrued transaction and property tax

12,299

14,072

14,930

Gift cards and store credits outstanding

12,926

13,002

12,274

Accrued sales returns

2,655

3,366

3,985

Accrued interest

158

189

197

Other accrued liabilities

5,000

4,120

4,279

$

71,362

$

74,673

$

79,447

Contract balances as a result of transactions with customers primarily consist of trade receivables included in accounts receivable, net, unearned revenue, and gift cards and store credits outstanding included in accrued liabilities in the Company’s consolidated balance sheets. Unearned revenue was $15,700 as of April 1, 2023, and $13,795 was subsequently recognized into revenue for the twenty-six weeks ended September 30, 2023. Gift cards and store credits outstanding was $13,002 as of April 1, 2023, and $2,386 was subsequently recognized into revenue for the twenty-six weeks ended September 30, 2023. See Note 10 for disaggregated revenue disclosures.

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4. Leases

We conduct all of our U.S. operations from leased facilities that include our support center, distribution centers, manufacturing facilities, and 98 store locations. The support center, distribution centers, manufacturing facilities, and stores are leased under operating leases that generally expire over the next 1 to 15 years. We also lease computer hardware under operating leases that generally expire over the next few years. In most cases, management expects that in the normal course of business, leases will be renewed or replaced by other leases. The Company also has finance leases at our Elfa segment which are immaterial.

Lease expense on operating leases is recorded on a straight-line basis over the term of the lease, commencing on the date the Company takes possession of the leased property and is recorded in selling, general and administrative expenses (“SG&A”).

We consider lease payments that cannot be predicted with reasonable certainty upon lease commencement to be variable lease payments, which are recorded as incurred each period and are excluded from our calculation of lease liabilities. Our variable lease payments include lease payments that are based on a percentage of sales.

 

Upon lease commencement, we recognize the lease liability measured at the present value of the fixed future minimum lease payments. We have elected the practical expedient to not separate lease and non-lease components. Therefore, lease payments included in the measurement of the lease liability include all fixed payments in the lease arrangement. We record a right-of-use asset for an amount equal to the lease liability, increased for any prepaid lease costs and initial direct costs and reduced by any lease incentives. We remeasure the lease liability and right-of-use asset when a change to our future minimum lease payments occurs. Key assumptions and judgments included in the determination of the lease liability include the discount rate applied to present value of the future lease payments and the exercise of renewal options.

Many of our leases contain renewal options. The option periods are generally not included in the lease term used to measure our lease liabilities and right-of-use assets upon commencement as exercise of the options is not reasonably certain. We remeasure the lease liability and right-of-use asset when we are reasonably certain to exercise a renewal option.

Discount Rate

Our leases do not provide information about the rate implicit in the lease. Therefore, we utilize an incremental borrowing rate to calculate the present value of our future lease obligations. The incremental borrowing rate represents the rate of interest we would have to pay on a collateralized borrowing, for an amount equal to the lease payments, over a similar term and in a similar economic environment.

The components of lease costs for the thirteen and twenty-six weeks ended September 30, 2023 and October 1, 2022 were as follows:

Thirteen Weeks Ended

Twenty-Six Weeks Ended

September 30, 2023

October 1, 2022

September 30, 2023

October 1, 2022

Operating lease costs

$

23,529

$

22,678

$

46,813

$

45,182

Variable lease costs

 

208

 

379

 

371

 

749

Total lease costs

$

23,737

$

23,057

$

47,184

$

45,931

We do not have sublease income and do not recognize lease assets or liabilities for short-term leases, defined as operating leases with initial terms of less than 12 months. Our short-term lease costs were not material for the thirteen and twenty-six weeks ended September 30, 2023 and October 1, 2022.

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Weighted average remaining operating lease term and incremental borrowing rate as of September 30, 2023 and October 1, 2022 were as follows:

Twenty-Six Weeks Ended

September 30, 2023

October 1, 2022

Weighted average remaining lease term (years)

6.3

6.7

Weighted average incremental borrowing rate

10.1

%

10.7

%

As of September 30, 2023, future minimum lease payments under our operating lease liabilities were as follows:

    

Operating leases (1)

Within 1 year (remaining)

$

47,724

2 years

 

94,630

3 years

 

86,281

4 years

 

76,419

5 years

 

64,127

Thereafter

 

151,304

Total lease payments

$

520,485

Less amount representing interest

135,722

Total lease liability

$

384,763

Less current lease liability

61,533

Total noncurrent lease liability

$

323,230

(1) Operating lease payments exclude approximately $62,809 of legally binding minimum lease payments for eight leases signed but not yet commenced.

5. Net (loss) income per common share

Basic net (loss) income per common share is computed as net (loss) income divided by the weighted-average number of common shares for the period. Net (loss) income per common share - diluted is computed as net (loss) income divided by the weighted-average number of common shares for the period plus common stock equivalents consisting of shares subject to stock-based awards with exercise prices less than or equal to the average market price of the Company’s common stock for the period, to the extent their inclusion would be dilutive. Potentially dilutive securities are excluded from the computation of net (loss) income per common share - diluted if their effect is anti-dilutive.

The following is a reconciliation of net (loss) income and the number of shares used in the basic and diluted net (loss) income per common share calculations:

Thirteen Weeks Ended

Twenty-Six Weeks Ended

 

September 30,

October 1,

September 30,

October 1,

 

    

2023

    

2022

    

2023

    

2022

    

    

Numerator:

Net (loss) income

$

(23,653)

$

15,747

$

(35,490)

$

26,226

Denominator:

Weighted-average common shares — basic

 

49,461,590

 

50,000,945

 

49,357,218

 

49,860,252

Nonvested restricted stock awards and other dilutive securities

349,604

464,204

Weighted-average common shares — diluted

49,461,590

50,350,549

49,357,218

50,324,456

Net (loss) income per common share — basic