tcs-20240928

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


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

For the quarterly period ended September 28, 2024


o			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
Preferred Stock Purchase Rights	—	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 þ 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 þ 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 þ

The registrant had 3,451,250 shares of its common stock outstanding as of October 23, 2024.

Table of Contents

TABLE OF CONTENTS


PART I.	FINANCIAL INFORMATION

Item 1.	Financial statements

	Unaudited consolidated balance sheets as of September 28 , 2024, March 30, 2024, and September 30 , 2023	3

	Unaudited consolidated statements of operations for the thirteen and t wenty-six weeks ended September 2 8 , 2024 and September 30 , 2023	5

	Unaudited consolidated statements of comprehensive (loss) income for the thirteen and twenty -six weeks ended September 2 8 , 2024 and September 30 , 2023	6

	Unaudited consolidated statements of cash flows for the t wenty -six weeks ended September 2 8 , 2024 and September 30 , 2023	7

	Unaudited consolidated statements of shareholders’ equity for the thirteen and tw enty-six weeks ended Se ptember 2 8 , 2024 and September 30 , 2023	8

	Notes to the unaudited consolidated financial statements	9

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 and use of proceeds	41

Item 3.	Default upon senior securities	41

Item 4.	Mine safety disclosures	41

Item 5.	Other information	41

Item 6.	Exhibits	41

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial statements

The Container Store Group, Inc.

Consolidated balance sheets


(In thousands)	September 28, 2024		March 30, 2024		September 30, 2023
Assets	(unaudited)				(unaudited)
Current assets:
Cash	$	66,123	$	21,000	$	10,195
Accounts receivable, net	24,511		22,010		24,857
Inventory	152,600		158,434		173,438
Prepaid expenses	15,834		12,940		12,986
Income taxes receivable	5,291		5,118		1,091
Other current assets	8,791		11,046		9,189
Total current assets	273,150		230,548		231,756
Noncurrent assets:
Property and equipment, net	146,056		155,402		158,740
Noncurrent operating lease right-of-use assets	396,694		400,188		355,863

Trade names	147,683		146,449		219,558
Deferred financing costs, net	71		97		123
Noncurrent deferred tax assets, net	496		393		432
Other assets	5,054		3,288		3,037
Total noncurrent assets	696,054		705,817		737,753
Total assets	$	969,204	$	936,365	$	969,509

See accompanying notes.

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The Container Store Group, Inc.

Consolidated balance sheets (continued)


(In thousands, except share and per share amounts)	September 28, 2024		March 30, 2024		September 30, 2023
Liabilities and shareholders’ equity	(unaudited)				(unaudited)
Current liabilities:
Accounts payable	$	64,692	$	59,873	$	65,275
Accrued liabilities	79,667		70,076		71,362
Current borrowings on revolving lines of credit	—		—		2,820
Current portion of long-term debt	2,212		2,166		2,060
Current operating lease liabilities	64,465		60,692		61,533
Income taxes payable	617		280		912
Total current liabilities	211,653		193,087		203,962
Noncurrent liabilities:
Long-term debt	229,780		174,611		168,321
Noncurrent operating lease liabilities	372,122		378,524		323,230
Noncurrent deferred tax liabilities, net	15,955		24,185		43,790
Other long-term liabilities	6,862		6,267		5,793
Total noncurrent liabilities	624,719		583,587		541,134
Total liabilities	836,372		776,674		745,096
Commitments and contingencies (Note 6)
Shareholders’ equity:
Common stock, $0.01 par value, 250,000,000 shares authorized; 3,330,165 shares issued at September 28, 2024; 3,306,986 shares issued at March 30, 2024; 3,305,871 shares issued at September 30, 2023	33		33		33
Additional paid-in capital	874,874		874,390		873,612
Accumulated other comprehensive loss	(29,948)		(33,443)		(35,740)
Retained deficit	(712,127)		(681,289)		(613,492)
Total shareholders’ equity	132,832		159,691		224,413
Total liabilities and shareholders’ equity	$	969,204	$	936,365	$	969,509

See accompanying notes.

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The Container Store Group, Inc.

Consolidated statements of operations


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
(In thousands, except share and per share amounts) (unaudited)	September 28, 2024		September 30, 2023		September 28, 2024		September 30, 2023
Net sales	$	196,575	$	219,731	$	378,436	$	426,843
Cost of sales (excluding depreciation and amortization)	87,537		93,064		163,303		185,627
Gross profit	109,038		126,667		215,133		241,216
Selling, general, and administrative expenses (excluding depreciation and amortization)	105,214		109,270		210,564		220,650
Stock-based compensation	196		615		514		1,089
Pre-opening costs	867		549		1,614		734
Depreciation and amortization	10,346		10,383		21,219		20,895
Indefinite-lived asset impairment charges	—		23,447		—		23,447
Long-lived asset impairment charges	3,390		—		4,291		—
Other expenses	3,488		7		5,174		2,460
Loss (gain) on disposal of assets	—		220		(23)		221
Loss from operations	(14,463)		(17,824)		(28,220)		(28,280)
Interest expense, net	6,044		5,238		11,512		10,205
Loss before taxes	(20,507)		(23,062)		(39,732)		(38,485)
(Benefit) provision for income taxes	(4,401)		591		(8,894)		(2,995)
Net loss	$	(16,106)	$	(23,653)	$	(30,838)	$	(35,490)

Net loss per common share — basic and diluted	$	(4.85)	$	(7.17)	$	(9.30)	$	(10.79)


Weighted-average common shares — basic and diluted	3,322,940		3,297,237		3,316,881		3,290,279

See accompanying notes.

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The Container Store Group, Inc.

Consolidated statements of comprehensive (loss) income


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
(In thousands) (unaudited)	September 28, 2024		September 30, 2023		September 28, 2024		September 30, 2023
Net loss	$	(16,106)	$	(23,653)	$	(30,838)	$	(35,490)

Pension liability adjustment	(69)		15		(81)		74
Foreign currency translation adjustment	3,160		(1,642)		3,576		(3,305)
Comprehensive loss	$	(13,015)	$	(25,280)	$	(27,343)	$	(38,721)

See accompanying notes.

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The Container Store Group, Inc.

Consolidated statements of cash flows


	Twenty-Six Weeks Ended
(In thousands) (unaudited)	September 28, 2024		September 30, 2023
Operating activities
Net loss	$	(30,838)	$	(35,490)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	21,219		20,895
Stock-based compensation	514		1,089
Impairment charges	4,291		23,447
(Gain) loss on disposal of assets	(23)		221
Deferred tax benefit	(8,584)		(4,603)
Non-cash interest	942		942
Other	397		176
Changes in operating assets and liabilities:
Accounts receivable	(2,108)		(25)
Inventory	6,720		(3,827)
Prepaid expenses and other assets	(3,035)		2,539
Accounts payable and accrued liabilities	14,947		10,776
Net change in lease assets and liabilities	(21)		5,574
Income taxes	232		(684)
Other noncurrent liabilities	49		(339)
Net cash provided by operating activities	4,702		20,691

Investing activities
Additions to property and equipment	(15,270)		(22,037)
Investments in non-qualified plan trust	(36)		(177)
Proceeds from non-qualified plan trust redemptions	750		472
Proceeds from sale of property and equipment	52		1
Net cash used in investing activities	(14,504)		(21,741)

Financing activities
Borrowings on revolving lines of credit	—		27,177
Payments on revolving lines of credit	—		(26,649)
Borrowings on long-term debt	55,000		20,000
Payments on long-term debt	(591)		(16,032)

Payment of taxes with shares withheld upon restricted stock vesting	(30)		(140)

Net cash provided by financing activities	54,379		4,356

Effect of exchange rate changes on cash	546		(69)

Net increase in cash	45,123		3,237
Cash at beginning of fiscal period	21,000		6,958
Cash at end of fiscal period	$	66,123	$	10,195

Supplemental information:
Purchases of property and equipment (included in accounts payable)	$	1,833	$	3,014
Cash paid for amounts included in the measurement of operating lease liabilities	$	49,639	$	47,160
Additions to right-of-use assets in exchange for operating lease liabilities	$	27,324	$	36,066

See accompanying notes.

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The Container Store Group, Inc.

Consolidated statements of shareholders’ equity


(In thousands, except share amounts) (unaudited)		Common stock				Additional paid-in capital		Accumulated other comprehensive (loss) income		Retained deficit		Total shareholders’ equity
	Shares		Amount
Balance at March 30, 2024		3,306,986		$	33	$	874,390	$	(33,443)	$	(681,289)	$	159,691
Net loss		—		—		—		—		(14,732)		(14,732)
Stock-based compensation		—		—		318		—		—		318
Vesting of restricted stock awards		12,035		—		—		—		—		—
Taxes related to net share settlement of restricted stock awards		—		—		(40)		—		—		(40)
Foreign currency translation adjustment		—		—		—		416		—		416
Pension liability adjustment		—		—		—		(12)		—		(12)
Balance at June 29, 2024		3,319,021		$	33	$	874,668	$	(33,039)	$	(696,021)	$	145,641
Net loss		—		—		—		—		(16,106)		(16,106)
Stock-based compensation		—		—		196		—		—		196
Vesting of restricted stock awards		11,144		—		—		—		—		—
Taxes related to net share settlement of restricted stock awards				—		10		—		—		10
Foreign currency translation adjustment		—		—		—		3,160		—		3,160
Pension liability adjustment		—		—		—		(69)		—		(69)
Balance at September 28, 2024		3,330,165		$	33	$	874,874	$	(29,948)	$	(712,127)	$	132,832


(In thousands, except share amounts) (unaudited)		Common stock				Additional paid-in capital		Accumulated other comprehensive (loss) income		Retained deficit		Total shareholders’ equity
	Shares		Amount
Balance at April 1, 2023		3,278,569		$	33	$	872,663	$	(32,509)	$	(578,002)	$	262,185
Net loss		—		—		—		—		(11,837)		(11,837)
Stock-based compensation		—		—		474		—		—		474

Vesting of restricted stock awards		13,950		—		—		—		—		—
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		3,292,519		$

SEC Form 10-Q filed by Container Store