tcs-20240629

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 June 29, 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

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 51,580,839 shares of its common stock outstanding as of July 31, 2024.


PART I.	FINANCIAL INFORMATION

Item 1.	Financial statements

	Unaudited consolidated balance sheets as of June 29, 2024 , March 30 , 202 4 , and July 1, 2023	3

	Unaudited consolidated statements of operations for the thirteen wee ks ended June 29, 2024 and July 1, 2023	5

	Unaudited consolidated statements of comprehensive (loss) income for the thirteen weeks ended June 29, 2024 and July 1, 2023	6

	Unaudited consolidated statements of cash flows for the thirt een weeks ended June 29, 2024 and July 1, 2023	7

	Unaudited consolidated statements of shareholders’ equity for the thirteen weeks ended June 29, 2024 and July 1, 2023	8

	Notes to the unaudited consolidated financial statements	9

Item 2.	Management’s discussion and analysis of financial condition and results of operations	18

Item 3.	Quantitative and qualitative disclosures about market risk	30

Item 4.	Controls and procedures	30

PART II.	OTHER INFORMATION

Item 1.	Legal proceedings	31

Item 1A.	Risk factors	31

Item 2.	Unregistered sales of equity securities and use of proceeds	31

Item 3.	Default upon senior securities	31

Item 4.	Mine safety disclosures	31

Item 5.	Other information	31

Item 6.	Exhibits	32


(In thousands)	June 29, 2024		March 30, 2024		July 1, 2023
Assets	(unaudited)				(unaudited)
Current assets:
Cash	$	44,088	$	21,000	$	12,155
Accounts receivable, net	22,609		22,010		21,870
Inventory	157,758		158,434		170,512
Prepaid expenses	14,001		12,940		14,624
Income taxes receivable	4,571		5,118		964
Other current assets	8,870		11,046		9,985
Total current assets	251,897		230,548		230,110
Noncurrent assets:
Property and equipment, net	152,791		155,402		157,747
Noncurrent operating lease right-of-use assets	401,927		400,188		353,402
Goodwill	—		—		23,447
Trade names	146,632		146,449		219,894
Deferred financing costs, net	84		97		137
Noncurrent deferred tax assets, net	485		393		517
Other assets	4,853		3,288		2,702
Total noncurrent assets	706,772		705,817		757,846
Total assets	$	958,669	$	936,365	$	987,956


(In thousands, except share and per share amounts)	June 29, 2024		March 30, 2024		July 1, 2023
Liabilities and shareholders’ equity	(unaudited)				(unaudited)
Current liabilities:
Accounts payable	$	60,815	$	59,873	$	53,305
Accrued liabilities	66,970		70,076		68,218

Current portion of long-term debt	2,181		2,166		2,055
Current operating lease liabilities	62,045		60,692		59,996
Income taxes payable	261		280		670
Total current liabilities	192,272		193,087		184,244
Noncurrent liabilities:
Long-term debt	214,553		174,611		183,333
Noncurrent operating lease liabilities	379,472		378,524		320,845
Noncurrent deferred tax liabilities, net	20,146		24,185		45,062
Other long-term liabilities	6,585		6,267		5,394
Total noncurrent liabilities	620,756		583,587		554,634
Total liabilities	813,028		776,674		738,878
Commitments and contingencies (Note 6)
Shareholders’ equity:
Common stock, $0.01 par value, 250,000,000 shares authorized; 49,788,349 shares issued at June 29, 2024; 49,607,811 shares issued at March 30, 2024; 49,390,882 shares issued at July 1, 2023	498		496		494
Additional paid-in capital	874,203		873,927		872,536
Accumulated other comprehensive loss	(33,039)		(33,443)		(34,113)
Retained deficit	(696,021)		(681,289)		(589,839)
Total shareholders’ equity	145,641		159,691		249,078
Total liabilities and shareholders’ equity	$	958,669	$	936,365	$	987,956


	Thirteen Weeks Ended
(In thousands, except share and per share amounts) (unaudited)	June 29, 2024		July 1, 2023
Net sales	$	181,861	$	207,112
Cost of sales (excluding depreciation and amortization)	75,766		92,563
Gross profit	106,095		114,549
Selling, general, and administrative expenses (excluding depreciation and amortization)	105,350		111,380

Stock-based compensation	318		474
Pre-opening costs	747		185
Depreciation and amortization	10,873		10,512
Long-lived asset impairment charges	901		—
Other expenses	1,686		2,453
(Gain) loss on disposal of assets	(23)		1
Loss from operations	(13,757)		(10,456)
Interest expense, net	5,468		4,967
Loss before taxes	(19,225)		(15,423)
Benefit for income taxes	(4,493)		(3,586)
Net loss	$	(14,732)	$	(11,837)

Net loss per common share — basic and diluted	$	(0.30)	$	(0.24)


Weighted-average common shares — basic and diluted	49,665,345		49,252,869


	Thirteen Weeks Ended
(In thousands) (unaudited)	June 29, 2024		July 1, 2023
Net loss	$	(14,732)	$	(11,837)

Pension liability adjustment	(12)		59
Foreign currency translation adjustment	416		(1,663)
Comprehensive loss	$	(14,328)	$	(13,441)


(In thousands, except share amounts) (unaudited)		Common stock				Additional paid-in capital		Accumulated other comprehensive loss		Retained deficit		Total shareholders’ equity
	Shares		Amount
Balance at March 30, 2024		49,607,811		$	496	$	873,927	$	(33,443)	$	(681,289)	$	159,691
Net loss		—		—		—		—		(14,732)		(14,732)
Stock-based compensation		—		—		318		—		—		318
Vesting of restricted stock awards		180,538		2		(2)		—		—		—
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		49,788,349		$	498	$	874,203	$	(33,039)	$	(696,021)	$	145,641


	Thirteen Weeks Ended
	June 29, 2024		July 1, 2023
Numerator:
Net loss	$	(14,732)	$	(11,837)

Denominator:


Weighted-average common shares — basic and diluted	49,665,345		49,252,869

Net loss per common share — basic and diluted	$	(0.30)	$	(0.24)


Antidilutive securities not included:
Stock options outstanding	382,082		1,711,246
Nonvested restricted stock awards	495,457		613,394


	Pension liability adjustment		Foreign currency translation		Total
Balance at March 30, 2024	$	(1,143)	$	(32,300)	$	(33,443)

Other comprehensive (loss) income before reclassifications, net of tax	(12)		416		404
Amounts reclassified to earnings, net of tax	—		—		—
Net current period other comprehensive (loss) income	(12)		416		404

Balance at June 29, 2024	$	(1,155)	$	(31,884)	$	(33,039)


Description	Balance Sheet Location	June 29, 2024		March 30, 2024		July 1, 2023
Assets
Nonqualified retirement plan	Other current assets	$	3,887	$	4,125	$	4,012
Total assets		$	3,887	$	4,125	$	4,012


Thirteen Weeks Ended June 29, 2024	TCS		Elfa		Eliminations		Total
Net sales to third parties	$	171,512	$	10,349	$	—	$	181,861
Intersegment sales	—		9,549		(9,549)		—
Adjusted EBITDA	1,164		1,189		(635)		1,718
Interest expense (income), net	5,564		(96)		—		5,468
Assets(1)	882,524		84,897		(8,752)		958,669


	June 29, 2024		March 30, 2024		July 1, 2023
Accounts receivable, net:
Trade receivables, net	$	12,153	$	13,943	$	12,727
Credit card receivables	7,166		4,859		7,351
Other receivables	3,290		3,208		1,792
	$	22,609	$	22,010	$	21,870
Inventory:
Finished goods	$	150,030	$	150,493	$	160,198
Raw materials	6,728		6,869		9,024
Work in progress	1,000		1,072		1,290
	$	157,758	$	158,434	$	170,512
Accrued liabilities:
Accrued payroll, benefits and bonuses	$	15,744	$	20,590	$	18,907
Unearned revenue	16,634		14,385		17,036
Accrued transaction and property tax	11,512		12,272		11,789
Gift cards and store credits outstanding	13,473		13,365		12,978
Accrued sales returns	2,328		1,974		2,999
Accrued interest	167		215		245
Other accrued liabilities	7,112		7,275		4,264
	$	66,970	$	70,076	$	68,218


	June 29, 2024		March 30, 2024		July 1, 2023
Senior secured term loan facility	$	112,368	$	132,435	$	152,625
Revolving credit facility	56,000		16,000		25,000

Obligations under finance leases	634		634		117
Total fair value of debt	$	169,002	$	149,069	$	177,742


Thirteen Weeks Ended July 01, 2023	TCS		Elfa		Eliminations		Total
Net sales to third parties	$	195,127	$	11,985	$	—	$	207,112
Intersegment sales	—		12,552		(12,552)		—
Adjusted EBITDA	774		1,953		192		2,919
Interest expense, net	4,885		82		—		4,967
Assets(1)	899,462		96,987		(8,493)		987,956

SEC Form 10-Q filed by Container Store