On this page of StockholderLetter.com we present the latest annual shareholder letter from Container Store Group, Inc. — ticker symbol TCS. Reading current and past TCS letters to shareholders can bring important insights into the investment thesis.
,~, lhe Container Store  
Annual Report 2023

Fellow Shareholders,
Last year, I shared with you how our teams continually
impressed me with their optimism and ability to flex despite
the challenging macroeconomic environment, and fiscal
2023 was no different. Once again, we asked for tremendous
support from each team member, and they continued
to impress. Together we made important progress on
positioning The Container Store for long-term success, while
navigating ongoing headwinds.
For fiscal 2023, we delivered sales of $847.SM and ended
the year with $6.9M in positive free cash flow.t Customers
continue to contend with macroeconomic pressures affecting
their consideration of spend in the home improvement and
organization categories, and challenges in our general
merchandise categories remain elevated. However, we
are being thoughtful and disciplined across all areas of the
business to position ourselves to capitalize on the significant
opportunities we expect during a more normalized backdrop.
We believe that there is a strong consumer need for The
Container Store and the comprehensive, solution-oriented
offering only we provide in the market. In a survey we
conducted earlier this year of 2,000 homeowners in the
United States, 40% shared that they are afraid of facing the
clutter in their home and more than 70% feel overwhelmed
when their homes are untidy. We are uniquely equipped with
the expertise, solutions and services to solve the challenges
these potential customers have across all areas of the home.
With this in mind, we made significant progress towards
helping our customers realize the many benefits of living an
organized life. Highlights from the 2023 fiscal year include:
Enhancing our Custom Spaces offering to give our
customers more solutions for their homes with
innovative additions like integrated European lighting,
new, on-trend finishes, and mesh door inserts to our
premium, wood-based Preston line and diversifying our
Elfa offering with Garage+.
Developing our in-home design service to make it
convenient for customers to transform their spaces with
more than 100 highly trained designers. These designers
are focused on selling premium spaces and drove 87% of
premium spaces sales for the year.
Delivering newness and innovation across our
assortment with the introduction of compelling new
brands and discovery categories like Cadence, which
offers original, magnetic travel capsules, Calpak,
which has brought modern luggage options to our
assortment, and Fortessa known for its innovative
break-resistant barware. These new brands and
categories have resonated well with customers and
complement our core offering so customers don't
have to go anywhere else to complete their spaces.
Strengthening our internal product sourcing and
development capabilities. This enhancement enables
us to create supply chain efficiencies and supports
the expansion of our Everything Organizer Collection,
which complements our Elfa Custom Spaces line.
Expanding our accessibility through the opening of
5 new small format stores including our 100th store
location in Princeton, New Jersey - a milestone for
our company.
The positive progress we made on deepening our
connection with our customers and expanding our reach
is demonstrated by strong net promoter scores across all
areas of the business including existing and new stores,
Custom Spaces, BOPIS and ecommerce. In addition, we
made impactful improvements to our online experience
and saw strength in our B2B business throughout the
fiscal year. While we have achieved significant progress in
our initiatives, we also gained valuable insights over the
past fiscal year that we have incorporated into our planning
for fiscal 2024.
As it relates to Custom Spaces, we expect fiscal 2024 to be
a big year for Elfa. Our marketing launch of the Garage+
by Elfa line kicked off in April and we are gearing up for our
Decor+ marketing launch in September. We firmly believe
the ways in which we are elevating our customer-favorite
Elfa offering further differentiate us from the competition.
Additionally, there is continued innovation and newness
coming to our premium Preston line and we are committed
to enabling our designers to drive meaningful improvement
in their conversion rates - an area where we see significant
opportunity and are making strides in being better
positioned for success.
Our general merchandise business saw a greater impact
from the macro environment and changes in customer
spending behavior throughout fiscal 2023 compared to
Custom Spaces. Our goal is to stabilize performance
in this area of the business in fiscal 2024. The Container
   Free cash flow is a non-GAAP financial measure. See a reconciliation of free cash flow to the most directly comparable GAAP measure on page 48 of the Annual Report on
Form 10-K herein.
Store has always stood for the best selection and quality
and that will not change, but we also recognize the need
to have various price points across our core storage and
organization assortment. To deliver this, we plan to expand
our private label offering and more closely collaborate with
our vendor partners on pricing. By leveraging our newer
product innovation and sourcing capabilities, we believe
we are better positioned to effectively compete without
compromising our reputation that is synonymous with
quality and continue to provide complementary solutions
that complete our Custom Spaces offering.
As the Board of Directors conducts this process, we
remain committed to delivering on our long-term
objectives of driving growth in custom spaces to
better capitalize on the $6 billion custom spaces total
addressable market, as well as stabilizing our general
merchandise business. We believe we can grow Custom
Spaces from 40% of sales to 60% of sales over time
through expanding our assortment, continuing to build and
strengthen our in-home and in-store design services, and
increasing the focus of our marketing efforts to drive brand
awareness for our solution-oriented offering.
Connecting Custom Spaces and general merchandise
leads me to our marketing plans. We have tremendous
untapped potential on the brand awareness front,
specifically as it relates to our Custom Spaces capabilities.
Building this awareness is an important area offocus for us
this year, and our teams have already put significant effort
into pursuing this objective. To name a few, we launched a
full-funnel marketing campaign in May in five key markets
connecting custom spaces and general merchandise,
installed permanent Elfa fixtures at the front of our stores
that will be refreshed throughout the year, have executed
and planned for "buzzworthy" partnerships to support
key initiatives, like our Jason and Kylie Kelce Garage+
transformation, and reintroduced our Brand Ambassador
program, significantly scaling the number of microinfluencers sharing about our brand online. Together, I am
confident these efforts and others will keep The Container
Store top of mind and drive awareness of our full, solutionoriented offering.
In summary, as we navigate the current environment with
discipline, we remain laser focused on the long-term
opportunity for our business and brand. We intend to
continue executing and investing in the key initiatives
that will best position us to capitalize on this long-term
opportunity, while maintaining strong expense and capital
discipline. I am encouraged by the progress we have made
in fiscal 2023 and excited by what is to come. Thank you
for supporting and being engaged with what we are doing
at The Container Store, we look forward to keeping you
updated on our progress.
Regarding store growth, we remain on target with
our previously shared plans for fiscal 2024. We have
successfully opened two new stores in Virginia, relocated
our San Francisco location and closed one Los Angeles
location due to a significant rent increase and low
productivity. Finally, we plan to open two locations in Florida
in 03. Our new stores are built to suit, with design and
construction meeting our specifications before we take
possession, and therefore requiring less capital spend.
We believe that the long-term market share potential within
the over $20 billion home storage and organization
category remains as compelling as when we first outlined
our growth objectives two years ago. The Company's
Board of Directors along with the management team do not
believe the Company's current market value is reflective
of its intrinsic value and are committed to acting in the
best interests of the Company and its stakeholders. As
announced with our fiscal 2023 full year results, the Board
of Directors, as part of its commitment to maximizing value
for our stakeholders, has initiated a formal review process to
evaluate strategic alternatives for the Company.

Satish Malhotra
CEO and President of The Container Store

 • shareholder letter icon 7/9/2024 Letter Continued (Full PDF)
 • stockholder letter icon 7/11/2023 TCS Stockholder Letter
 • stockholder letter icon More "Home Furnishing Stores" Category Stockholder Letters
 • Benford's Law Stocks icon TCS Benford's Law Stock Score = 69


TCS Shareholder/Stockholder Letter Transcript:

,~, lhe Container Store  
Annual Report 2023


Fellow Shareholders,
Last year, I shared with you how our teams continually
impressed me with their optimism and ability to flex despite
the challenging macroeconomic environment, and fiscal
2023 was no different. Once again, we asked for tremendous
support from each team member, and they continued
to impress. Together we made important progress on
positioning The Container Store for long-term success, while
navigating ongoing headwinds.
For fiscal 2023, we delivered sales of $847.SM and ended
the year with $6.9M in positive free cash flow.t Customers
continue to contend with macroeconomic pressures affecting
their consideration of spend in the home improvement and
organization categories, and challenges in our general
merchandise categories remain elevated. However, we
are being thoughtful and disciplined across all areas of the
business to position ourselves to capitalize on the significant
opportunities we expect during a more normalized backdrop.
We believe that there is a strong consumer need for The
Container Store and the comprehensive, solution-oriented
offering only we provide in the market. In a survey we
conducted earlier this year of 2,000 homeowners in the
United States, 40% shared that they are afraid of facing the
clutter in their home and more than 70% feel overwhelmed
when their homes are untidy. We are uniquely equipped with
the expertise, solutions and services to solve the challenges
these potential customers have across all areas of the home.
With this in mind, we made significant progress towards
helping our customers realize the many benefits of living an
organized life. Highlights from the 2023 fiscal year include:
Enhancing our Custom Spaces offering to give our
customers more solutions for their homes with
innovative additions like integrated European lighting,
new, on-trend finishes, and mesh door inserts to our
premium, wood-based Preston line and diversifying our
Elfa offering with Garage+.
Developing our in-home design service to make it
convenient for customers to transform their spaces with
more than 100 highly trained designers. These designers
are focused on selling premium spaces and drove 87% of
premium spaces sales for the year.
Delivering newness and innovation across our
assortment with the introduction of compelling new
brands and discovery categories like Cadence, which
offers original, magnetic travel capsules, Calpak,
which has brought modern luggage options to our
assortment, and Fortessa known for its innovative
break-resistant barware. These new brands and
categories have resonated well with customers and
complement our core offering so customers don't
have to go anywhere else to complete their spaces.
Strengthening our internal product sourcing and
development capabilities. This enhancement enables
us to create supply chain efficiencies and supports
the expansion of our Everything Organizer Collection,
which complements our Elfa Custom Spaces line.
Expanding our accessibility through the opening of
5 new small format stores including our 100th store
location in Princeton, New Jersey - a milestone for
our company.
The positive progress we made on deepening our
connection with our customers and expanding our reach
is demonstrated by strong net promoter scores across all
areas of the business including existing and new stores,
Custom Spaces, BOPIS and ecommerce. In addition, we
made impactful improvements to our online experience
and saw strength in our B2B business throughout the
fiscal year. While we have achieved significant progress in
our initiatives, we also gained valuable insights over the
past fiscal year that we have incorporated into our planning
for fiscal 2024.
As it relates to Custom Spaces, we expect fiscal 2024 to be
a big year for Elfa. Our marketing launch of the Garage+
by Elfa line kicked off in April and we are gearing up for our
Decor+ marketing launch in September. We firmly believe
the ways in which we are elevating our customer-favorite
Elfa offering further differentiate us from the competition.
Additionally, there is continued innovation and newness
coming to our premium Preston line and we are committed
to enabling our designers to drive meaningful improvement
in their conversion rates - an area where we see significant
opportunity and are making strides in being better
positioned for success.
Our general merchandise business saw a greater impact
from the macro environment and changes in customer
spending behavior throughout fiscal 2023 compared to
Custom Spaces. Our goal is to stabilize performance
in this area of the business in fiscal 2024. The Container
   Free cash flow is a non-GAAP financial measure. See a reconciliation of free cash flow to the most directly comparable GAAP measure on page 48 of the Annual Report on
Form 10-K herein.

Store has always stood for the best selection and quality
and that will not change, but we also recognize the need
to have various price points across our core storage and
organization assortment. To deliver this, we plan to expand
our private label offering and more closely collaborate with
our vendor partners on pricing. By leveraging our newer
product innovation and sourcing capabilities, we believe
we are better positioned to effectively compete without
compromising our reputation that is synonymous with
quality and continue to provide complementary solutions
that complete our Custom Spaces offering.
As the Board of Directors conducts this process, we
remain committed to delivering on our long-term
objectives of driving growth in custom spaces to
better capitalize on the $6 billion custom spaces total
addressable market, as well as stabilizing our general
merchandise business. We believe we can grow Custom
Spaces from 40% of sales to 60% of sales over time
through expanding our assortment, continuing to build and
strengthen our in-home and in-store design services, and
increasing the focus of our marketing efforts to drive brand
awareness for our solution-oriented offering.
Connecting Custom Spaces and general merchandise
leads me to our marketing plans. We have tremendous
untapped potential on the brand awareness front,
specifically as it relates to our Custom Spaces capabilities.
Building this awareness is an important area offocus for us
this year, and our teams have already put significant effort
into pursuing this objective. To name a few, we launched a
full-funnel marketing campaign in May in five key markets
connecting custom spaces and general merchandise,
installed permanent Elfa fixtures at the front of our stores
that will be refreshed throughout the year, have executed
and planned for "buzzworthy" partnerships to support
key initiatives, like our Jason and Kylie Kelce Garage+
transformation, and reintroduced our Brand Ambassador
program, significantly scaling the number of microinfluencers sharing about our brand online. Together, I am
confident these efforts and others will keep The Container
Store top of mind and drive awareness of our full, solutionoriented offering.
In summary, as we navigate the current environment with
discipline, we remain laser focused on the long-term
opportunity for our business and brand. We intend to
continue executing and investing in the key initiatives
that will best position us to capitalize on this long-term
opportunity, while maintaining strong expense and capital
discipline. I am encouraged by the progress we have made
in fiscal 2023 and excited by what is to come. Thank you
for supporting and being engaged with what we are doing
at The Container Store, we look forward to keeping you
updated on our progress.
Regarding store growth, we remain on target with
our previously shared plans for fiscal 2024. We have
successfully opened two new stores in Virginia, relocated
our San Francisco location and closed one Los Angeles
location due to a significant rent increase and low
productivity. Finally, we plan to open two locations in Florida
in 03. Our new stores are built to suit, with design and
construction meeting our specifications before we take
possession, and therefore requiring less capital spend.
We believe that the long-term market share potential within
the over $20 billion home storage and organization
category remains as compelling as when we first outlined
our growth objectives two years ago. The Company's
Board of Directors along with the management team do not
believe the Company's current market value is reflective
of its intrinsic value and are committed to acting in the
best interests of the Company and its stakeholders. As
announced with our fiscal 2023 full year results, the Board
of Directors, as part of its commitment to maximizing value
for our stakeholders, has initiated a formal review process to
evaluate strategic alternatives for the Company.

Satish Malhotra
CEO and President of The Container Store




shareholder letter icon 7/9/2024 Letter Continued (Full PDF)
 

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