UsetheselinkstorapidlyreviewthedocumentTABLEOFCONTENTSFINANCIALSTATEMENTS

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UNITEDSTATESSECURITIESANDEXCHANGECOMMISSION

Washington,D.C.20549

Form10-K

CommissionFileNumber001-36161

THECONTAINERSTOREGROUP,INC.(Exactnameofregistrantasspecifiedinitscharter)

Delaware(Stateorotherjurisdictionofincorporationororganization)

26-0565401(IRSEmployerIdentificationNo.)

500FreeportParkwayCoppell,TX(Addressesofprincipalexecutive

offices)

75019(ZipCodes)

Registrant'stelephonenumberintheUnitedStates,includingareacode,is:(972)538-6000

SecuritiesregisteredpursuanttoSection12(b)oftheAct:

Titleofeachclass NameofeachexchangeonwhichregisteredCommonStock,parvalue$.01per

share NewYorkStockExchange

SecuritiesregisteredpursuanttoSection12(g)oftheAct:None

Indicatebycheckmarkiftheregistrantisawell-knownseasonedissuer,asdefinedinRule405oftheSecuritiesAct.YESoNOý

IndicatebycheckmarkiftheregistrantisnotrequiredtofilereportspursuanttoSection13orSection15(d)oftheAct.YESoNOý

Indicatebycheckmarkwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof1934duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports),and(2)hasbeensubjecttosuchfilingrequirementsforthepast90days.YESýNOo

IndicatebycheckmarkwhethertheregistranthassubmittedelectronicallyandpostedonitscorporateWebsite,ifany,everyInteractiveDataFilerequiredtobesubmittedandpostedpursuanttoRule405ofRegulationS-Tduringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtosubmitandpostsuchfiles.)YESýNOo

IndicatebycheckmarkifdisclosureofdelinquentfilerspursuanttoItem405ofRegulationS-Kisnotcontainedherein,andwillnotbecontained,tothebestoftheregistrant'sknowledge,indefinitiveproxyorinformationstatementsincorporatedbyreferenceinPartIIIofthisForm10-KoranyamendmenttothisForm10-K.o

(MarkOne)

ý ANNUALREPORTPURSUANTTOSECTION13OR15(d)OFTHESECURITIESEXCHANGEACTOF1934

ForthefiscalyearendedApril1,2017

OR

o TRANSITIONREPORTPURSUANTTOSECTION13OR15(d)OFTHESECURITIESEXCHANGEACTOF1934

Forthetransitionperiodfromto

Indicatebycheckmarkwhethertheregistrantisalargeacceleratedfiler,anacceleratedfiler,anon-acceleratedfiler,smallerreportingcompany,oranemerginggrowthcompany.Seethedefinitionsof"largeacceleratedfiler,""acceleratedfiler,""smallerreportingcompany,"and"emerginggrowthcompany"inRule12b-2oftheExchangeAct.

Ifanemerginggrowthcompany,indicatebycheckmarkiftheregistranthaselectednottousetheextendedtransitionperiodforcomplyingwithanyneworrevisedfinancialaccountingstandardsprovidedpursuanttoSection13(a)oftheExchangeAct.ý

Indicatebycheckmarkwhethertheregistrantisashellcompany(asdefinedinRule12b-2oftheAct).YESoNOý

AsofSeptember30,2016,thelastbusinessdayoftheregistrant'smostrecentlycompletedsecondquarter,theapproximatemarketvalueoftheregistrant'scommonstockheldbynon-affiliateswas$85,983,122.Solelyforpurposesofthisdisclosure,sharesofcommonstockheldbyexecutiveofficersanddirectorsoftheregistrantasofsuchdatehavebeenexcludedbecausesuchpersonsmaybedeemedtobeaffiliates.

AsofMay16,2017,thenumberofsharesofcommonstockoutstandingwas48,291,648.

DOCUMENTSINCORPORATEDBYREFERENCE

Portionsoftheregistrant'sdefinitiveProxyStatementforits2017AnnualMeetingofStockholdersareincorporatedbyreferenceintoPartIIIofthisAnnualReportonForm10-K.

Largeacceleratedfilero Acceleratedfilerý Non-acceleratedfilero(Donotcheckifa

smallerreportingcompany)

SmallerreportingcompanyoEmerginggrowthcompanyý

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PARTI. Item1. Business 5Item1A. RiskFactors 12Item1B. UnresolvedStaffComments 31Item2. Properties 32Item3. LegalProceedings 32Item4. MineSafetyDisclosures 32PARTII. Item5. MarketforRegistrant'sCommonEquity,RelatedStockholderMattersandIssuerPurchasesofEquity

Securities 34

Item6. SelectedFinancialandOperatingData 35Item7. Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperations 43Item7A. QuantitativeandQualitativeDisclosuresAboutMarketRisk 65Item8. FinancialStatementsandSupplementaryData 66Item9. ChangesandDisagreementsWithAccountantsonAccountingandFinancialDisclosures 116Item9A. ControlsandProcedures 116Item9B. OtherInformation 116PARTIII. Item10. Directors,ExecutiveOfficersandCorporateGovernance 117Item11. ExecutiveCompensation 117Item12. SecurityOwnershipofCertainBeneficialOwnersandManagementandRelatedStockholderMatters 117Item13. CertainRelationshipsandRelatedTransactions,andDirectorIndependence 117Item14. PrincipalAccountingFeesandServices 117PARTIV. Item15. Exhibits,FinancialStatementSchedules 118Item16. Form10-KSummary 122

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Cautionarynoteregardingforward-lookingstatements

ThisAnnualReportonForm10-Kcontainsstatementsthatconstituteforward-lookingstatementswithinthemeaningofthePrivateSecuritiesLitigationReformActof1995.Thesestatementsinvolveknownandunknownrisks,uncertaintiesandotherimportantfactorsthatmaycauseouractualresults,performanceorachievementstobemateriallydifferentfromanyfutureresults,performanceorachievementsexpressedorimpliedbytheforward-lookingstatements.

Insomecases,youcanidentifyforward-lookingstatementsbytermssuchas"may,""will,""should,""expects,""plans,""anticipates,""could,""intends,""target,""projects,""contemplates,""believes,""estimates,""predicts,""potential"or"continue"orthenegativeofthesetermsorothersimilarexpressions.Theforward-lookingstatementsinthisreportinclude,butarenotlimitedto,statementsrelatedto:anticipatedeffectsofthechangeinourfiscalyearend,anticipatedfinancialperformance,thesufficiencyofourcashgeneratedfromoperationsandborrowingsunderourcreditfacilities,abilitytoincreaseourmarketshare,expectationswithrespecttonewstoreopeningsandrelocations,expectationsregardingkeygrowthinitiatives,expectationsregardingimpactofmarketingandexpensesavingsprograms,includingwithoutlimitationourOptimizationPlan,andourabilitytoattractnewcustomersandincreasebrandloyalty.Theseforward-lookingstatementsareonlypredictions.Wehavebasedtheseforward-lookingstatementslargelyonourcurrentexpectationsandprojectionsaboutfutureeventsandfinancialtrendsthatwebelievemayaffectourbusiness,financialconditionandresultsofoperations.

Theseforward-lookingstatementsspeakonlyasofthedateofthisreportandaresubjecttoanumberofrisks,uncertaintiesandassumptions,includingtheimportantfactorsdescribedinthe"RiskFactors"sectionofthisAnnualReportonForm10-K.Becauseforward-lookingstatementsareinherentlysubjecttorisksanduncertainties,someofwhichcannotbepredictedorquantified,youshouldnotrelyontheseforward-lookingstatementsasaccuratepredictionsoffutureevents.Theeventsandcircumstancesreflectedinourforward-lookingstatementsmaynotbeachievedoroccurandactualresultscoulddiffermateriallyfromthoseprojectedintheforward-lookingstatements.Exceptasrequiredbyapplicablelaw,wedonotplantopubliclyupdateorreviseanyforward-lookingstatementscontainedhereinafterthedateofthisreport,whetherasaresultofanynewinformation,futureeventsorotherwise.

Unlessthecontextotherwiserequires,referencesinthisAnnualReportonForm10-Ktothe"Company,""we,""us,"and"our"refertoTheContainerStoreGroup,Inc.and,whereappropriate,itssubsidiaries.

Thefollowingdiscussioncontainsreferencestofiscal2016,fiscal2015,fiscal2014,andfiscal2013,whichrepresentourfiscalyearsendingApril1,2017,February27,2016,February28,2015,andMarch1,2014,respectively.

ChangeinFiscalYear

OnMarch30,2016,theBoardofDirectorsoftheCompanyapprovedachangeintheCompany'sfiscalyearendfromthe52-or53-weekperiodendingontheSaturdayclosesttoFebruary28tothe52-or53-weekperiodendingontheSaturdayclosesttoMarch31.ThefiscalyearchangewaseffectivebeginningwiththeCompany's2016fiscalyear,whichbeganonApril3,2016andendedonApril1,2017.Asaresultofthechange,theCompanyhadaMarch2016fiscalmonthtransitionperiodwhichbeganonFebruary28,2016andendedonApril2,2016.TheunauditedresultsofthetransitionperiodwerereportedintheCompany'sForm10-QfiledforthenewfiscalfirstquarterendedJuly2,2016andtheauditedresultsarepresentedherein.BecausethefiscalyearchangewasnoteffectiveuntilafterthecompletionoftheCompany'sFebruary27,2016fiscalyear,theprioryearcomparativefinancialandotherinformationreportedintheFinancialStatementshereincontinuestobepresentedbasedontheCompany'spriorFebruary28fiscalyearendcalendar.However,forcomparativeanalysispurposes,the

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Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperations("MD&A")presentedhereincomparestheauditedresultsforthe52-weekperiodendedApril1,2017("fiscal2016")totheunauditedresultsforthe52-weekperiodendedApril2,2016("recastfiscal2015").TheSelectedFinancialandOperatingDatapresentedhereinincludestheunauditedresultsforrecastfiscal2015inadditiontoprioryearauditedresultsbasedontheFebruary28fiscalyearendcalendar.

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PARTI

ITEM1.BUSINESS

General

TheContainerStore®istheoriginalandleadingspecialtyretailerofstorageandorganizationproductsandsolutionsintheUnitedStatesandtheonlynationalretailersolelydevotedtothecategory.Weprovideacollectionofcreative,multifunctionalandcustomizablestorageandorganizationsolutionsthataresoldinourstoresandonlinethroughahigh-service,differentiatedshoppingexperience.Ourvisionistobeabelovedbrandandthefirstchoiceforpersonalizedorganizationsolutionsandservices.Ourcustomersarepredominantlyfemale,highlyeducatedandverybusy—fromcollegestudentstoemptynesters.Weservicethemwithstorageandorganizationsolutionsthatsavethemspaceandtimeandultimatelyimprovethequalityoftheirlives.Webelieveanorganizedlifeisahappylife.

Wewerefoundedin1978inDallas,TexasasTheContainerStore,Inc.In2007,TheContainerStore,Inc.wassoldtoTheContainerStoreGroup,Inc.InNovember2013,wecompletedtheinitialpublicofferingofourcommonstock(the"IPO").OurcommonstocknowtradesontheNewYorkStockExchange("NYSE")underthesymbol"TCS."Infiscal2016,wegeneratednetsalesof$819.9million.Todayouroperationsconsistoftwooperatingsegments:

• The Container Store ("TCS") , whichconsistsofourretailstores,websiteandcallcenter,aswellasourinstallationandorganizationalservicesbusiness.Weoperate86storeswithanaveragesizeofapproximately25,000squarefeet(19,000sellingsquarefeet)in31statesandtheDistrictofColumbia.Ourstorespresentourproductsinauniqueandengagingatmosphere.Ourvisualmerchandisingteamworkstoensurethatallofourmerchandiseisappropriatelyshowcasedtohighlightthevalueandfunctionalityofourproductsandmaximizetheappealofourimageandbrand.Wemaintainarelativelyconsistentstorelayoutwhichcreatesafamiliarshoppingexperienceacrossourstorebase.Ourstoresarecleanandspaciouswithstrict,orderlymerchandisingandstrategicproductplacementstooptimizeoursellingspaceandincreaseproductivity.Weallowourcustomerstoshopwithusinavarietyofways—anywhere,anytime,anywayshewantsthroughamulti-channelshoppingexperience.Ourstoresreceivesubstantiallyallofourproductsdirectlyfromourdistributioncenterco-locatedwithourcorporateheadquartersandcallcenterinCoppell,Texas.Infiscal2016,TCShadnetsalesof$752.7million,whichrepresentedapproximately92%ofourtotalnetsales.

• Elfa, TheContainerStore,Inc.'swhollyownedSwedishsubsidiary,ElfaInternationalAB("Elfa"),whichdesignsandmanufacturescomponent-basedshelvinganddrawersystemsandmade-to-measureslidingdoors.Elfawasfoundedin1948andisheadquarteredinMalmö,Sweden.Elfa'sshelvinganddrawersystemsarecustomizableforanyareaofthehome,includingclosets,kitchens,officesandgarages.ElfaoperatesfourmanufacturingfacilitieswithtwolocatedinSweden,oneinFinlandandoneinPoland.TheContainerStorebegansellingelfa®productsin1978andacquiredElfain1999.TodayourTCSsegmentistheexclusivedistributorofelfa®productsintheU.S.andrepresentedapproximately42%ofElfa'stotalsalesinfiscal2016.Elfaalsosellsitsproductsonawholesalebasistovariousretailersinapproximately30countriesaroundtheworld,withaconcentrationintheNordicregionofEurope.Infiscal2016,theElfasegmenthad$67.3millionofthirdpartynetsales,whichrepresentedapproximately8%ofourtotalnetsales.

Forinformationonkeyfinancialhighlightsandsegmentfinancialinformation,seeItem6,SelectedFinancialandOperatingData,Item7,Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperations,andItem8,FinancialStatementsandSupplementalDataandNote14

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thereto.Forfinancialinformationbygeographicarea,seeNote14toourauditedconsolidatedfinancialstatements.

OnMarch30,2016,theBoardofDirectorsoftheCompanyapprovedachangeintheCompany'sfiscalyearendfromtheSaturdayclosesttoFebruary28totheSaturdayclosesttoMarch31ofeachyear.ThefiscalyearchangebecameeffectivebeginningwiththeCompany's2016fiscalyear,whichbeganonApril3,2016andendedonApril1,2017.Asaresultofthechange,theCompanyhadaMarch2016fiscalmonthtransitionperiodfromFebruary28,2016toApril2,2016.TheunauditedresultsofthetransitionperiodwerereportedintheCompany'sForm10-QfiledforthenewfiscalfirstquarterendedJuly2,2016andtheauditedresultsarepresentedherein.

OurKeyDifferentiators

Our Unique Product Collection—Solutions for Every Area of the Home:

Ourmerchandisingphilosophyistoprovideacarefullycurated,oneofakindcollectionofstorageandorganizationsolutionsforeveryareaofthehome,atavarietyofpricepoints.Weoffermorethan11,000productsdesignedtosavespaceandtimeandeachyear,weintroduceover2,000newSKUsintotheassortment.Oursolutions-basedsellingapproach(versusitems-based)isdeliveredbyourhighlytrainedsalespeople.Webelievesellingsolutionsprimarilyconsistingofexclusive,proprietaryproductsthatcan'tbefoundanywhereelsedifferentiatesusfromotherretailers.Infact,overhalfofourannualsalescomefromexclusiveorproprietaryproducts.

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Currently,ourstoresaretypicallyorganizedinto16distinctlifestyledepartments.Thetypesofproductssoldineachdepartmentareasfollows:

Inordertoofferouruniquecollectionofproductsandasacompetitivemerchandisingandbusinessstrategy,weworktoformmeaningful,long-lastingrelationshipswithvendorsfromaroundtheworld.Webelievetheserelationshipsbenefitusinanumberofways,includingprovidinguswithanincreasednumberofexclusiveproductsandcompetitivepricing.Webelievethatbycreativelycraftingmutuallybeneficialvendorrelationshipswefosterauniquesenseofloyaltyamongourmorethan800productvendors.Eighteenofourtop20vendorshavebeenwithusforatleast10yearsandseveralofthosevendorshavebeenwithussinceourinceptionin1978.FortheTCSsegment,ourtop10vendors,excludingElfa,accountedfor28%ofourtotalpurchasesinfiscal2016.Inordertomaximizeourpurchasingflexibility,wegenerallydonotenterintolong-termcontractswithourvendors.

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Lifestyledepartments SelectproductsBath CountertopOrganizers,CosmeticandJewelryOrganizers,ShowerandBathtubOrganizers,Drawer

Organization,CabinetStorage

Box CorrugatedBoxes,PackingMaterial,Tape,StorageBags,SpecialtyBoxes

Closet ShoeRacks,Hangers,DrawerOrganizers,BoxesandBins,HangingStorageBags,GarmentRacks

Collections MediaStorage,PhotoStorage,Display,SmallCraftandPartsOrganizers

Containers SmallBoxes,SmallBaskets,Tins,DividedBoxes,DecorativeContainers

elfa® Includeselfa®collectionofVentilatedandSolidShelvingandDrawercomponentsandsystems,WallandDoorRackSolutions,Accessories,UtilityandGarageSystems,andSlidingDoors

GiftPackaging GiftWrapandTags,RibbonsandBows,GiftWrapOrganizers,GiftBagsandSacks,GiftBoxes

Hooks WallMounted,SelfAdhesive,Magnetic,Overdoor,Removable

Kitchen Canisters,Jars,LunchtimeEssentials,BulkFoodStorage,PlasticandGlassFoodStorage,DrawerLinersandOrganizers,CountertopOrganizers,DishDryingRacks,CabinetStorage,PantryOrganizers

Laundry StepStools,Hampers,LaundryBagsandBaskets,ClothesDryingRacks,CleaningTools

Office DesktopCollections,PaperStorage,FileCartsandCabinets,LiteratureOrganizers,MessageBoards

Shelving FreeStandingShelving,WallMountedShelving,CubeSystems,ComponentShelving,Desks,Chairs

Storage Drawers,BoxesandBins,Totes,Crates,Carts

TCSClosets® Ourexclusiveluxurysolidclosetsystemwithdrawers,integratedlightingandaccessories

Trash RecycleBins,Wastebaskets,OpenCans,Step-onCans,Bags

Travel Luggage,Totes,ClothingOrganizers,CosmeticandJewelryOrganizers,TravelBottles

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Custom Closets:

WecontinuetobelievethatourfocusonCustomClosets,inclusiveofelfa®productsolutions,TCSClosets®,elfa®SlidingDoors,installationservicesandourclosetcompletionproducts,providesauniqueopportunitytodrivecomparablestoresalesthroughhigheraverageticketwhiledifferentiatingtheCompanyfromonline,items-basedretailers.Ourhighly-trainedandexperiencedsalesforcehasbeensellingproprietary,custom-designedelfa®andotherclosetsolutionsfor38years.Webelievethereisnoothercomparableretailerexecutingthisholisticapproachtocustomclosets.Weofferthecompletecustomclosetsolution—notjusttheframeworkofthecloset,butthefullarrayofclosetorganizationproductsthataccompanythecloset,aswellasanationalfootprintwithmillionsofcustomerscomingthroughthedoorandvisitingouronlinesiteeachyear.WedesignandsellCustomClosetsin-store,online,throughourcallcenter,aswellasthroughourContainedHome®in-homeorganizationservice.

Ourelfa®productscontinuetobeaneverimportant,highlyprofitableanddifferentiatingcomponentinthegrowthofourcompanyandourcommitmenttodominatingthecustomclosetmarket,accountingforabout25%ofourTCSretailsales.DuetoourverticalintegrationofElfa,wehavecontroloverthesourcingandavailabilityofourbestsellingandhighestmarginproduct,elfa®.Wearetheexclusivedistributorofelfa®productsintheUnitedStates.Approximately17%ofourfiscal2016TCSsegmentpurchaseswereattributedtointercompanypurchasesfromourElfasegment.

TCSClosets®averagetickethasexceeded$10,000sincelaunchingtheproductline.AndwhiletheinitialfocusforTCSClosets®hasbeenthecloset,basedoncustomerdemandandcurrenttrends,weplantoexpandourofferingofTCSClosets®solutionstootherareasofthehome.

ToincentivizeCustomClosetpurchases,welaunchedourCustomerFinancingProgramwithSynchronyFinancial.Theprogram'searlyresultsshowthatforelfa®purchasesover$500,financedelfa®purchaseshaveamuchhigheraverageticketthannon-financedelfa®purchases.Inadditiontocustomersfinancingelfa®purchases,theyarealsousingtheTCSCreditCardtopurchaseTCSClosets®andotherproducts.

Our Shopping Experience:

WestrivetocreateanAirofExcitement™ineachofourstoresacrossthecountry.Wesay,"threestepsinthedoorandyoucantellwhetherornotastorehasit."YoucanexperiencetheAirofExcitement™throughouremployees'smilingfacesandtheirgenuineinterestinacustomer'sneeds;inthebrightvisualdisplaysofproductsandsolutions;ourclean,well-organizedstore;andinourenergeticproductdemonstrationsandupbeatmusic.

Thisiscoupledwithourhighlypersonalizedapproachtocustomerservice.Whenacustomercomesintoourstorelookingforashoerack,weaskquestionstounderstandallofherneeds.Webelievethatifwefailtodiscoverherunderlyingstorageandorganizationchallenges,wefailtotrulyhelpherandmakeherhappy.ServiceandsellingarethesamethingatTheContainerStore.WebelievewecanbestservethecustomerbyastonishingherandgivingherthesolutionshetrulyneedsandbenefittheCompanyatthesametime.

Weareamulti-channelretailer,withafully-integratedwebsite,responsivemobilesite,andcallcentertocomplementourphysicalstores.Ourwebsite,containerstore.com,isintendedtoreplicatethestoreexperienceofferingthesameproductassortmentandrealtimeinventoryinformationforourstores,aswellascertainproductsfoundexclusivelyonline.Weenhancethecustomer'sexperienceanddeepenloyaltybycreatingconsistent,relevantmessages,regardlessofwhichchannelisbeingused—wearechannelagnostic.Weofferfreeshippingonordersover$75andourcustomersareabletopurchaseonlineandpickupatastore,withcurbsidepick-upinmostmarkets,orrequestsame-day

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homedeliveryinselectmarkets.Thewebsite,mobilesite,andcallcentersaleschannelsaccountedforanaggregateofapproximately15%ofTCSnetsalesinfiscal2016.

Our Stores:

Wehaveadoptedadisciplinedexpansionstrategydesignedtoleveragethestrengthofourbusinessmodelandnationallyrecognizedbrandnametosuccessfullydevelopnewstoresinanarrayofmarketsthatareprimedforgrowth,includingnew,existing,smallandlargemarkets.Ourcurrentfootprintof86storesextendsto31statesandtheDistrictofColumbia.Weopenedatotalofsevennewstoresinthe2016fiscalyearandweexpecttoopenatotaloffivenewstores(includingonerelocation)inthe2017fiscalyear.Whileourcurrentexpansionfocusisondomesticmarkets,webelieveinternationalexpansionmayprovideadditionalgrowthopportunitiesforusinthefuture.

WehaveastrongbaseofprofitablestoresandbelievethatourexpansionopportunitiesintheUnitedStatesaresignificant.Weplantocontinuetoseekoutstrategicandprofitablerealestateexpansionviaavarietyofstoreformatsandsizes.Infiscal2017,weplantotestareduced-sizedfootprintinAlbuquerque,NewMexico,anddoacompletere-designofourflagshipstoreinDallas,whichwebelievewillprovideusinsighttodevelopnewstoreformatsandevolvethefutureofourexistingstores'experience.Ourstoreopeningstrategyinvolvesastrategicformulaoftraining,marketing,non-profitpartnershipsandpublicrelations,whichenablesournewstorestodeliverstrongsalesvolumemorequickly.

WhatWeStandFor—OrganizationwithHeart®

TheContainerStorehasbeengettingpeopleorganizedformorethan38years,andsince1978,we'vealsobeenrunningourbusinessguidedbyourvalues-basedsetofprinciples.Backthen,wejustcalleditdoingbusiness.Today,we'reproudtobeoneofthefoundingcompaniesinamovementcalledConsciousCapitalism®,whichincludesagroupoflike-mindedbusinesses,thoughtleaders,authorsandacademicsallworkingtogethertochangethewaybusinessisdoneinAmericaandaroundtheworld.BusinessesthatpracticeConsciousCapitalismhaveleaderswho"walkthetalk"bydevelopingandnurturingaconsciousculture.Wehaveafirmbeliefthatcreatingvalueforandoptimizingrelationshipsbetweenallofthestakeholdersofourbusiness—employees,customers,vendors,communityandshareholders—istherightthingtodo.

ConsistentwithourcommitmenttoConsciousCapitalism,webelievethathappyemployeesleaddirectlytobetterperformanceandhigherprofits.WebelieveinputtingemployeesfirstandstayingtruetooursevenFoundationPrinciples®—simplebusinessphilosophiesthatguideeachdecisionwemake.OneofthoseFoundationPrinciplesis1GreatPerson=3GoodPeople®intermsofbusinessproductivity—that'sourhiringphilosophy.Infact,infiscal2016,wehiredonly8%ofjobapplicants.Ouremployee-firstcultureincludesatremendouscommitmenttocommunication,trainingandcareerdevelopmentthathelpsdeliveradifferentiatedexperiencetoourcustomers,whichwebelieveresultsinahigheraverageticket,repeatvisitsandfrequentreferralstootherpotentialcustomers.Infact,full-timestoreemployeesreceiveupto260hoursofformaltrainingintheirfirstyearalone—significantlyhigherthanindustryaverage.Ourstoresofferflexibleworkschedules,comprehensivebenefitsandaboveretailindustryaveragecompensationtobothfull-timeandpart-timeemployees.Asaresult,TCShasanaveragefull-timeemployeeturnoverrateofapproximately13%annually,significantlybelowtheretailaverage.It'sforthesereasonsandmorethatTheContainerStorehasbeennamedbyFORTUNEMagazinetoitsannuallistof100BestCompaniestoWorkFor®18yearsinarow.

AsofApril1,2017,wehadapproximately5,100employees,ofwhichapproximately4,500wereTCSemployeesandapproximately600wereElfaemployees.Ofthe4,500TCSemployees,approximately2,900werepart-timeemployees.

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YoucanlearnaboutourFoundationPrinciplesandConsciousCapitalismonourblog,www.whatwestandfor.com. TheinformationcontainedonourblogisnotincorporatedbyreferenceintothisAnnualReportonForm10-K.

Distribution

IntheTCSsegment,substantiallyallofourmerchandiseflowsthroughacentralizeddistributioncenterpriortotransporttoourretailstores.Ourdistributioncenterisco-locatedwithourcorporateofficesinCoppell,Texas.Theapproximately1.1millionsquarefootfacilitywasdesignedandconstructedspecificallyforTheContainerStoreandiscomprisedofapproximately93,000squarefeetofcorporateofficespaceandapproximately1millionsquarefeetofwarehousespace.

OurCoppell,Texasdistributioncenterisutilizedforretailstorereplenishmentanddirect-to-customerorders.WiththeexceptionoftheDallas/FortWorthmarket,weutilizethirdpartytruckloadcarrierstotransportallofourproductstoourstores.Weutilizebestinclasslogisticstechnologytooptimizeoperationsandcurrentprocessesforpicking,packingandshippingwhileprovidingastrongfoundationforfuturegrowth.Webelieveourenhanceddistributionandsupplychainoperationsallowustodistributemerchandisetoourstoresandcustomersinanefficientandcost-effectivemanner,improvingourcustomer'soverallbuyingexperience.Wecontinuetostrengthenourdistributioncenterwithongoingprocessandmaterialhandlingimprovementsinordertoachieveevengreaterefficienciesinservicelevelsandthemanagementofourinventory.Thisincludesautomationimprovementstoenhanceourstorefulfillmentandcustomerdeliverylogisticsperformance.

Withinourdistributionoperations,wehaveacultureofsafetyandefficiency,witharobustmetricprogramandacommitmenttocontinuousimprovement.Allprocesses,teamsandindividualsareheldtohighefficiencyandperformancestandards.Webelievethatthesizeandscalabilityofthedistributioncenterissufficienttosupportourfutureexpansionoverthenext2to3years.Wearecurrentlyconsideringtheneedforaseconddistributioncenteralongwithsupplychainsystemenhancementsinthemid-tolong-termforincreasedlogisticsnetworksupport.

Elfautilizesabroadnetworkofthird-partycarrierstodeliverproductsfromitsmanufacturingfacilitiestocustomersworldwide.

Intellectualproperty

Our"TheContainerStore,""ContainYourself","FoundationPrinciples","POP!PerfectlyOrganizedPerks","TCSClosets","ContainedHome",and"elfa"trademarksandcertainvariationsthereon,suchasour"TheContainerStore"logoandmanytrademarksusedforourproductlinesandsalescampaignsareregisteredorarethesubjectofpendingtrademarkapplicationswiththeU.S.PatentandTrademarkOfficeandwiththetrademarkregistriesofmanyforeigncountries.Inaddition,weownmanydomainnames,including"www.containerstore.com ,""www.whatwestandfor.com "andothersthatincludeourtrademarks.Wealsoownapatentforourproprietaryretailshoppingcomputersystemsandcopyrightsinourcatalogs,websites,andothermarketingmaterial.Webelievethatourtrademarks,productdesignsandcopyrightedworkshavesignificantvalueandwevigorouslyprotectthemagainstinfringement.

Competition

Weoperatewithinthestorageandorganizationcategorywhichextendsacrossmanyretailsegmentsincludinghousewares,officesuppliesandtravel,amongothers.However,wearetheonlynationalretailersolelydevotedtoit.Storageandorganizationproductsaresoldbyavarietyofretailers,includingmassmerchants,specialtyretailchains,andinternet-basedretailers,buttheydevoteasmallerportionoftheirmerchandiseassortmenttostorageandorganization.Someoftheseretailersarelargerandhavegreaterfinancial,marketingandotherresourcesthanTheContainerStore.We

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competewithsuchretailersbasedonourcustomerservice,productselectionandquality,price,convenience,effectiveconsumermarketingandpromotionalactivities,theabilitytoidentifyandsatisfyemergingconsumerpreferences,vendorrelationships,andbrandrecognition,amongotherthings.Webelievethatthestrengthofoursolutions-basedsellingwithhighlytrainedemployees,exclusiveofferingsandvendorrelationships,ourpassionateandloyalcustomerbaseandthequality,differentiationandbreadthofproductassortmentcomparefavorablytothoseofourcompetitors.

Seasonality

Ourstorageandorganizationproductofferingmakesuslesssusceptibletoholidayseasonshoppingpatternsthanmanyretailers.Historically,ourbusinesshasrealizedahigherportionofnetsales,operatingincomeandcashflowsfromoperationsinthefourthfiscalquarter,attributableprimarilytotheimpactofOurAnnualelfa®Sale,whichtraditionallystartsonoraboutDecember24thandrunsintoFebruary.Assuch,ourbusinesshashistoricallyrealizedgreaterleverageonourselling,generalandadministrativeexpensesduringourfiscalfourthquarter.Infact,overhalfofouradjustednetincomewasderivedinthefiscalfourthquarterinfiscalyears2016,2015,and2014.Formoreinformationregardingouruseofadjustednetincome,andareconciliationofadjustednetincometotheGAAPfinancialmeasureofnetincome(loss)availabletocommonshareholders,see"Item6:SelectedFinancialandOperatingData."

Regulationandlegislation

Wearesubjecttolaborandemploymentlaws,lawsgoverningtruth-in-advertising,privacylaws,safetyregulationsandotherlaws,includingconsumerprotectionregulations,suchastheConsumerProductSafetyImprovementActof2008,thatregulateretailersandgovernthepromotionandsaleofmerchandiseandtheoperationofstoresandwarehousefacilities.Wemonitorchangesintheselawsandbelievethatweareinmaterialcompliancewithapplicablelaws.

WesourceasignificantportionofourproductsfromoutsidetheUnitedStates.TheU.S.ForeignCorruptPracticesAct,andothersimilaranti-briberyandanti-kickbacklawsandregulationsgenerallyprohibitcompaniesandtheirintermediariesfrommakingimproperpaymentstonon-U.S.officialsforthepurposeofobtainingorretainingbusiness.Ourpoliciesandourvendorcomplianceagreementsmandatecompliancewithapplicablelaw,includingtheselawsandregulations.

Whereyoucanfindmoreinformation

Wemaintainawebsiteathttp://investor.containerstore.com andmakeavailable,freeofcharge,throughthissiteourAnnualReportsonForm10-K,QuarterlyReportsonForm10-Q,CurrentReportsonForm8-K,ProxyStatementsandForms3,4and5filedonbehalfofdirectorsandexecutiveofficersandholdersofmorethan10%ofourcommonstock,aswellasanyamendmentstothosereportsfiledorfurnishedpursuanttotheSecuritiesExchangeActof1934,asamended(the"ExchangeAct")assoonasreasonablypracticableafterweelectronicallyfilesuchmaterialwith,orfurnishitto,theSEC.WealsoputonourwebsitesthechartersforourBoardofDirectors'AuditCommittee,CultureandCompensationCommittee,NominatingandCorporateGovernanceCommittee,aswellasourCodeofBusinessConductandEthics,whichappliestoallofourdirectors,officers,andemployees,includingourprincipalexecutiveofficerandourprincipalfinancialandaccountingofficers,ourCorporateGovernanceGuidelinesandotherrelatedmaterials.Theinformationonourwebsitesisnotpartofthisannualreport.

OurInvestorRelationsDepartmentcanbecontactedatTheContainerStoreGroup,Inc.,500FreeportParkway,Coppell,TX75019-3863,Attention:InvestorRelations;telephone:972-538-6504;email:InvestorRelations@containerstore.com

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ITEM1A.RISKFACTORS

Ourbusinessfacessignificantrisksanduncertainties.Certainimportantfactorsmayhaveamaterialadverseeffectonourbusinessprospects,financialconditionandresultsofoperations,andyoushouldcarefullyconsiderthem.Accordingly,inevaluatingourbusiness,weencourageyoutoconsiderthefollowingdiscussionofriskfactors,initsentirety,inadditiontootherinformationcontainedinorincorporatedbyreferenceintothisAnnualReportonForm10-KandourotherpublicfilingswiththeSEC.

Risksrelatedtoourbusiness

An overall decline in the health of the economy and consumer spending may affect consumer purchases of discretionary items, which could reduce demand forour products and materially harm our sales, profitability and financial condition.

Ourbusinessdependsonconsumerdemandforourproductsand,consequently,issensitivetoanumberoffactorsthatinfluenceconsumerspendinggenerallyandfordiscretionaryitemsinparticular.Factorsinfluencingconsumerspendingincludegeneraleconomicconditions,consumerdisposableincome,fuelprices,recessionandfearsofrecession,unemployment,warandfearsofwar,inclementweather,availabilityofconsumercredit,consumerdebtlevels,conditionsinthehousingmarket,interestrates,salestaxratesandrateincreases,inflation,consumerconfidenceinfutureeconomicconditionsandpoliticalconditions,andconsumerperceptionsofpersonalwell-beingandsecurity.Forexample,adecreaseinhomepurchasesmayleadtodecreasedconsumerspendingonhome-relatedproducts.Prolongedorpervasiveeconomicdownturnscouldslowthepaceofnewstoreopeningsorcausecurrentstorestoclose.Adversechangesinfactorsaffectingdiscretionaryconsumerspendinghavereducedandmaycontinuetofurtherreduceconsumerdemandforourproducts,thusreducingoursalesandharmingourbusinessandoperatingresults.Inparticular,consumerpurchasesofdiscretionaryitems,suchasourelfa®andTCSClosetsTMclosetsystems,tendtodeclineduringrecessionaryperiodswhendisposableincomeislower.

Competition, including internet-based competition, could negatively impact our business, adversely affecting our ability to generate higher net sales.

Theretailindustryishighlycompetitive,withfewbarrierstoentry.Competitionischaracterizedbymanyfactors,includinglevelofservice,merchandiseassortment,productquality,price,location,reputation,creditavailability,andcustomerloyalty.Avarietyofretailersofferproductsthataresimilartotheonesweofferinourstoresandthroughourwebsite.Competitiveproductscanbefoundinmassmerchants,aswellasspecialtyretailchains.Someofourcompetitors,particularlythemassmerchants,arelargerandhavegreaterfinancialresourcesthanwedo.Wealsofacecompetitionfrominternet-basedretailers,inadditiontotraditionalstore-basedretailers.Thiscouldresultinincreasedpricecompetitionsinceourcustomerscanmorereadilysearchandcomparesimilarproducts.

A security breach or cyber-attack of our website or information technology systems could damage our reputation and our relationships with our customers oremployees, expose us to litigation risk and adversely affect our business and the trading price of our common stock .

Inconductingourbusiness,includingoure-commercebusiness,weobtainandtransmitconfidentialinformationaboutourcustomers,includingcreditcardinformation,throughourwebsiteandourinformationtechnologysystems,andwedependonthesecuretransmissionofsuchinformation.Wealsoreceiveandmaintainconfidentialinformationaboutouremployeesinthenormalcourseofbusiness.Asecuritybreachorcyber-attackcouldadverselyaffectourbusinessandoperations,includingdamagingourreputationandourrelationshipswithourcustomersandemployees,andexposingustorisksoflitigationandliability.Wecannotassurethatanybreaches,attacksor

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unauthorizeddisclosureswillnotoccur.Becausetechniquesusedtoobtainunauthorizedaccessortosabotagesystemschangefrequentlyandoftenarenotrecognizeduntillaunchedagainstatarget,wemaybeunabletoanticipatethesetechniquesortoimplementadequatepreventativemeasures.Inaddition,asaresultofsecuritybreachesatanumberofprominentretailers,themediaandpublicscrutinyofinformationsecurityandprivacyhasbecomemoreintense.Asaresult,wemayincursignificantcoststochangeourbusinesspracticesormodifyourserviceofferingsinconnectionwiththeprotectionofpersonallyidentifiableinformation.Further,wemaybesubjecttooneormoreclaimsorlawsuitsrelatedtointentionalorunintentionalexposureofourcustomer'spersonallyidentifiableinformation.Anysecuritybreachorresultinglawsuitcouldcauseourcustomerstoloseconfidenceinthesecurityofourinformationsystems,andchoosenottodobusinesswithus,therebyadverselyaffectingourbusinessandthetradingpriceofourcommonstock.

Inaddition,statesandthefederalgovernmenthaveincreasinglyenactedadditionallawsandregulationstoprotectconsumersagainstidentitytheft,includinglawsgoverningtreatmentofpersonallyidentifiableinformation.Theselawshaveincreasedthecostsofdoingbusinessandwecannotassureyouthatourvendorsandemployeeswillcomplywithallapplicablelaws,regulationsandcontractualprovisionspertainingtotheuseofpersonalinformation.Ifwefailtoimplementappropriatesafeguardsorwefailtodetectandprovidepromptnoticeofunauthorizedaccessasrequiredbysomeoftheselawsandregulations,wecouldbesubjecttopotentialclaimsfordamagesandotherremedies.Ifwewererequiredtopayanysignificantamountsinsatisfactionofclaimsundertheselawsandregulations,ourbusiness,resultsofoperationsandfinancialconditioncouldbeadverselyaffected.

Finally,therecanbenoassurancethatinthefuturewewillbeabletooperateourbusinessinaccordancewiththePCIDataSecurityStandardsorotherindustryrecommendedpractices.WeintendtomaintaincompliancewithPCIDataSecurityStandardsandwillincuradditionalexpensestomaintainPCIcompliance.Evenifwearecompliantwithsuchstandards,westillmaybevulnerableandunabletopreventsecuritybreachesinvolvingcustomertransactiondata.

If our operating and financial performance in any given period does not meet the guidance that we provide to the public, our stock price may decline.

Wemayprovidepublicguidanceonourexpectedoperatingandfinancialresultsforfutureperiods.Suchguidanceiscomprisedofforward-lookingstatementssubjecttotherisksanduncertaintiesdescribedinthisreportandinourotherpublicfilingsandpublicstatements.Ouractualresultshavenotalwaysbeenandmaynotalwaysbeinlinewithorexceedtheguidancewehaveprovided,especiallyintimesofeconomicuncertaintyorwhenthereareperiodsofsevereweather.If,inthefuture,ouroperatingorfinancialresultsforaparticularperioddonotmeetourguidanceortheexpectationsofinvestmentanalystsorifwereduceourguidanceforfutureperiods,themarketpriceofourcommonstockmaydeclineaswell.

Ourcomparablestoresaleshavefluctuatedsignificantlyinthepastbasedonanumberofeconomic,seasonal,andcompetitivefactors,andweexpectthemtocontinuetofluctuateinthefuture.Thisvariabilitycouldcauseourcomparablestoresalestofallbelowtheexpectationsofsecuritiesanalystsorinvestors,whichcouldresultinadeclineinthemarketpriceofourcommonstock.Ourcomparablestoresalesgrowthcouldvaryformanyreasons,includingtheimpactofnewstoresenteringintothecomparablestorebase,theopeningofnewstoresthatcannibalizestoresalesinexistinglocations,generaleconomicconditions,increasedcompetition,pricechangesinresponsetocompetitivefactors,possiblesupplyshortages,andcyclingagainstanyprioryearofabove-averagesalesresults.

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We are undertaking a number of significant business initiatives at the same time and if these initiatives are not successful, they may have a negative impact onour operating results.

Weareincreasingthenumberofourstoresandareundertakingseveralbusinessinitiatives.Wemayincurcostsfortheseinitiativesbeforewerealizeanycorrespondingrevenue.Thenumberofcurrentbusinessinitiativescouldstrainourfinancial,operationalandmanagementresources.Inaddition,theseinitiativesmaynotbesuccessfulormaytakelongerthanplannedtobesuccessful.Ifwearenotsuccessfulinmanagingourcurrentstoregrowthandtheinitiativesthatareunderway,wecouldexperienceanadverseimpactonourfinancialconditionandresultsofoperations.Alloftheforegoingrisksmaybecompoundedinanyeconomicdownturn.Ifwefailtoachievetheintendedresultsofourcurrentbusinessinitiatives,oriftheimplementationoftheseinitiativesisdelayedorabandoned,divertsmanagement'sattentionorresourcesfromotheraspectsofourbusinessorcostsmorethananticipated,wemayexperienceinadequatereturnoninvestmentforsomeorallofourbusinessinitiatives,whichwouldhaveanegativeeffectonouroperatingresults.

If we are unable to source and market new products to meet our high standards and customer preferences or are unable to offer our customers an aestheticallypleasing and convenient shopping environment, our results of operations may be adversely affected.

Oursuccessdependsonourabilitytosourceandmarketnewproductsthatbothmeetourstandardsforqualityandappealtocustomers'preferences.Asmallnumberofouremployees,includingourbuyingteam,areprimarilyresponsibleforbothsourcingproductsthatmeetourhighspecificationsandidentifyingandrespondingtochangingcustomerpreferences.Failuretosourceandmarketsuchproducts,ortoaccuratelyforecastchangingcustomerpreferences,couldleadtoadecreaseinthenumberofcustomertransactionsatourstoresandadecreaseintheamountcustomersspendwhentheyvisitourstores.Inaddition,thesourcingofourproductsisdependent,inpart,onourrelationshipswithourvendors.Ifweareunabletomaintaintheserelationshipswemaynotbeabletocontinuetosourceproductsatcompetitivepricesthatbothmeetourstandardsandappealtoourcustomers.Wealsoattempttocreateapleasant,appealingandconvenientshoppingexperience.Ifwearenotsuccessfulincreatingapleasant,appealingandconvenientshoppingexperiencewemaylosecustomersorfailtoobtainnewcustomers.Ifwedonotsucceedinintroducingandsourcingnewproductsthatconsumerswanttobuyormaintaininggoodrelationshipswithourvendors,orareunabletoprovideapleasant,appealingandconvenientshoppingenvironmentormaintainourlevelofcustomerservice,oursales,operatingmarginsandmarketsharemaydecrease,whichwouldadverselyimpactourbusiness,financialconditionandresultsofoperations.

We face risks related to our indebtedness.

AsofApril1,2017,wehadtotaloutstandingdebtof$321.1millionandanadditional$88.9millionofavailabilityundertheRevolvingCreditFacilityandthe2014ElfaRevolvingCreditFacility.OurSeniorSecuredTermLoanFacility,whichmaturesApril6,2019,represented$316.8millionofthetotaloutstandingdebt.Wemayincuradditionalindebtednessinthefuture.Ourhighdegreeofleveragecouldhaveimportantconsequencestous,including:

• exposingustotheriskofincreasedinterestratesasourborrowingsunderourtermloan,ortheSeniorSecuredTermLoanFacility,theRevolvingCreditFacilityandthe2014ElfaSeniorSecuredCreditFacilitiesareatvariablerates;

• makingitmoredifficultforustomakepaymentsonourdebt;

• limitingourabilitytopayfuturedividends;

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• increasingourvulnerabilitytodownturnsinourbusiness,thestorageandorganizationretailindustryorthegeneraleconomyandlimitingourflexibilityinplanningfor,orreactingto,changesinourbusiness;

• requiringasubstantialportionofcashflowfromoperationstobededicatedtothepaymentofprincipalandinterestonourdebt,therebyreducingourabilitytouseourcashflowtofundouroperations,capitalexpenditures,andfuturebusinessopportunities;

• restrictingusfrommakingstrategicacquisitionsorcausingustomakenon-strategicdivestitures;

• requiringustocomplywithfinancialandoperationalcovenants,restrictingus,amongotherthingsfromplacingliensonourassets,makinginvestments,incurringdebt,makingpaymentstoourequityordebtholdersandengagingintransactionswithaffiliates;

• limitingourabilitytoobtainadditionalfinancingforworkingcapital,capitalexpenditures,productdevelopment,debtservicerequirements,acquisitions,andgeneralcorporateorotherpurposes;

• preventingusfromtakingadvantageofbusinessopportunitiesastheyariseorsuccessfullycarryingoutourplanstoexpandourstorebaseandproductofferings;and

• placingusatacompetitivedisadvantagecomparedtoourcompetitorswhomaybelesshighlyleveraged.

Inaddition,ifwecannotgeneratesufficientcashflowfromoperationstoserviceourdebt,wemayneedtorefinanceourdebt,disposeofassetsorissueequitytoobtainnecessaryfunds.Wedonotknowwhetherwewouldbeabletotakeanyoftheseactionsonatimelybasis,ontermssatisfactorytous,oratall.Afailurebyusoroursubsidiariestocomplywiththeagreementsgoverningourindebtednesscouldresultinaneventofdefaultundersuchindebtedness,whichcouldadverselyaffectourabilitytorespondtochangesinourbusinessandmanageouroperations.Upontheoccurrenceofaneventofdefaultunderanyoftheagreementsgoverningourindebtedness,thelenderscouldelecttodeclareallamountsoutstandingtobedueandpayableandexerciseotherremediesassetforthintheagreements.Ifanyofourindebtednessweretobeaccelerated,therecanbenoassurancethatourassetswouldbesufficienttorepaythisindebtednessinfull,whichcouldhaveamaterialadverseeffectonourabilitytocontinuetooperateasagoingconcern.

If we are unable to effectively manage our online sales, our reputation and operating results may be harmed.

WesellmerchandiseovertheInternetthroughourwebsite,www.containerstore.com,andthroughmobileapplicationsforsmartphonesandtablets.Wearevulnerabletocertainrisksanduncertaintiesassociatedwithoure-commercewebsites,including:changesinrequiredtechnologyinterfaces;websitedowntimeandothertechnicalfailures;costsandtechnicalissuesasweupgradeourwebsitesoftware;computerviruses;changesinapplicablefederalandstateregulations;securitybreaches;andconsumerprivacyconcerns.Thefailureofourwebsiteormobileapplicationstoperformasexpectedcouldresultindisruptionsandcoststoouroperationsandmakeitmoredifficultforcustomerstopurchasemerchandiseonline.

Inaddition,wemustsuccessfullyrespondtochangingconsumerpreferencesandbuyingtrendsrelatingtoe-commerceusage,includingtheuseofneworimprovedtechnology,creativeuserinterfacesandothere-commercemarketingtoolssuchaspaidsearchandmobileapplications,amongothers,whichmayincreaseourcostsandwhichmaynotsucceedinincreasingsalesorattractingcustomers.Ourcompetitors,someofwhomhavegreaterresourcesthanus,mayalsobeabletobenefitfromchangesine-commercetechnologies,whichcouldharmourcompetitiveposition.Ourfailuretosuccessfullyrespondtotheserisksanduncertaintiesmightadverselyaffectthesalesinoure-commercebusiness,aswellasdamageourreputationandbrands.

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We depend on a single distribution center for all of our stores.

WehandlemerchandisedistributionforallofourstoresfromasinglefacilityinCoppell,Texas,asuburbofDallas,Texas.Weuseindependentthirdpartytransportationcompaniesaswellasleasedtruckstodeliverourmerchandisetoourstoresandourclients.Anysignificantinterruptionintheoperationofourdistributioncenterorthedomestictransportationinfrastructureduetonaturaldisasters,accidents,inclementweather,systemfailures,workstoppages,slowdownsorstrikesbyemployeesofthetransportationcompanies,orothercausescoulddelayorimpairourabilitytodistributemerchandisetoourstores,whichcouldresultinlowersales,alossofloyaltytoourbrandsandexcessinventoryandwouldhaveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperations.Ourbusinessdependsuponthesuccessfuloperationofourdistributioncenter,aswellasourabilitytofulfillordersandtodeliverourmerchandisetoourcustomersinatimelymanner.

Costs and risks relating to new store openings could severely limit our growth opportunities.

Ourgrowthstrategydependsonopeningstoresinnewandexistingmarkets.Wemustsuccessfullychoosestoresites,executefavorablerealestatetransactionsontermsthatareacceptabletous,hirecompetentpersonnelandeffectivelyopenandoperatethesenewstores.Ourplanstoincreaseournumberofretailstoreswilldependinpartontheavailabilityofexistingretailstoresorstoresites.Alackofavailablefinancingontermsacceptabletorealestatedevelopersoratighteningcreditmarketmayadverselyaffectthenumberorqualityofretailsitesavailabletous.Wecannotassureyouthatstoresorsiteswillbeavailabletous,orthattheywillbeavailableontermsacceptabletous.Ifadditionalretailstoresitesareunavailableonacceptableterms,wemaynotbeabletocarryoutasignificantpartofourgrowthstrategy.

Our business requires that we lease substantial amounts of space and there can be no assurance that we will be able to continue to lease space on terms asfavorable as the leases negotiated in the past.

WedonotownanyrealestateatourTCSsegment.Instead,weleaseallofourstorelocations,aswellasourcorporateheadquartersanddistributioncenterinCoppell,Texas.Ourstoresareleasedfromthirdpartiesandgenerallyhaveaninitialtermoftentofifteenyears.Manyofourleaseagreementsalsohaveadditionalfive-yearrenewaloptionsandcertainleaseshaveearlycancellationclauses,whichpermittheleasetobeterminatedbyusorthelandlordifcertainsaleslevelsarenotmetinspecificperiodsoriftheshoppingvenuedoesnotmeetspecifiedoccupancystandards.Inadditiontofixedminimumleasepayments,mostofourstoreleasesprovideforadditionalrentalpaymentsbasedonapercentageofsales,or"percentagerent,"ifsalesattherespectivestoresexceedspecifiedlevels,aswellasthepaymentofcommonareamaintenancecharges,realpropertyinsuranceandrealestatetaxes.Manyofourleaseagreementshavedefinedescalatingrentprovisionsovertheinitialtermandanyextensions.Increasesinouralreadysubstantialoccupancycostsanddifficultyinidentifyingeconomicallysuitablenewstorelocationscouldhavesignificantnegativeconsequences,whichinclude:

• requiringthatagreaterportionofouravailablecashbeappliedtopayourrentalobligations,thusreducingcashavailableforotherpurposesandreducingouroperatingprofitability;

• increasingourvulnerabilitytogeneraladverseeconomicandindustryconditions;and

• limitingourflexibilityinplanningfor,orreactingtochangesin,ourbusinessorintheindustryinwhichwecompete.

Additionalsitesthatweleasemaybesubjecttolong-termnon-cancelableleasesifweareunabletonegotiateourcurrentstandardleaseterms.Ifanexistingorfuturestoreisnotprofitable,andwedecidetocloseit,wemaynonethelessbecommittedtoperformourobligationsundertheapplicableleaseincluding,amongotherthings,payingthebaserentforthebalanceoftheleaseterm.Moreover,evenifaleasehasanearlycancellationclause,wemaynotsatisfythecontractualrequirementsfor

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earlycancellationunderthatlease.Inaddition,ifwearenotabletoenterintonewleasesorrenewexistingleasesontermsacceptabletous,thiscouldhaveanadverseeffectonourresultsofoperations.

If we fail to successfully anticipate consumer preferences and demand, or to manage inventory commensurate with demand, our results of operations may beadversely affected.

Oursuccessdependsinlargepartonourabilitytoidentify,originateanddefinestorageandorganizationproducttrends,aswellastoanticipate,gaugeandreacttochangingconsumerdemandsinatimelymanner.Ourproductsmustappealtoarangeofconsumerswhosepreferencescannotalwaysbepredictedwithcertainty.Wecannotassureyouthatwewillbeabletocontinuetodevelopproductsthatcustomersrespondtopositivelyorthatwewillsuccessfullymeetconsumerdemandsinthefuture.Anyfailureonourparttoanticipate,identifyorrespondeffectivelytoconsumerpreferencesanddemandcouldadverselyaffectsalesofourproducts.Ifthisoccurs,oursalesmaydecline,andwemayberequiredtomarkdowncertainproductstoselltheresultingexcessinventory,whichcouldhaveamaterialadverseeffectonourfinancialconditionandresultsofoperations.

Inaddition,wemustmanageourmerchandiseinstockandinventorylevelstotrackconsumerdemand.Muchofourmerchandiserequiresthatweprovidevendorswithsignificantorderingleadtime,frequentlybeforemarketfactorsareknown.Inaddition,thenatureofourproductsrequiresustocarryasignificantamountofinventorypriortopeaksellingseasons.Ifwearenotabletoanticipateconsumerdemandforourdifferentproductofferings,orsuccessfullymanageinventorylevelsforproductsthatareindemand,wemayexperience:

• backorders,ordercancellationsandlostsalesforproductsthatareinhighdemandforwhichwedidnotstockadequateinventory;and

• overstockinventorylevelsforproductsthathavelowerconsumerdemand,requiringustotakemarkdownsorotherstepstosellslowermovingmerchandise.

Asaresultoftheseandotherfactors,wearevulnerabletodemandandpricingshiftsandtomisjudgmentsintheselectionandtimingofmerchandisepurchases.

Newstoresinnewmarkets,wherewearelessfamiliarwiththetargetcustomerandlesswell-known,mayfacedifferentoradditionalrisksandincreasedcostscomparedtostoresoperatedinexistingmarketsornewstoresinexistingmarkets.Wealsomaynotbeabletoadvertisecost-effectivelyinneworsmallermarketsinwhichwehavelessstoredensity,whichcouldslowsalesgrowthatsuchstores.

Our facilities and systems, as well as those of our vendors, are vulnerable to natural disasters and other unexpected events, and as a result we may losemerchandise and be unable to effectively deliver it to our stores and online customers.

Ourretailstores,corporateoffices,distributioncenter,infrastructureprojectsanddirect-to-customeroperations,aswellastheoperationsofourvendorsfromwhichwereceivegoodsandservices,arevulnerabletodamagefromearthquakes,tornadoes,hurricanes,fires,floods,powerlosses,telecommunicationsfailures,hardwareandsoftwarefailures,computervirusesandsimilarevents.Ifanyoftheseeventsresultindamagetoourfacilitiesorsystems,orthoseofourvendors,wemayexperienceinterruptionsinourbusinessuntilthedamageisrepaired,resultinginthepotentiallossofcustomersandrevenues.Inaddition,wemayincurcostsinrepairinganydamagebeyondourapplicableinsurancecoverage.

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Material damage to, or interruptions in, our information systems as a result of external factors, staffing shortages and difficulties in updating our existingsoftware or developing or implementing new software could have a material adverse effect on our business or results of operations.

Wedependuponourinformationtechnologysystemsintheconductofallaspectsofouroperations.Suchsystemsaresubjecttodamageorinterruptionfrompoweroutages,computerandtelecommunicationsfailures,computerviruses,securitybreaches,fireandnaturaldisasters.Damageorinterruptiontoourinformationsystemsmayrequireasignificantinvestmenttofixorreplacethem,andwemaysufferinterruptionsinouroperationsintheinterim.Inaddition,costsandpotentialproblemsandinterruptionsassociatedwiththeimplementationofneworupgradedsystemsandtechnologyorwithmaintenanceoradequatesupportofexistingsystemscouldalsodisruptorreducetheefficiencyofouroperations.Anymaterialinterruptionsorfailuresinourinformationsystemsmayhaveamaterialadverseeffectonourbusinessorresultsofoperations.

Wealsorelyonourinformationtechnologystaff.Ifwecannotmeetourstaffingneedsinthisarea,wemaynotbeabletofulfillourtechnologyinitiativeswhilecontinuingtoprovidemaintenanceonexistingsystems.

Werelyoncertainsoftwarevendorstomaintainandperiodicallyupgrademanyofthesesystemssothattheycancontinuetosupportourbusiness.Thesoftwareprogramssupportingmanyofoursystemswerelicensedtousbyindependentsoftwaredevelopers.Theinabilityofthesedevelopersorustocontinuetomaintainandupgradetheseinformationsystemsandsoftwareprogramswoulddisruptorreducetheefficiencyofouroperationsifwewereunabletoconverttoalternatesystemsinanefficientandtimelymanner.

Wearevulnerabletovariousrisksanduncertaintiesassociatedwithourwebsites,includingchangesinrequiredtechnologyinterfaces,websitedowntimeandothertechnicalfailures,costsandtechnicalissuesasweupgradeourwebsitesoftware,computerviruses,changesinapplicablefederalandstateregulation,securitybreaches,legalclaimsrelatedtoourwebsiteoperationsande-commercefulfillmentandotherconsumerprivacyconcerns.Ourfailuretosuccessfullyrespondtotheserisksanduncertaintiescouldreducewebsitesalesandhaveamaterialadverseeffectonourbusinessorresultsofoperations.

We rely upon independent third-party transportation providers for substantially all of our product shipments and are subject to increased shipping costs as wellas the potential inability of our third-party transportation providers to deliver on a timely basis.

Werelyuponindependentthird-partytransportationprovidersforsubstantiallyallofourproductshipments,includingshipmentstoandfromallofourstores.Ourutilizationofthesedeliveryservicesforshipmentsissubjecttorisks,includingincreasesinfuelprices,whichwouldincreaseourshippingcosts,andemployeestrikesandinclementweatherwhichmayimpactashippingcompany'sabilitytoprovidedeliveryservicesthatadequatelymeetourshippingneeds.Ifwechangetheshippingcompaniesweuse,wecouldfacelogisticaldifficultiesthatcouldadverselyaffectdeliveriesandwewouldincurcostsandexpendresourcesinconnectionwithsuchchange.Moreover,wemaynotbeabletoobtaintermsasfavorableasthosereceivedfromindependentthird-partytransportationproviders,whichinturnwouldincreaseourcosts.

Our business depends in part on a strong brand image. If we are not able to protect our brand, we may be unable to attract a sufficient number of customers orsell sufficient quantities of our products.

Webelievethatthebrandimagewehavedevelopedhascontributedsignificantlytothesuccessofourbusinesstodate.WealsobelievethatprotectingTheContainerStorebrandisintegraltoourbusinessandtotheimplementationofourstrategiesforexpandingourbusiness.Ourbrandimagemaybediminishedifwedonotcontinuetomakeinvestmentsinareassuchasmarketingandadvertising,as

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wellastheday-to-dayinvestmentsrequiredforstoreoperations,catalogmailings,onlinesalesandemployeetraining.Ourbrandimagemaybefurtherdiminishedifnewproductsfailtomaintainorenhanceourdistinctivebrandimage.Furthermore,ourreputationcouldbejeopardizedifwefailtomaintainhighstandardsformerchandisequality,ifwefailtomaintainhighethical,socialandenvironmentalstandardsforallofouroperationsandactivities,ifwefailtocomplywithlocallawsandregulationsorifweexperiencenegativepublicityorothernegativeeventsthataffectourimageorreputation,someofwhichmaybebeyondourabilitytocontrol,suchastheeffectsofnegativepublicityregardingourvendors.Anyfailuretomaintainastrongbrandimagecouldhaveanadverseeffectonoursalesandresultsofoperations.

Expansion increases the complexity of our business and we may not be able to effectively manage our growth, which may cause our brand image and financialperformance to suffer.

Ourexpansioninnewandexistingmarketsmaypresentcompetitive,distribution,merchandisingandregulatorychallengesthatdifferfromourcurrentchallenges,includingcompetitionamongourstores,diminishednoveltyofourstoredesignandconcept,addedstrainonourdistributioncenter,additionalinformationtobeprocessedbyourmanagementinformationsystemsanddiversionofmanagementattentionfromoperations,suchasthecontrolofinventorylevelsinourstores.Wealsocannotguaranteethatwewillbeabletoobtainanddistributeadequateproductsuppliestoourstoresormaintainadequatewarehousinganddistributioncapabilityatacceptablecosts.Newstoresalsomayhavelowerthananticipatedsalesvolumesrelativetopreviouslyopenedstoresduringtheircomparableyearsofoperation,andsalesvolumesatnewstoresmaynotbesufficienttoachievestore-levelprofitabilityorprofitabilitycomparabletothatofexistingstores.Totheextentthatwearenotabletomeetthesevariouschallenges,oursalescoulddecrease,ouroperatingcostscouldincreaseandouroperatingprofitabilitycouldbeimpacted.

Our costs and financial results may change as a result of currency exchange rate fluctuations.

Duringfiscal2016,approximately80%ofourmerchandisewasmanufacturedabroadbasedoncostofmerchandisepurchased.ThepriceschargedbyforeignmanufacturersmaybeaffectedbythefluctuationoftheirlocalcurrencyagainsttheU.S.dollar.Wesourcegoodsfromvariouscountries,includingChina,andthuschangesinthevalueoftheU.S.dollarcomparedtoothercurrenciesmayaffectthecostsofgoodsthatwepurchase.

OurlargestexposuretocurrencyexchangeratefluctuationsisbetweentheU.S.dollarandSwedishkrona.TheTCSsegmentpurchasesallproductsfromtheElfasegmentinSwedishkrona.Approximately17%ofourU.S.dollarmerchandisepurchasesintheTCSsegmentinfiscal2016wereoriginallymadeinSwedishkronafromourElfasegment.Additionally,allassetsandliabilitiesofourElfasegmentaretranslatedatyearendratesofexchange,withtheexceptionofcertainassetsandliabilitiesthataretranslatedathistoricalratesofexchange.Revenues,expenses,andcashflowsofourElfasegmentaretranslatedataverageratesofexchangefortheyear.Asaresult,ourfinancialresultsmaybeadverselyaffectedbyfluctuationsintheSwedishkronaascomparedtotheU.S.dollar.BasedontheaverageexchangeratefromSwedishkronatoU.S.dollarduringfiscal2016,andresultsofoperationsinfunctionalcurrency,webelievethata10%increaseordecreaseintheexchangerateoftheSwedishkronawouldincreaseordecreasenetincome(loss)byapproximately$0.4million.

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We will require significant capital to fund our expanding business, which may not be available to us on satisfactory terms or at all. We plan to use cash fromoperations to fund our operations and execute our growth strategy. If we are unable to maintain sufficient levels of cash flow, we may not meet our growthexpectations or we may require additional financing which could adversely affect our financial health and impose covenants that limit our business activities.

Weplantocontinueourgrowthandexpansion,includingopeningnewstores,remodelingexistingstoresandupgradingourinformationtechnologysystemsandotherinfrastructure,asopportunitiesarise.Ourplanstoexpandourstorebasemaynotbesuccessfulandtheimplementationoftheseotherplansmaynotresultinexpectedincreasesinournetsaleseventhoughtheyincreaseourcosts.Wewillrequiresignificantcapitaltosupportourexpandingbusinessandexecuteonourgrowthstrategy.

Weprimarilydependoncashflowfromoperations,theRevolvingCreditFacility,andthe2014ElfaRevolvingCreditFacility,tofundourbusinessandgrowthplans.Ifourbusinessdoesnotgeneratesufficientcashflowfromoperationstofundtheseactivities,wemayneedadditionalequityordebtfinancing.Ifsuchfinancingisnotavailabletous,orisnotavailableonsatisfactoryterms,ourabilitytooperateandexpandourbusinessorrespondtocompetitivepressureswouldbecurtailedandwemayneedtodelay,limitoreliminateplannedstoreopeningsoroperationsorotherelementsofourgrowthstrategy.Ifweraiseadditionalcapitalbyissuingequitysecuritiesorsecuritiesconvertibleintoequitysecurities,yourownershipwouldbediluted.

Disruptions in the global financial markets may make it difficult for us to borrow a sufficient amount of capital to finance the carrying costs of inventory andto pay for capital expenditures and operating costs, which could negatively affect our business.

Disruptionsintheglobalfinancialmarketsandbankingsystemshavemadecreditandcapitalmarketsmoredifficultforcompaniestoaccess,evenforsomecompanieswithestablishedrevolvingorothercreditfacilities.UndertheRevolvingCreditFacility,eachmemberofthesyndicatefortheRevolvingCreditFacilityisresponsibleforprovidingaportionoftheloanstobemadeunderthefacility.FactorsthathavepreviouslyaffectedourborrowingabilityundertheRevolvingCreditFacilityhaveincludedtheborrowingbaseformulalimitations,adjustmentsintheappraisedvalueofourinventoryusedtocalculatetheborrowingbaseandtheavailabilityofeachofthelenderstoadvanceitsportionofrequestedborrowingdrawdownsunderthefacility.If,inconnectionwithadisruptionintheglobalfinancialmarketsorotherwise,anyparticipant,orgroupofparticipants,withasignificantportionofthecommitmentsintheRevolvingCreditFacilityfailstosatisfyitsobligationstoextendcreditunderthefacilityandweareunabletofindareplacementforsuchparticipantorgroupofparticipantsonatimelybasis(ifatall),ourliquidityandourbusinessmaybemateriallyadverselyaffected.

We are subject to risks associated with our dependence on foreign imports for our merchandise.

Duringfiscal2016,includingpurchasesforElfa,wepurchasedapproximately53%fromvendorslocatedoutsidetheUnitedStates(includingapproximately38%fromvendorslocatedinChina)andapproximately47%ofourmerchandisefromvendorslocatedintheUnitedStates.Inaddition,someofthemerchandisewepurchasefromvendorsintheUnitedStatesalsodepends,inwholeorinpart,onmanufacturerslocatedoutsidetheUnitedStates.Asaresult,ourbusinessdependsonglobaltrade,aswellastradeandcostfactorsthatimpactthespecificcountrieswhereourvendorsarelocated,includingAsia.Ourfuturesuccesswilldependinpartuponourabilitytomaintainourexistingforeignvendorrelationshipsandtodevelopnewones.Whilewerelyonourlong-termrelationshipswithourforeignvendors,wehavenolong-termcontractswiththemandtransactbusinessonanorderbyorderbasis.

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Manyofourimportedproductsaresubjecttoexistingduties,tariffsandquotasthatmaylimitthequantityofsometypesofgoodswhichwemayimportintotheUnitedStates.Additionally,theresultsoftherecentUnitedStateselectionsmaysignalachangeintradepolicybetweentheUnitedStatesandothercountries.Becausealargeportionofourmerchandiseissourced,directlyorindirectly,fromoutsidetheUnitedStates,majorchangesintaxpolicyortraderelations,suchasthedisallowanceofincometaxdeductionsforimportedmerchandiseortheimpositionofadditionaltariffsordutiesonimportedproducts,couldadverselyaffectourbusiness,resultsofoperations,effectiveincometaxrate,liquidityandnetincome.Ourdependenceonforeignimportsalsomakesusvulnerabletorisksassociatedwithproductsmanufacturedabroad,including,amongotherthings,risksofdamage,destructionorconfiscationofproductswhileintransittoourdistributioncenterslocatedintheUnitedStates,chargesonorassessmentofadditionalimportduties,tariffsandquotas,lossof"mostfavorednation"tradingstatusbytheUnitedStatesinrelationtoaparticularforeigncountry,workstoppages,includingwithoutlimitationasaresultofeventssuchaslongshoremenstrikes,transportationandotherdelaysinshipments,includingwithoutlimitationasaresultofheightenedsecurityscreeningandinspectionprocessesorotherport-of-entrylimitationsorrestrictionsintheUnitedStates,freightcostincreases,economicuncertainties,includinginflation,foreigngovernmentregulations,traderestrictions,includingtheUnitedStatesretaliatingagainstprotectionistforeigntradepracticesandpoliticalunrest,increasedlaborcostsandothersimilarfactorsthatmightaffecttheoperationsofourmanufacturersinspecificcountriessuchasChina.

Aninterruptionordelayinsupplyfromourforeignsources,ortheimpositionofadditionalduties,taxesorotherchargesontheseimports,couldhaveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperationsunlessanduntilalternativesupplyarrangementsaresecured.

Inaddition,thereisariskthatcompliancelapsesbyourmanufacturerscouldoccurwhichcouldleadtoinvestigationsbyU.S.governmentagenciesresponsibleforinternationaltradecompliance.Resultingpenaltiesorenforcementactionscoulddelayfutureimports/exportsorotherwisenegativelyimpactourbusiness.Inaddition,thereremainsariskthatoneormoreofourforeignmanufacturerswillnotadheretoapplicablelegalrequirementsorourglobalcompliancestandardssuchasfairlaborstandards,theprohibitiononchildlaborandotherproductsafetyormanufacturingsafetystandards.Theviolationofapplicablelegalrequirements,includinglabor,manufacturingandsafetylaws,byanyofourmanufacturers,thefailureofanyofourmanufacturerstoadheretoourglobalcompliancestandardsorthedivergenceofthelaborpracticesfollowedbyanyofourmanufacturersfromthosegenerallyacceptedintheUnitedStates,coulddisruptoursupplyofproductsfromourmanufacturersortheshipmentofproductstous,resultinpotentialliabilitytousandharmourreputationandbrand,anyofwhichcouldnegativelyaffectourbusinessandoperatingresults.

Our ability to obtain merchandise on a timely basis at competitive prices could suffer as a result of any deterioration or change in our vendor relationships orevents that adversely affect our vendors or their ability to obtain financing for their operations.

Webelieveourvendorrelationshipsarecriticaltooursuccess.Wedonothavelong-termcontractswithanyofourvendorsandwegenerallytransactbusinessonanorder-by-orderbasis,operatingwithoutanycontractualassurancesofcontinuedsupply,pricingoraccesstonewproducts.Anyofourvendorscoulddiscontinuesupplyinguswithdesiredproductsinsufficientquantitiesforavarietyofreasons.

Thebenefitswecurrentlyexperiencefromourvendorrelationshipscouldbeadverselyaffectedifourvendors:

• discontinuesellingmerchandisetous;

• enterintoexclusivityarrangementswithourcompetitors;

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• sellsimilarmerchandisetoourcompetitorswithsimilarorbetterpricing,manyofwhomalreadypurchasemerchandiseinsignificantlygreatervolumeand,insomecases,atlowerpricesthanwedo;

• raisethepricestheychargeus;

• changepricingtermstorequireustopayondeliveryorupfront,includingasaresultofchangesinthecreditrelationshipssomeofourvendorshavewiththeirvariouslendinginstitutions;

• lengthentheirleadtimes;or

• initiateorexpandsalesofstorageandorganizationproductstoretailcustomersdirectlythroughtheirownstores,catalogsorontheinternetandcompetewithusdirectly.

Wehistoricallyhaveestablishedexcellentworkingrelationshipswithmanysmall-tomid-sizevendorsthatgenerallyhavemorelimitedresources,productioncapacitiesandoperatinghistories.Marketandeconomiceventsthatadverselyimpactourvendorscouldimpairourabilitytoobtainmerchandiseinsufficientquantities.Sucheventsincludedifficultiesorproblemsassociatedwithourvendors'business,finances,labor,abilitytoexportorimport,asthecasemaybe,merchandise,costs,production,insuranceandreputation.Therecanbenoassurancethatwewillbeabletoacquiredesiredmerchandiseinsufficientquantitiesonacceptabletermsoratallinthefuture,especiallyifweneedsignificantlygreateramountsofinventoryinconnectionwiththegrowthofourbusiness.Wemayneedtodevelopnewrelationshipswithlargervendors,asourcurrentvendorsmaybeunabletosupplyuswithneededquantitiesandwemaynotbeabletofindsimilarmerchandiseonthesametermsfromlargervendors.Ifweareunabletoacquiresuitablemerchandiseinsufficientquantities,atacceptablepriceswithadequatedeliverytimesduetothelossoforadeteriorationorchangeinourrelationshipwithoneormoreofourkeyvendorsoreventsharmfultoourvendorsoccur,itmayadverselyaffectourbusinessandresultsofoperations.

There is a risk that our vendors may sell similar or identical products to our competitors, which could harm our business.

AlthoughmanyofourproductsaresoldbyourvendorsonlytoTheContainerStore,productsrelatedtothemajorityofournon-elfa®salesarenotsoldtousonanexclusivebasis.Ofthenon-elfa®productsthatwepurchaseonanexclusivebasis,noneoftheseproductsaresoldpursuanttoagreementswithexclusivityprovisions.Asaresult,mostofourvendorshavenoobligationtorefrainfromsellingsimilaroridenticalproductstoourcompetitors,someofwhompurchaseproductsinsignificantlygreatervolume,orenteringintoexclusivearrangementswithotherretailersthatcouldlimitouraccesstotheirproducts.OurvendorscouldalsoinitiateorexpandsalesoftheirproductsthroughtheirownstoresorthroughtheInternettotheretailmarketandthereforecompetewithusdirectlyorselltheirproductsthroughoutletcentersordiscountstores,increasingthecompetitivepricingpressureweface.

We depend on key executive management.

Wedependontheleadershipandexperienceofourkeyexecutivemanagement,includingMelissaReiff,SharonTindell,andJodiTaylor.Particularlywiththefiscal2016transitioninourexecutiveleadership,thelossoftheservicesofanyofourexecutivemanagementmemberscouldhaveamaterialadverseeffectonourbusinessandprospects.Asthereisahighlevelofcompetitionforexperienced,successfulpersonnelintheretailindustry,wemaynotbeabletofindsuitableindividualstoreplacesuchpersonnelonatimelybasisorwithoutincurringincreasedcosts,oratall.Wedonotmaintainkey-manlifeinsurancepoliciesonanyofourexecutiveofficers.Webelievethatourfuturesuccesswilldependonourcontinuedabilitytoattractandretainhighlyskilledandqualifiedpersonnel.Ourinabilitytomeetourstaffingrequirementsinthefuturecouldimpairourgrowthandharmourbusiness.

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If we are unable to find, train and retain key personnel, including new employees that reflect our brand image and embody our culture, we may not be able togrow or sustain our operations.

Oursuccessdependsinpartuponourabilitytoattract,motivateandretainasufficientnumberofstoreemployees,includinggeneralmanagersandstoremanagers,whounderstandandappreciateourcustomers,products,brandandcorporateculture,andareabletoadequatelyandeffectivelyrepresentourcultureandestablishcredibilitywithourcustomers.Ourplannedgrowthwillrequireustohireandtrainevenmorepersonneltomanagesuchgrowth.Ifweareunabletohireandretainpersonnelcapableofconsistentlyprovidingahighlevelofcustomerservice,asdemonstratedbytheirenthusiasmforourculture,understandingofourcustomersandknowledgeofthemerchandiseweoffer,ourabilitytoopennewstoresmaybeimpaired,theperformanceofourexistingandnewstorescouldbemateriallyadverselyaffectedandourbrandimagemaybenegativelyimpacted.Thereisahighlevelofcompetitionforexperienced,qualifiedpersonnelintheretailindustryandwecompeteforpersonnelwithavarietyofcompanieslookingtohireforretailpositions.Ourgrowthplanscouldstrainourabilitytostaffournewstores,particularlyatthestoremanagerlevel,whichcouldhaveanadverseeffectonourabilitytomaintainacohesiveandconsistentlystrongteam,whichinturncouldhaveanadverseimpactonourbusiness.Ifweareunabletoattract,trainandretainemployeesinthefuture,wemaynotbeabletoserveourcustomerseffectively,thusreducingourabilitytocontinueourgrowthandtooperateourexistingstoresasprofitablyaswehaveinthepast.

Labor activities could cause labor relations difficulties for us.

NoneofourU.S.-basedemployeesiscurrentlysubjecttoacollectivebargainingagreement.Aswecontinuetogrowandenterdifferentregions,unionsmayattempttoorganizeallorpartofouremployeebaseatcertainstoresorwithincertainregions.Respondingtosuchorganizationattemptsmaydistractmanagementandemployeesandmayhaveanegativefinancialimpactonindividualstores,oronourbusinessasawhole.

AsofApril1,2017,approximately50%ofElfa'semployees(approximately6%ofourtotalemployees)werecoveredbycollectivebargainingagreements.Adisputewithaunionoremployeesrepresentedbyaunion,includingafailuretoextendorrenewourcollectivebargainingagreements,couldresultinproductioninterruptionscausedbyworkstoppages.Ifastrikeorworkstoppageweretooccur,ourresultsofoperationscouldbeadverselyaffected.

Our costs may increase due to factors that may or may not be controllable by us, which may negatively affect our financial results.

Increasesinourcoststhatarebeyondourcontrol,includingitemssuchasincreasesincommoditypricesforrawmaterialsthataredirectlyorindirectlyrelatedtotheproductionanddistributionofourproducts,suchasthepricesofsteel,oil,resinandpulp,increasesinfuelandtransportationcosts,higherinterestrates,increasesinlossesfromdamagedmerchandise,inflation,fluctuationsinforeigncurrencyrates,highercostsoflabor,labordisputesaroundtheworld,increasesinthecostsofinsuranceandhealthcare,increasesinpostageandmediacosts,highertaxratesandthecostofcompliancewithchangesinlawsandregulations,includingaccountingstandards,maynegativelyimpactourfinancialresults.

Because of our international operations, we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery and anti-kickback laws.

WesourceasignificantportionofourproductsfromoutsidetheUnitedStates.TheU.S.ForeignCorruptPracticesAct,andothersimilaranti-briberyandanti-kickbacklawsandregulationsgenerallyprohibitcompaniesandtheirintermediariesfrommakingimproperpaymentstonon-U.S.officialsforthepurposeofobtainingorretainingbusiness.Whileourvendorcomplianceagreementsmandate

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compliancewithapplicablelaw,wecannotassureyouthatwewillbesuccessfulinpreventingouremployeesorotheragentsfromtakingactionsinviolationoftheselawsorregulations.Suchviolations,orallegationsofsuchviolations,coulddisruptourbusinessandresultinamaterialadverseeffectonourfinancialcondition,resultsofoperationsandcashflows.

Our fixed lease obligations could adversely affect our financial performance.

Ourfixedleaseobligationswillrequireustouseasignificantportionofcashgeneratedbyouroperationstosatisfytheseobligations,andcouldadverselyimpactourabilitytoobtainfuturefinancingtosupportourgrowthorotheroperationalinvestments.Wewillrequiresubstantialcashflowsfromoperationstomakeourpaymentsunderouroperatingleases,manyofwhichprovideforperiodicincreasesinrent.Ifwearenotabletomaketherequiredpaymentsundertheleases,thelendersorownersofthestoresmay,amongotherthings,repossessthoseassets,whichcouldadverselyaffectourabilitytoconductouroperations.Inaddition,ourfailuretomakepaymentsunderouroperatingleasescouldtriggerdefaultsunderotherleasesorunderagreementsgoverningourindebtedness,whichcouldcausethecounterpartiesunderthoseagreementstoacceleratetheobligationsduethereunder.

There are claims made against us from time to time that may result in litigation that could distract management from our business activities and result insignificant liability or damage to our brand.

Fromtimetotimeweareinvolvedinlitigation,claimsandotherproceedingsrelatingtotheconductofourbusiness,includingbutnotlimitedtoconsumerprotectionclassactionlitigation,claimsrelatedtoourbusiness,oremploymentpracticesandclaimsofintellectualpropertyinfringement.Inaddition,fromtimetotime,wearesubjecttoproductliabilityandpersonalinjuryclaimsfortheproductsthatwesellandthestoresweoperate.Ourpurchaseordersgenerallyrequirethevendortoindemnifyusagainstanyproductliabilityclaims;however,ifthevendordoesnothaveinsuranceorbecomesinsolvent,wemaynotbeindemnified.Inaddition,wecouldfaceawidevarietyofemployeeclaimsagainstus,includinggeneraldiscrimination,privacy,laborandemployment,EmployeeRetirementIncomeSecurityActof1974,asamended,anddisabilityclaims.Anyclaimscouldalsoresultinlitigationagainstusandcouldalsoresultinregulatoryproceedingsbeingbroughtagainstusbyvariousfederalandstateagenciesthatregulateourbusiness,includingtheU.S.EqualEmploymentOpportunityCommission.Oftenthesecasesraisecomplexfactualandlegalissues,whicharesubjecttorisksanduncertaintiesandwhichcouldrequiresignificantmanagementtime.Litigationandotherclaimsandregulatoryproceedingsagainstuscouldresultinunexpectedexpensesandliabilityandcouldalsomateriallyadverselyaffectouroperationsandourreputation.

Product recalls and/or product liability, as well as changes in product safety and other consumer protection laws, may adversely impact our operations,merchandise offerings, reputation, results of operations, cash flow and financial condition.

Wearesubjecttoregulationsbyavarietyoffederal,stateandinternationalregulatoryauthorities,includingtheConsumerProductSafetyCommission.Duringfiscal2016,wepurchasedmerchandisefromapproximately800vendors.Ifourvendorsfailtomanufactureorimportmerchandisethatadherestoproductsafetyrequirementsorourqualitycontrolstandards,ourreputationandbrandscouldbedamaged,potentiallyleadingtoincreasesincustomerlitigationagainstus.Itispossiblethatoneormoreofourvendorsmightnotadheretoproductsafetyrequirementsorourqualitycontrolstandards,andwemightnotidentifythedeficiencybeforemerchandiseissold.Anyissuesofproductsafetycouldcauseustorecallsomeofthoseproducts.Ifourvendorsareunableorunwillingtorecallproductsfailingtomeetproductsafetyrequirementsorourqualitystandards,wemayberequiredtorecallthoseproductsatasubstantialcosttous.Furthermore,totheextentweareunabletoreplaceanyrecalledproducts,wemayhavetoreduceourmerchandiseofferings,resultinginadecreaseinsales,especiallyifarecalloccursnearaseasonalperiod.

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Moreover,changesinproductsafetyorotherconsumerprotectionlawscouldleadtoincreasedcoststousforcertainmerchandise,oradditionallaborcostsassociatedwithreadyingmerchandiseforsale.Longleadtimesonmerchandiseorderingcyclesincreasethedifficultyforustoplanandprepareforpotentialchangestoapplicablelaws.Inparticular,TheConsumerProductSafetyImprovementActof2008imposessignificantrequirementsonmanufacturing,importing,testingandlabelingrequirementsforsomeofourproducts.Intheeventthatweareunabletotimelycomplywithregulatorychanges,significantfinesorpenaltiescouldresult,andcouldadverselyaffectourreputation,resultsofoperations,cashflowandfinancialcondition.

Changes in statutory, regulatory, accounting, and other legal requirements could potentially impact our operating and financial results.

Wearesubjecttonumerousstatutory,regulatoryandlegalrequirements,domesticallyandabroad.Ouroperatingresultscouldbenegativelyimpactedbydevelopmentsintheseareasduetothecostsofcomplianceinadditiontopossiblegovernmentpenaltiesandlitigationintheeventofdeemednoncompliance.Changesintheregulatoryenvironmentintheareaofproductsafety,environmentalprotection,privacyandinformationsecurity,wageandhourlaws,amongothers,couldpotentiallyimpactouroperationsandfinancialresults.

WeleaseallofourpropertiesattheTCSsegmentandthegroupheadquartersandsalesofficesattheElfasegment,andeachisclassifiedasanoperatinglease.InFebruary2016,theFinancialAccountingStandardsBoard("FASB")issuedAccountingStandardsUpdate("ASU")2016-02,Leases (Topic 842) ,toreviseleaseaccountingguidance.Theupdaterequiresmostleasestoberecordedonthebalancesheetasaleaseliability,withacorrespondingright-of-useasset,whereastheseleasescurrentlyhaveanoff-balancesheetclassification.ASU2016-02willbeeffectivefortheCompanyinthefirstquarteroffiscal2019.Wearestillevaluatingtheimpactofimplementationofthisstandardonourfinancialstatements,butweexpectthatadoptionwillhaveamaterialimpacttoourtotalassetsandliabilitiesgiventhatwehaveasignificantnumberofoperatingleasesnotcurrentlyrecognizedonourbalancesheet.

Our total assets include intangible assets with an indefinite life, goodwill and trademarks, and substantial amounts of property and equipment. Changes inestimates or projections used to assess the fair value of these assets, or operating results that are lower than our current estimates at certain store locations,may cause us to incur impairment charges that could adversely affect our results of operation.

Ourtotalassetsincludeintangibleassetswithanindefinitelife,goodwillandtrademarks,andsubstantialamountsofpropertyandequipment.Wemakecertainestimatesandprojectionsinconnectionwithimpairmentanalysesfortheselonglivedassets,inaccordancewithFASBAccountingStandardsCodification("ASC")360,"Property,PlantandEquipment"("ASC360"),andASC350,"Intangibles—GoodwillandOther"("ASC350").WealsoreviewthecarryingvalueoftheseassetsforimpairmentonanannualbasisandwhenevereventsorchangesincircumstancesindicatethatthecarryingvalueoftheassetmaynotberecoverableinaccordancewithASC360orASC350.Wewillrecordanimpairmentlosswhenthecarryingvalueoftheunderlyingasset,assetgrouporreportingunitexceedsitsfairvalue.Thesecalculationsrequireustomakeanumberofestimatesandprojectionsoffutureresults.Iftheseestimatesorprojectionschange,wemayberequiredtorecordadditionalimpairmentchargesoncertainoftheseassets.Iftheseimpairmentchargesaresignificant,ourresultsofoperationswouldbeadverselyaffected.

Fluctuations in our tax obligations and effective tax rate and realization of our deferred tax assets, including net operating loss carryforwards, may result involatility of our operating results.

WearesubjecttoincometaxesinvariousU.S.andcertainforeignjurisdictions.Werecordtaxexpensebasedonourestimatesoffuturepayments,whichmayincludereservesforuncertaintax

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positionsinmultipletaxjurisdictions,andvaluationallowancesrelatedtocertainnetdeferredtaxassets,includingnetoperatinglosscarryforwards.Atanyonetime,manytaxyearsaresubjecttoauditbyvarioustaxingjurisdictions.Theresultsoftheseauditsandnegotiationswithtaxingauthoritiesmayaffecttheultimatesettlementoftheseissues.Weexpectthatthroughouttheyeartherecouldbeongoingvariabilityinourquarterlytaxratesaseventsoccurandexposuresareevaluated.

Inaddition,oureffectivetaxrateinagivenfinancialstatementperiodmaybemateriallyimpactedbyavarietyoffactorsincludingbutnotlimitedtochangesinthemixandlevelofearnings,varyingtaxratesinthedifferentjurisdictionsinwhichweoperate,fluctuationsinthevaluationallowance,timingoftheutilizationofnetoperatinglosscarryforwards,orbychangestoexistingaccountingrulesorregulations.Further,taxlegislationmaybeenactedinthefuturewhichcouldnegativelyimpactourcurrentorfuturetaxstructureandeffectivetaxrates.

Our operating results are subject to quarterly and seasonal fluctuations, and results for any quarter may not necessarily be indicative of the results that may beachieved for the full fiscal year.

Ourquarterlyresultshavefluctuatedinthepastandmayfluctuatesignificantlyinthefuture,dependinguponavarietyoffactors,includingourproductofferings,promotionalevents,storeopenings,theweather,remodelingorrelocations,shiftsinthetimingofholidays,timingofcatalogreleasesorsales,timingofdeliveryoforders,competitivefactorsandgeneraleconomicconditions,amongotherthings,andmayfluctuatesignificantlyinthefuture.Asaresultofthesefactors,thedemandsonourproductdistributionanddeliverynetworkmayfluctuateduringthefiscalyear.Accordingly,ourresultsofoperationsmayfluctuateonaseasonalandquarterlybasisandrelativetocorrespondingperiodsinprioryears.Wehistoricallyhaverealizedahigherportionofnetsales,operatingincomeandcashflowsfromoperationsinthefourthfiscalquarter,attributableprimarilytotheimpactofOurAnnualelfa®Sale,whichtraditionallystartsonoraboutDecember24thandrunsintoFebruary.Infact,overhalfofouradjustednetincomewasderivedinthefiscalfourthquarterinfiscalyears2016,2015,and2014.Inaddition,wemaytakecertainpricingormarketingactionsthatcouldhaveadisproportionateeffectonourbusiness,financialconditionandresultsofoperationsinaparticularquarterorsellingseason.Theseinitiativesmaydisproportionatelyimpactresultsinaparticularquarterandwebelievethatcomparisonsofouroperatingresultsfromperiodtoperiodarenotnecessarilymeaningfulandcannotberelieduponasindicatorsoffutureperformance.

Material disruptions at one of our Elfa manufacturing facilities could negatively affect our business.

Elfaoperatesfourmanufacturingfacilities:twoinSweden,oneinPolandandoneinFinland.AmaterialoperationaldisruptioninoneofourElfamanufacturingfacilitiescouldoccurasaresultofanynumberofeventsincluding,butnotlimitedto,majorequipmentfailures,laborstoppages,transportationfailuresaffectingthesupplyandshipmentofmaterialsandfinishedgoods,severeweatherconditionsanddisruptionsinutilityservices.Suchadisruptioncouldnegativelyimpactproduction,customerdeliveriesandfinancialresults.

Our failure or inability to protect our intellectual property rights could diminish the value of our brand and weaken our competitive position.

Weattempttoprotectourintellectualpropertyrights,bothintheUnitedStatesandinforeigncountries,throughacombinationofcopyright,patent,trademark,tradesecret,tradedressandunfaircompetitionlaws,aswellasconfidentialityprocedures,andassignmentandlicensingarrangements.Ourfailuretoobtainormaintainadequateprotectionofourintellectualpropertyrightsforanyreasoncouldhaveamaterialadverseeffectonourbusiness,resultsofoperationsandfinancialcondition.Further,wecannotassureyouthatcompetitorsorotherthirdpartieswillnotinfringeourintellectualpropertyrights,orthatwewillhaveadequateresourcestoenforceourintellectualpropertyrights.

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Inaddition,intellectualpropertyprotectionmaybeunavailableorlimitedinsomeforeigncountrieswherelawsorlawenforcementpracticesmaynotprotectourintellectualpropertyrightsasfullyasintheUnitedStates,anditmaybemoredifficultforustosuccessfullychallengetheuseofourintellectualpropertyrightsbyotherpartiesinsuchcountriesandourcompetitivepositionmaysuffer.

If third parties claim that we infringe upon their intellectual property rights, our operating results could be adversely affected.

Wefacetheriskofclaimsthatwehaveinfringedthirdparties'intellectualpropertyrights.Anyclaimsofintellectualpropertyinfringement,eventhosewithoutmerit,could(i)beexpensiveandtimeconsumingtodefend;(ii)causeustoceasemaking,licensingorusingproductsormethodsthatallegedlyinfringe;(iii)requireustoredesign,reengineer,orrebrandourproductsorpackaging,iffeasible;(iv)divertmanagement'sattentionandresources;or(v)requireustoenterintoroyaltyorlicensingagreementsinordertoobtaintherighttouseathirdparty'sintellectualproperty.Anyroyaltyorlicensingagreements,ifrequired,maynotbeavailabletousonacceptabletermsoratall.Asuccessfulclaimofinfringementagainstuscouldresultinourbeingrequiredtopaysignificantdamages,enterintocostlylicenseorroyaltyagreements,orstopthesaleofcertainproducts,anyofwhichcouldhaveanegativeimpactonouroperatingresultsandharmourfutureprospects.

Risksrelatedtoourorganizationandownershipofourcommonstock

Our common stock price may be volatile or may decline.

Themarketpriceforourcommonstockhasbeenandmaybevolatile.Asaretailer,ourresultsaresignificantlyaffectedbyvariousfactorswhichcansignificantlyaffectourstockprice,manyofwhichareoutsideofourcontrol,includingthefollowing:

• quarterlyvariationsinouroperatingresultscomparedtomarketexpectations;

• changesinpreferencesofourcustomersandbuyingtrends,andourabilitytorespondtosuchpreferencesandtrends;

• announcementsofnewproductsorsignificantpricereductionsbyusorourcompetitors;

• sizeofthepublicfloat;

• stockpriceperformanceofourcompetitors;

• defaultonourindebtedness;

• actionsbycompetitorsorothershoppingcentertenants;

• changesinseniormanagementorkeypersonnel;

• changesinfinancialestimatesbysecuritiesanalysts;

• negativeearningsorotherannouncementsbyusorotherretailhomegoodscompanies;

• downgradesinourcreditratingsorthecreditratingsofourcompetitors;

• weatherconditions,particularlyduringtheholidayseasonandourAnnualelfa®Sale;

• naturaldisastersorothersimilarevents;

• issuancesorexpectedissuancesofcapitalstock;and

• globaleconomic,legalandregulatoryfactorsunrelatedtoourperformance.

Inaddition,stockmarketshaveexperiencedextremepriceandvolumefluctuationsthathaveaffectedandcontinuetoaffectthemarketpricesofequitysecuritiesofmanyretailcompanies.Inthe

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past,shareholdershaveinstitutedsecuritiesclassactionlitigationfollowingperiodsofmarketvolatility.Ifwewereinvolvedinsecuritieslitigation,wecouldincursubstantialcostsandourresourcesandtheattentionofmanagementcouldbedivertedfromourbusiness.

We are controlled by investment funds managed by Leonard Green and Partners, L.P. ("LGP"), whose interests in our business may be different from yours.

LGPownsapproximately27.5millionshares,or57.0%,ofouroutstandingcommonstock.LGPwill,fortheforeseeablefuture,havesignificantinfluenceoverourreportingandcorporatemanagementandaffairs,andwillbeabletocontrolvirtuallyallmattersrequiringshareholderapproval.LGPisableto,subjecttoapplicablelaw,designateamajorityofthemembersofourboardofdirectorsandcontrolactionstobetakenbyusandourboardofdirectors,includingamendmentstoourcertificateofincorporationandbylawsandapprovalofsignificantcorporatetransactions,includingmergersandsalesofsubstantiallyallofourassets.Thedirectorssoelectedwillhavetheauthority,subjecttothetermsofourindebtednessandourrulesandregulations,toissueadditionalstock,implementstockrepurchaseprograms,declaredividendsandmakeotherdecisions.ItispossiblethattheinterestsofLGPmayinsomecircumstancesconflictwithourinterestsandtheinterestsofourothershareholders,includingyou.

We are a "controlled company" within the meaning of the New York Stock Exchange listing requirements and as a result, qualify for and intend to rely onexemptions from certain corporate governance requirements. You do not have the same protection afforded to shareholders of companies that are subject tosuch corporate governance requirements.

BecauseoftheaggregatevotingpoweroverourCompanyheldbycertainaffiliatesofLGP,weareconsidereda"controlledcompany"forthepurposesoftheNewYorkStockExchangelistingrequirements.Assuch,weareexemptfromthecorporategovernancerequirementsthatourboardofdirectors,ourcultureandcompensationcommitteeandournominatingandcorporategovernancecommitteemeetthestandardofindependenceestablishedbythosecorporategovernancerequirements.Theindependencestandardsareintendedtoensurethatdirectorswhomeetthosestandardsarefreeofanyconflictinginterestthatcouldinfluencetheiractionsasdirectors.

Weintendtocontinuetoutilizetheseexemptionsaffordedtoa"controlledcompany"inthefuture.Accordingly,youdonothavethesameprotectionsaffordedtoshareholdersofcompaniesthataresubjecttoallofthecorporategovernancerequirementsoftheNewYorkStockExchange.

Substantial future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.

Salesofsubstantialamountsofourcommonstockinthepublicmarket,ortheperceptionthatthesesalescouldoccur,couldadverselyaffectthepriceofourcommonstockandcouldimpairourabilitytoraisecapitalthroughthesaleofadditionalshares.AlloutstandingsharesofourcommonstockarefreelytradablewithoutrestrictionundertheSecuritiesActof1933(the"SecuritiesAct"),exceptforanysharesofourcommonstockthatmaybeheldoracquiredbyourdirectors,executiveofficersandotheraffiliates,asthattermisdefinedintheSecuritiesAct,whicharesubjecttorestrictionsundertheSecuritiesAct.Certainexistingholdersofamajorityofourcommonstockhaverights,subjecttocertainconditions,torequireustofileregistrationstatementscoveringtheirsharesortoincludetheirsharesinregistrationstatementsthatwemayfileforourselvesorothershareholders.Iftheofferandsaleofthesesharesareregistered,theywillbefreelytradablewithoutrestrictionundertheSecuritiesAct.Intheeventsuchregistrationrightsareexercisedandalargenumberofsharesofcommonstockaresoldinthepublicmarket,suchsalescouldreducethetradingpriceofourcommonstock.

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Inthefuture,wemayalsoissueoursecuritiesifweneedtoraisecapitalinconnectionwithacapitalraiseoracquisitions.Theamountofsharesofourcommonstockissuedinconnectionwithacapitalraiseoracquisitioncouldconstituteamaterialportionofourthen-outstandingsharesofourcommonstock.

We do not currently expect to pay any cash dividends.

Thecontinuedoperationandexpansionofourbusinesswillrequiresubstantialfunding.Accordingly,wedonotcurrentlyexpecttopayanycashdividendsonsharesofourcommonstock.Anydeterminationtopaydividendsinthefuturewillbeatthediscretionofourboardofdirectorsandwilldependuponresultsofoperations,financialcondition,contractualrestrictions,restrictionsimposedbyapplicablelawandotherfactorsourboardofdirectorsdeemsrelevant.Additionally,theobligorsundertheSeniorSecuredTermLoanFacility,theRevolvingCreditFacilityandthe2014ElfaSeniorSecuredCreditFacilitiesarecurrentlyrestrictedfrompayingcashdividends,andweexpecttheserestrictionstocontinueinthefuture.

We incur costs as a public company and our management is required to devote substantial time to compliance matters.

Asapubliccompany,weincursignificantlegal,accounting,insuranceandotherexpenses,includingcostsresultingfrompubliccompanyreportingobligationsundertheExchangeActandrulesandregulationsregardingcorporategovernancepractices,includingthoseundertheSarbanes-OxleyAct,theDodd-FrankAct,andthelistingrequirementsoftheNewYorkStockExchange.Ourmanagementandotherpersonneldevoteasubstantialamountoftimetoensurethatwecomplywithallofthesereportingrequirements,rules,andregulations,andsuchrequirements,rulesandregulationsincreaseourlegalandfinancialcompliancecostsandmakecertainactivitiesmoretime-consumingandcostly.Inaddition,theselaws,rulesandregulationsalsomakeitmoredifficultandmoreexpensiveforustoobtaincertaintypesofinsurance,includingdirectorandofficerliabilityinsurance,andwemayberequiredtoacceptreducedpolicylimitsandcoverageorincursubstantiallyhighercoststoobtainthesameorsimilarcoverage.Thesefactorscouldalsomakeitmoredifficultforustoattractandretainqualifiedpersonstoserveonourboardofdirectors,ourboardcommitteesorasourexecutiveofficers.Furthermore,ifweareunabletosatisfyourobligationsasapubliccompany,wecouldbesubjecttodelistingofourcommonstock,fines,sanctionsandotherregulatoryactionandpotentiallycivillitigation.

Our anti-takeover provisions could prevent or delay a change in control of our Company, even if such change in control would be beneficial to ourshareholders.

ProvisionsofouramendedandrestatedcertificateofincorporationandamendedandrestatedbylawsaswellasprovisionsofDelawarelawcoulddiscourage,delayorpreventamerger,acquisitionorotherchangeincontrolofourCompany,evenifsuchchangeincontrolwouldbebeneficialtoourshareholders.Theseinclude:

• authorizingtheissuanceof"blankcheck"preferredstockthatcouldbeissuedbyourboardofdirectorstoincreasethenumberofoutstandingsharesandthwartatakeoverattempt;

• aprovisionforaclassifiedboardofdirectorssothatnotallmembersofourboardofdirectorsareelectedatonetime;

• theremovalofdirectorsonlyforcause;

• noprovisionfortheuseofcumulativevotingfortheelectionofdirectors;

• limitingtheabilityofshareholderstocallspecialmeetings;

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• requiringallshareholdersactionstobetakenatameetingofourshareholders(i.e.noprovisionforshareholderactionbywrittenconsent);and

• establishingadvancenoticerequirementsfornominationsforelectiontotheboardofdirectorsorforproposingmattersthatcanbeacteduponbyshareholdersatshareholdermeetings.

Inaddition,theDelawareGeneralCorporationLaw,towhichwearesubject,prohibitsus,exceptunderspecifiedcircumstances,fromengaginginanymergers,significantsalesofstockorassetsorbusinesscombinationswithanyshareholderorgroupofshareholderwhoownsatleast15%ofourcommonstock.

The provision of our certificate of incorporation requiring exclusive venue in the Court of Chancery in the State of Delaware for certain types of lawsuits mayhave the effect of discouraging lawsuits against our directors and officers.

Ourcertificateofincorporationrequires,tothefullestextentpermittedbylaw,that(i)anyderivativeactionorproceedingbroughtonourbehalf,(ii)anyactionassertingaclaimofbreachofafiduciarydutyowedbyanyofourdirectors,officersorotheremployeestousorourshareholders,(iii)anyactionassertingaclaimagainstusarisingpursuanttoanyprovisionoftheGeneralCorporationLawoftheStateofDelawareorourcertificateofincorporationorthebylawsor(iv)anyactionassertingaclaimagainstusgovernedbytheinternalaffairsdoctrinewillhavetobebroughtonlyintheCourtofChanceryintheStateofDelaware.Thisprovisionmayhavetheeffectofdiscouraginglawsuitsagainstourdirectorsandofficers.

Taking advantage of the reduced disclosure requirements applicable to "emerging growth companies" may make our common stock less attractive to investors.

TheJOBSActprovidesthat,solongasacompanyqualifiesasan"emerginggrowthcompany,"itwill,amongotherthings:

• beexemptfromtheprovisionsofSection404(b)oftheSarbanes-OxleyActrequiringthatitsindependentregisteredpublicaccountingfirmprovideanattestationreportontheeffectivenessofitsinternalcontroloverfinancialreporting;

• beexemptfromthe"sayonpay"and"sayongoldenparachute"advisoryvoterequirementsoftheDodd-FrankWallStreetReformandCustomerProtectionAct(the"Dodd-FrankAct");

• beexemptfromcertaindisclosurerequirementsoftheDodd-FrankActrelatingtocompensationofitsexecutiveofficersandbepermittedtoomitthedetailedcompensationdiscussionandanalysisfromproxystatementsandreportsfiledundertheSecuritiesExchangeActof1934,asamended(the"ExchangeAct");and

• insteadprovideareducedlevelofdisclosureconcerningexecutivecompensationandbeexemptfromanyrulesthatmaybeadoptedbythePublicCompanyAccountingOversightBoardrequiringmandatoryauditfirmrotationsorasupplementtotheauditor'sreportonthefinancialstatements.

Wearecurrentlytakingadvantageofthereduceddisclosurerequirementsregardingexecutivecompensation.WehaveirrevocablyelectednottotakeadvantageoftheextensionoftimetocomplywithneworrevisedfinancialaccountingstandardsavailableunderSection107(b)oftheJOBSAct.Wearealsotakingadvantageofotherexemptions,includingtheexemptionsfromtheadvisoryvoterequirementsandexecutivecompensationdisclosuresundertheDodd-FrankActandtheexemptionfromtheprovisionsofSection404(b)oftheSarbanes-OxleyAct.Investorsmayfindourcommonstocklessattractiveduetoourrelianceontheseexemptions,andtakingadvantageoftheseexemptionsmayresultinlessactivetradingormorevolatilityinthepriceofourcommonstock.Also,asaresultofour

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decisiontotakeadvantageofthereducedregulatoryandreportingrequirementsthatwillbeavailabletousaslongaswequalifyasan"emerginggrowthcompany,"ourfinancialstatementsmaynotbecomparabletocompaniesthatfullycomplywithregulatoryandreportingrequirementsuponthepubliccompanyeffectivedates.

Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our businessand stock price.

WearerequiredtocomplywiththerulesoftheSECimplementingSection404oftheSarbanes-OxleyActandourmanagementisthereforerequiredtoprovideanannualreportontheeffectivenessofourinternalcontroloverfinancialreportingforthatpurpose.Asanemerginggrowthcompany,ourindependentregisteredpublicaccountingfirmwillnotberequiredtoformallyattesttotheeffectivenessofourinternalcontroloverfinancialreportingpursuanttoSection404untilthedatewearenolongeranemerginggrowthcompany.Atsuchtime,ourindependentregisteredpublicaccountingfirmmayissueareportthatisadverseintheeventitisnotsatisfiedwiththelevelatwhichourcontrolsaredocumented,designedoroperating.

TocomplywiththerequirementsofSection404,wehavetakenandmayneedtotakevariousactions,suchasimplementingnewinternalcontrolsandproceduresandhiringadditionalaccountingorinternalauditstaff.Testingandmaintaininginternalcontrolcandivertourmanagement'sattentionfromothermattersthatareimportanttotheoperationofourbusiness.Inaddition,whenevaluatingourinternalcontroloverfinancialreporting,wemayidentifymaterialweaknessesthatwemaynotbeabletoremediateintimetomeettheapplicabledeadlineimposeduponusforcompliancewiththerequirementsofSection404.IfweidentifyamaterialweaknessinourinternalcontroloverfinancialreportingorareunabletocomplywiththerequirementsofSection404inatimelymannerorassertthatourinternalcontroloverfinancialreportingiseffective,orifourindependentregisteredpublicaccountingfirmisunabletoexpressanopinionastotheeffectivenessofourinternalcontroloverfinancialreporting,investorsmayloseconfidenceintheaccuracyandcompletenessofourfinancialreportsandthemarketpriceofourcommonstockcouldbenegativelyaffected,andwecouldbecomesubjecttoinvestigationsbytheNewYorkStockExchange,theSECorotherregulatoryauthorities,whichcouldrequireadditionalfinancialandmanagementresources.

ITEM1B.UNRESOLVEDSTAFFCOMMENTS

None.

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ITEM2.PROPERTIES

Weleaseallofour86retailstores.Ourleasesgenerallyhaveatermof10to15years,withrenewaloptionsthatgenerallyrangefrom5to15years.Mostleasesforourretailstoresprovideforaminimumrent,typicallyincludingescalatingrentincreases.Further,certainleasesalsoincludeapercentagerentbaseduponsalesaftercertainminimumthresholdsareachieved.Theleasesgenerallyrequireustopayinsurance,utilities,realestatetaxesandrepairandmaintenanceexpenses.AsummaryofourstorelocationsbystateasofApril1,2017isbelow:

Wealsoleaseapproximately1.1millionsquarefeetofspaceinCoppell,TexasforourcorporateofficesanddistributioncenterforourTCSsegment.ThetermforthisleaseexpiresinApril2025,andweretainthreefive-yearrenewaloptions.

Elfaleasesitsapproximately13,000squarefootgroupheadquartersinMalmö,Sweden.Inaddition,Elfaownsfourmanufacturingfacilities,locatedinVästervik,Sweden(approximately200,000squarefeet),Mullsjö,Sweden(approximately100,000squarefeet),Koszalin,Poland(approximately90,000squarefeet),andLahti,Finland(approximately60,000squarefeet).

ITEM3.LEGALPROCEEDINGS

Wearesubjecttovariouslegalproceedingsandclaims,includingemploymentclaims,wageandhourclaims,intellectualpropertyclaims,contractualandcommercialdisputesandothermattersthatariseintheordinarycourseofbusiness.Whiletheoutcomeoftheseandotherclaimscannotbepredictedwithcertainty,managementdoesnotbelievethattheoutcomeofthesematterswillhaveamaterialadverseeffectonourbusiness,resultsofoperationsorfinancialconditiononanindividualbasisorintheaggregate.

ITEM4.MINESAFETYDISCLOSURES

None.

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Location Store(s) Location Store(s) Location Store(s) Arizona 4 Maryland 1 Oregon 1Arkansas 1 Massachusetts 3 Pennsylvania 2California 13 Michigan 2 RhodeIsland 1Colorado 3 Minnesota 1 Tennessee 1Delaware 1 Missouri 1 Texas 13Florida 6 Nebraska 1 Utah 1Georgia 3 Nevada 1 Virginia 3Illinois 5 NewJersey 2 Washington 2Iowa 1 NewYork 5 Wisconsin 1Indiana 1 NorthCarolina 2 DistrictofColumbia 1Kansas 1 Ohio 2

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ExecutiveOfficersoftheRegistrant

Melissa Reiff hasservedasourChiefExecutiveOfficersinceJuly2016,succeedingWilliamA.("Kip")Tindell,III.Previously,Ms.ReiffservedasourPresidentandChiefOperatingOfficersinceMarch2013andasourPresidentsince2006.ShehasalsoservedonourboardofdirectorssinceAugust2007(andontheboardofdirectorsofTheContainerStore,Inc.sinceFebruary2006).Ms.ReiffjoinedTheContainerStorein1995asVicePresidentofSalesandMarketingandassumedtheroleofExecutiveVicePresidentofStoresandMarketingin2003.SheisamemberoftheInternationalWomen'sFoundationandC200,anorganizationofleadingwomeninbusinessdedicatedtofosteringgrowthandincreasingopportunitiesforwomenentrepreneursandcorporateleadersworldwide.Ms.ReiffhasservedontheboardofdirectorsofEtsysinceApril2015,wheresheisalsoamemberoftheCompensationCommittee.ShealsoservesonSouthernMethodistUniversity'sCoxSchoolofBusinessExecutiveBoardandisasustainingmemberoftheJuniorLeagueofDallas.Ms.Reiffwashonoredwiththe2012-2013SMUCoxSchoolofBusinessDistinguishedAlumnaaward.

Sharon Tindell hasservedasourPresidentandChiefMerchandisingOfficersinceJuly2016,ChiefMerchandisingOfficersince2006andhasservedonourboardofdirectorssinceAugust2007(andontheboardofdirectorsofTheContainerStore,Inc.sinceApril1988).In1980shejoinedusfull-timeworkingonthesalesfloor,managinginventoryandparticipatinginothertasksthatputherindirecttouchwiththestore'sinnovativeproductmixandcustomers'storageandorganizationchallengesandbecameourfirstbuyerin1981.Inhercurrentrole,Tindellleadstheretailer'smerchandisingvision,aswellasitsfocusoncustomclosetsolutions,developmentofexclusiveandproprietaryproducts,storeformatanddesign,andthevisualimpactofthecustomer'sshoppingexperience.Shealsooverseessupplychainandlogistics,aswellastheCompany'sElfaInternationalABsubsidiaryservingasitsBoardChair.In2006,Ms.TindellwasinductedintotheRetailingHallofFame,thefirstwomanselectedforthishonor.Ms.TindellalsoservesontheboardofdirectorsofthePerotMuseumofNatureandScience.SharonTindellismarriedtoWilliamA."Kip"Tindell,III,ChairmanoftheBoardofDirectors.

Jodi Taylor hasservedasourChiefFinancialOfficerandChiefAdministrativeOfficersinceJuly2016,ChiefFinancialOfficersinceDecember2007,andasourSecretarysinceOctober2013.Ms.TaylorisresponsibleforthebusinessareasofFinance,Accounting,InvestorRelations,RealEstate,Procurement,Payroll,Benefits,LegalandLossPrevention.Priortojoiningus,Ms.TaylorservedasChiefFinancialOfficerandSecretaryfrom1998to2007atHarold's,athenpublicly-tradedapparelretailerwhichfiledforbankruptcyin2008.From1986-1998,Ms.TaylorwasanexecutivewithBabySuperstore,Inc.orsuccessorcompanies,whichafteranIPOin1994,wasultimatelyacquiredbyToys"R"Us,Inc.in1996.Ms.TaylorwasformerlyanauditorwithDeloitte,Haskins,&Sells(nowDeloitte&Touche).

William A. ("Kip") Tindell, III hasservedasChairmanofourBoardofDirectorssinceAugust2007(andontheBoardofDirectorsofTheContainerStore,Inc.sinceJuly1978).Mr.TindellservedasourChiefExecutiveOfficerfrom2006to2016.Priortothat,heservedasPresidentandChiefOperatingOfficerofTheContainerStorethrough2005.Mr.TindellwaspresentedErnst&Young'sEntrepreneuroftheYearawardin1991andisarecipientoftheNationalRetailFederation's1998

33

Name Age Position(s)Executive Officers: MelissaReiff 62 ChiefExecutiveOfficerandDirectorSharonTindell 61 President,ChiefMerchandisingOfficer

andDirectorJodiTaylor 54 ChiefFinancialOfficer,Chief

AdministrativeOfficerandSecretaryWilliamA.("Kip")Tindell,III 64 ChairmanoftheBoardofDirectors

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InnovatoroftheYearAward.In2006hewasinductedintotheRetailingHallofFameandisa2009JuniorAchievementofDallasBusinessHallofFameinductee.In2011Mr.TindellreceivedtheNationalRetailFederation'sGoldMedalAward,whichisgenerallyregardedastheindustry'stopaccolade,giventoindividualswhohaveservedtheindustrywithdistinctionandachievedanationalreputationforexcellencetotheretailcraft.HeisamemberoftheDallasArboretumCEOAdvisoryCouncilandservesontheboardofdirectorsofWholeFoodsMarket,Inc.(WFM)andBaylorHealthcareSystemsFoundation.Mr.TindellalsoservesontheexecutiveboardoftheNationalRetailFederationasitschairman,andservedontheboardofdirectorsoftheNationalRetailFederationFoundationfrom2010to2013.HeservesontheboardofConsciousCapitalismInstituteandConsciousCapitalism,Inc.,acommunityoflike-mindedbusiness,thoughtandacademicleadersworkingtoelevatehumanitythroughaconsciousapproachtobusiness.Mr.TindellisanactivememberoftheDallasSalesmanshipClub,anonprofitorganizationdedicatedtotransformingchildren'sfuturesbyservingatriskfamiliesintheGreaterDallasarea.Mr.TindellismarriedtoSharonTindell,ourPresidentandChiefMerchandisingOfficer.

PARTII

ITEM5.MARKETFORREGISTRANT'SCOMMONEQUITY,RELATEDSTOCKHOLDERMATTERSANDISSUERPURCHASESOFEQUITYSECURITIES

MarketInformationandDividendPolicy

OurcommonstocktradesonTheNewYorkStockExchange("NYSE"),underthesymbol"TCS."ThefollowingtablesetsforththehighestandlowestsalespricesforourcommonstockontheNYSEfortheperiodsindicated.

ThenumberofstockholdersofrecordofourcommonstockasofMay16,2017was70.Thisnumberexcludesstockholderswhosestockisheldinnomineeorstreetnamebybrokers.Nodividendshavebeendeclaredorpaidonourcommonstock.Wedonotcurrentlyanticipatethatwewillpayanycashdividendsonourcommonstockintheforeseeablefuture.

StockPerformanceGraph

This performance graph shall not be deemed "soliciting material" or to be "filed" with the SEC for purposes of Section 18 of the Exchange Act or otherwisesubject to the liabilities under that section, and shall not be deemed to be incorporated by reference into any filing of The Container Store Group, Inc. under theSecurities Act or the Exchange Act.

ThefollowinggraphandtablecomparethecumulativetotalstockholderreturnforourcommonstockduringtheperiodfromNovember1,2013(thedateourcommonstockcommencedtradingontheNYSE)throughApril1,2017incomparisontotheNYSECompositeIndexandtheS&PRetailingSelectIndex.Thegraphandthetablebelowassumethat$100wasinvestedatthemarketcloseon

34

Highest Lowest Fiscal2015 FirstquarterendedMay30,2015 $ 23.50 $ 15.80SecondquarterendedAugust29,2015 $ 19.20 $ 15.00ThirdquarterendedNovember28,2015 $ 17.70 $ 9.71FourthquarterendedFebruary27,2016 $ 10.46 $ 3.77

Fiscal2016 FirstquarterendedJuly2,2016 $ 7.98 $ 4.47SecondquarterendedOctober1,2016 $ 6.22 $ 4.76ThirdquarterendedDecember31,2016 $ 8.34 $ 4.58FourthquarterendedApril1,2017 $ 6.74 $ 3.75

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November1,2013inthecommonstockofTheContainerStoreGroup,Inc.,theNYSECompositeIndexandtheS&PRetailingSelectIndex.DatafortheNYSECompositeIndexandtheS&PRetailingSelectIndexassumesreinvestmentsofdividends.ThecomparisonsinthegraphandtablearerequiredbytheSECandarenotintendedtobeindicativeofpossiblefutureperformanceofourcommonstock.

ITEM6.SELECTEDFINANCIALANDOPERATINGDATA

Youshouldreadthefollowingselectedconsolidatedfinancialdatainconjunctionwith"Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperations"andourconsolidatedfinancialstatementsandtherelatednotesappearingelsewhereinthisAnnualReportonForm10-K.

ThefollowingselectedconsolidatedfinancialdataforeachoftheyearsendedApril1,2017(fiscal2016),February27,2016(fiscal2015),andFebruary28,2015(fiscal2014)andtheselectedconsolidatedbalancesheetdataasofApril1,2017andFebruary27,2016havebeenderivedfromourauditedconsolidatedfinancialstatements,whichareincludedelsewhereinthisAnnualReportonForm10-K.TheselectedconsolidatedfinancialdataforeachoftheyearsendedMarch1,2014(fiscal2013)andMarch2,2013(fiscal2012)andtheselectedconsolidatedbalancesheetdataasofFebruary28,2015,March1,2014,andMarch2,2013havebeenderivedfromourauditedconsolidatedfinancialstatements,whicharenotincludedinthisAnnualReportonForm10-K.Thetablebelowalsoincludes,forcomparativepurposes,unauditeddatafortherecast52-weekperiodendedApril2,2016.Historicalresultsarenotindicativeoftheresultstobeexpectedinthefuture.Fiscal2012included53weeks,whereasfiscal2016,fiscal2015,fiscal2014,andfiscal2013included52weeks.CategoriesthatareonlyapplicabletoourTCSsegmentarenotedwith(*)andtoourElfasegmentwith(+).Forsegmentdata,seeNote14toourconsolidatedfinancialstatements.

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11/1/2013 3/1/2014 2/28/2015 2/27/2016 4/1/2017 TheContainerStoreGroup,Inc. 100.00 98.92 50.88 14.56 11.69NYSECompositeIndex 100.00 104.07 110.43 96.02 114.72S&PRetailingSelectIndex 100.00 101.21 116.35 102.88 100.44

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AlldollaramountsinthisSelectedFinancialandOperatingDataareinthousands,exceptpershareamounts,unlessotherwisestated.

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Fiscalyearended

April1,2017(1)

April2,2016(2)

February27,2016

February28,2015

March1,2014

March2,2013

(unaudited) Consolidatedstatementofoperations

Netsales $ 819,930 $ 797,087 $ 794,630 $ 781,866 $ 748,538 $ 706,757Costofsales(excludingdepreciationandamortization) 343,860 332,594 331,079 323,800 308,755 291,146

Grossprofit 476,070 464,493 463,551 458,066 439,783 415,611Selling,generalandadministrativeexpenses(excludingdepreciationandamortization) 387,948 394,585 393,810 372,867 354,271 331,097

Stock-basedcompensation* 1,989 1,575 1,556 1,289 15,137 283Pre-openingcosts* 6,852 9,004 9,033 8,283 6,672 7,562Goodwillandtradenameimpairment+ — — — — — 15,533Depreciationandamortization 37,124 34,628 34,230 31,011 30,353 29,550Restructuringcharges+ — — — — 532 6,369Otherexpenses 1,058 102 — 1,132 1,585 987Loss(gain)ondisposalofassets 57 62 61 (3,487) 206 88Incomefromoperations 41,042 24,537 24,861 46,971 31,027 24,142Interestexpense,net 16,687 16,772 16,810 17,105 21,185 21,388Lossonextinguishmentofdebt* — — — — 1,229 7,333Income(loss)beforetaxes 24,355 7,765 8,051 29,866 8,613 (4,579)Provision(benefit)forincometaxes(3) 9,402 2,907 2,909 7,193 447 (4,449)Netincome(loss) $ 14,953 $ 4,858 $ 5,142 $ 22,673 $ 8,166 $ (130)Less:Distributionsaccumulatedtopreferredshareholders(4) — — — — (59,747) (90,349)

Netincome(loss)availabletocommonshareholders(4) $ 14,953 $ 4,858 $ 5,142 $ 22,673 $ (51,581) $ (90,479)

Netincome(loss)percommonshare—basicanddiluted(4) $ 0.31 $ 0.10 $ 0.11 $ 0.47 $ (2.87) $ (30.88)

Weighted-averagecommonshares—basic 47,996,746 47,986,034 47,985,717 47,971,243 17,955,757 2,929,789

Weighted-averagecommonshares—diluted 48,016,010 47,976,034 47,985,717 48,520,865 17,955,757 2,929,789

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Fiscalyearended

April1,2017(1)

April2,2016(2)

February27,2016

February28,2015

March1,2014

March2,2013

Operatingdata: Comparablestoresalesgrowthfortheperiod*(5) (2.4)% (0.8)% 0.0% (1.4)% 2.9% 4.4%

Numberofstoresopenatendofperiod* 86 79 79 70 63 58Non-GAAPmeasures(6): AdjustedEBITDA(7) $ 86,559 $ 68,362 $ 68,159 $ 88,230 $ 86,101 $ 87,585AdjustedEBITDAmargin(7) 10.6% 8.6% 8.6% 11.3% 11.5% 12.4%Adjustednetincome(8) $ 14,953 $ 4,858 $ 5,142 $ 16,501 $ 16,354 $ 16,159Adjustednetincomepercommonshare—diluted(8) $ 0.31 $ 0.10 $ 0.11 $ 0.34 $ 0.33 $ 0.34

Asof

April1,2017

February27,2016

February28,2015

March1,2014

March2,2013

Consolidatedbalancesheetdata: Cash $ 10,736 $ 13,609 $ 24,994 $ 18,046 $ 25,351Networkingcapital(9) 44,342 22,913 20,965 34,832 29,651Totalassets(10) 761,834 758,119 761,579 773,841 744,593Long-termdebt(10)(11) 317,471 321,508 324,616 325,943 277,144Totalstockholders'equity 221,790 207,068 201,862 197,186 233,375

(1) Beginningwithfiscal2016,theCompanychangeditsfiscalyeartoa52-53weekperiodendingontheSaturdayclosesttoMarch31;previously,theCompany'sfiscalyearendedontheSaturdayclosesttoFebruary28.SeeNote17totheFinancialStatementsforfinancialdataforthefive-weektransitionperiodendedApril2,2016.

(2) Forcomparativepurposes,theCompanyhaspresentedunauditedselectedconsolidatedfinancialdataforthe52-weekperiodendedApril2,2016.

(3) ThedifferencebetweentheCompany'seffectivetaxrateandthestatutoryFederaltaxratecanbeattributedtofluctuationsinthevaluationallowancerecordedagainstnetdeferredassetsnotexpectedtoberealized,indefinite-livedintangibleassetimpairmentchargesnotdeductiblefortaxpurposes,theeffectsofpriorperiodadjustments,theeffectsofforeignincometaxedatadifferentrateincludingstatutorychangesinthoseratesandintraperiodtaxallocationsbetweencontinuingoperationsandothercomprehensiveincome.

(4) Forfiscal2012andfiscal2013,commonstockholdersdidnotshareinnetincomeduetoearningsnotexceedingtheaccrueddistributionsontheCompany'spreferredstock.Forfiscal2012and2013,basicanddilutednetlosspercommonsharearethesame,asanyadditionalcommonstockequivalentswouldbeanti-dilutive.

(5) Astoreisincludedinthecomparablestoresalescalculationonthefirstdayofthesixteenthfullfiscalmonthfollowingthestore'sopening.Comparablestoresalesarenetofdiscountsandreturns.Whenastoreisrelocated,wecontinuetoconsidersalesfromthatstoretobecomparablestoresales.Netsalesfromourwebsiteandcallcenterarealsoincludedincalculationsofcomparablestoresales.Priortofiscal2015,thecomparablestoresalesgrowthoperatingmeasuredoesnotincludenetsalesfromservices.Infiscal2012,theCompany'sfiscalyearincluded53weeks.Asaresult,salesrecordedinweeksonethroughfifty-twooffiscal2013arecomparabletoweekstwothroughfifty-threeoffiscal2012.

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Inthefirstquarteroffiscal2016,wechangedourcomparablestoresalesoperatingmeasuretoreflectthepointatwhichmerchandiseandserviceordersarefulfilledanddeliveredtocustomers,excludingshippinganddelivery.Priortothefirstquarteroffiscal2016,ourcomparablestoresalesoperatingmeasureinagivenperiodwasbasedonmerchandiseandserviceordersplacedinthatperiod,excludingshippinganddelivery,whichdidnotalwaysreflectthepointatwhichmerchandiseandserviceswerereceivedbythecustomerand,therefore,recognizedinourfinancialstatementsasnetsales.Webelievethatchangingthecomparablestoresalesoperatingmetrictobetteralignwithnetsalespresentedinourfinancialstatementswillassistinvestorsinevaluatingourfinancialperformance.Thecomparablestoresalesgrowthmetricisanoperatingmeasureintendedonlyassupplementalinformationandisnotasubstitutefornetsalespresentedinaccordancewithgenerallyacceptedaccountingprinciples("GAAP").

(6) WehavepresentedEBITDA,AdjustedEBITDA,AdjustedEBITDAmargin,adjustednetincome,andadjustednetincomepercommonshare—dilutedassupplementalmeasuresoffinancialperformancethatarenotrequiredby,orpresentedinaccordancewith,GAAP.Thesenon-GAAPmeasuresshouldnotbeconsideredasalternativestonetincome(loss)asameasureoffinancialperformanceorcashflowsfromoperationsasameasureofliquidity,oranyotherperformancemeasurederivedinaccordancewithGAAPandtheyshouldnotbeconstruedasaninferencethatourfutureresultswillbeunaffectedbyunusualornon-recurringitems.Thesenon-GAAPmeasuresarekeymetricsusedbymanagement,ourboardofdirectors,andLGPtoassessourfinancialperformance.Wepresentthesenon-GAAPmeasuresbecausewebelievetheyassistinvestorsincomparingourperformanceacrossreportingperiodsonaconsistentbasisbyexcludingitemsthatwedonotbelieveareindicativeofourcoreoperatingperformanceandbecausewebelieveitisusefulforinvestorstoseethemeasuresthatmanagementusestoevaluatetheCompany.Thesenon-GAAPmeasuresarealsofrequentlyusedbyanalysts,investorsandotherinterestedpartiestoevaluatecompaniesinourindustry.Inevaluatingthesenon-GAAPmeasures,youshouldbeawarethatinthefuturewewillincurexpensesthatarethesameasorsimilartosomeoftheadjustmentsinthispresentation.Ourpresentationofthesenon-GAAPmeasuresshouldnotbeconstruedtoimplythatourfutureresultswillbeunaffectedbyanysuchadjustments.ManagementcompensatesfortheselimitationsbyrelyingonourGAAPresultsinadditiontousingnon-GAAPmeasuressupplementally.Ournon-GAAPmeasuresarenotnecessarilycomparabletoothersimilarlytitledcaptionsofothercompaniesduetodifferentmethodsofcalculation.Pleaserefertofootnotes(7)and(8)ofthistableforfurtherinformationregardingwhywebelieveeachnon-GAAPfinancialmeasureprovidesusefulinformationtoinvestorsregardingourfinancialconditionandresultsofoperations,aswellastheadditionalpurposesforwhichmanagementuseseachofthenon-GAAPfinancialmeasures.

(7) EBITDA,AdjustedEBITDA,andAdjustedEBITDAmarginhavebeenpresentedinthisAnnualReportonForm10-Kassupplementalmeasuresoffinancialperformancethatarenotrequiredby,orpresentedinaccordancewith,GAAP.WedefineEBITDAasnetincomebeforeinterest,taxes,depreciation,andamortization.AdjustedEBITDAiscalculatedinaccordancewithourSecuredTermLoanFacilityandtheRevolvingCreditFacilityandisoneofthecomponentsforperformanceevaluationunderourexecutivecompensationprograms.AdjustedEBITDAreflectsfurtheradjustmentstoEBITDAtoeliminatetheimpactofcertainitems,includingcertainnon-cashandotheritems,thatwedonotconsiderinourevaluationofongoingoperatingperformancefromperiodtoperiodasdiscussedfurtherbelow.AdjustedEBITDAmarginmeans,foranyperiod,theAdjustedEBITDAforthatperioddividedbythenetsalesforthatperiodpresentedinaccordancewithGAAP.

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EBITDA,AdjustedEBITDA,andAdjustedEBITDAmarginareincludedinthisAnnualReportonForm10-Kbecausetheyarekeymetricsusedbymanagement,ourboardofdirectorsandLGPtoassessourfinancialperformance.Inaddition,weuseAdjustedEBITDAinconnectionwithcovenantcomplianceandexecutiveperformanceevaluations,andweuseAdjustedEBITDAandAdjustedEBITDAmargintosupplementGAAPmeasuresofperformancetoevaluatetheeffectivenessofourbusinessstrategies,tomakebudgetingdecisionsandtocompareourperformanceagainstthatofotherpeercompaniesusingsimilarmeasures.WebelieveitisusefulforinvestorstoseethemeasuresthatmanagementusestoevaluatetheCompany,itsexecutivesandourcovenantcompliance,asapplicable.EBITDAandAdjustedEBITDAarealsofrequentlyusedbyanalysts,investorsandotherinterestedpartiestoevaluatecompaniesinourindustry.

EBITDA,AdjustedEBITDA,andAdjustedEBITDAmarginarenotGAAPmeasuresofourfinancialperformanceorliquidityandshouldnotbeconsideredasalternativestonetincome(loss)asameasureoffinancialperformanceorcashflowsfromoperationsasameasureofliquidity,oranyotherperformancemeasurederivedinaccordancewithGAAPandtheyshouldnotbeconstruedasaninferencethatourfutureresultswillbeunaffectedbyunusualornon-recurringitems.Additionally,EBITDAandAdjustedEBITDAarenotintendedtobemeasuresoffreecashflowformanagement'sdiscretionaryuse,astheydonotreflectcertaincashrequirementssuchastaxpayments,debtservicerequirements,capitalexpenditures,storeopeningsandcertainothercashcoststhatmayrecurinthefuture.EBITDA,AdjustedEBITDA,andAdjustedEBITDAmargincontaincertainotherlimitations,includingthefailuretoreflectourcashexpenditures,cashrequirementsforworkingcapitalneedsandcashcoststoreplaceassetsbeingdepreciatedandamortized.InevaluatingAdjustedEBITDAandAdjustedEBITDAmargin,youshouldbeawarethatinthefuturewewillincurexpensesthatarethesameasorsimilartosomeoftheadjustmentsinthispresentation,suchaspre-openingcostsandstockcompensationexpense.OurpresentationofAdjustedEBITDAandAdjustedEBITDAmarginshouldnotbeconstruedtoimplythatourfutureresultswillbeunaffectedbyanysuchadjustments.ManagementcompensatesfortheselimitationsbyrelyingonourGAAPresultsinadditiontousingEBITDA,AdjustedEBITDA,andAdjustedEBITDAmarginsupplementally.OurmeasuresofEBITDA,AdjustedEBITDA,andAdjustedEBITDAmarginarenotnecessarilycomparabletoothersimilarlytitledcaptionsofothercompaniesduetodifferentmethodsofcalculation.

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Areconciliationofnetincome(loss)toEBITDAandAdjustedEBITDAissetforthbelow:

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Fiscalyearended

April1,2017

April2,2016

February27,2016

February28,2015

March1,2014

March2,2013

(unaudited) Netincome(loss) $ 14,953 $ 4,858 $ 5,142 $ 22,673 $ 8,166 $ (130)Depreciationandamortization 37,124 34,628 34,230 31,011 30,353 29,550Interestexpense,net 16,687 16,772 16,810 17,105 21,185 21,388Incometaxexpense(benefit) 9,402 2,907 2,909 7,193 447 (4,449)EBITDA 78,166 59,165 59,091 77,982 60,151 46,359Managementfees*(a) — — — — 667 1,000Pre-openingcosts*(b) 6,852 9,004 9,033 8,283 6,672 7,562Goodwillandtradenameimpairment+(c) — — — — — 15,533

IPOcosts*(d) — — — — 1,259 —Noncashrent*(e) (1,365) (1,784) (1,844) (374) 260 2,014Restructuringcharges+(f) — — — — 532 6,369Stock-basedcompensation*(g) 1,989 1,575 1,556 1,289 15,137 283Lossonextinguishmentofdebt*(h) — — — — 1,229 7,333Foreignexchange(gains)losses+(i) (342) 226 241 (171) (224) 55Otheradjustments(j) 1,259 176 82 1,221 418 1,077AdjustedEBITDA $ 86,559 $ 68,362 $ 68,159 $ 88,230 $ 86,101 $ 87,585

(a) FeespaidtoLGPinaccordancewithourmanagementservicesagreement,whichwasterminatedonNovember6,2013inassociationwithourIPO.

(b) Non-capitalexpendituresassociatedwithopeningnewstoresandrelocatingstores,includingrent,marketingexpenses,travelandrelocationcosts,andtrainingcosts.Weadjustforthesecoststofacilitatecomparisonsofourperformancefromperiodtoperiod.

(c) Non-cashchargesrelatedtoimpairmentofintangibleassets,primarilyrelatedtotheElfasegment,whichwedonotconsiderinourevaluationofourongoingperformance.

(d) ChargesincurredinconnectionwithourIPO,whichwedonotexpecttorecuranddonotconsiderinourevaluationofongoingperformance.

(e) ReflectstheextenttowhichourannualGAAPrentexpensehasbeenaboveorbelowourcashrentpaymentduetoleaseaccountingadjustments.Theadjustmentvariesdependingontheaverageageofourleaseportfolio(weightedforsize),asourGAAPrentexpenseonyoungerleasestypicallyexceedsourcashcost,whileourGAAPrentexpenseonolderleasesistypicallylessthanourcashcost.

(f) IncludeschargesincurredtorestructurebusinessoperationsatElfa,includingthesaleofasubsidiaryinGermanyandamanufacturingfacilityinNorwayinfiscal2012,aswellastherelocationofcertainheadofficefunctionsinsalesandmarketingfromtheVästervik,Sweden,manufacturinglocationtothegroupheadquartersinMalmö,Swedeninfiscal2012,whichwedonotconsiderinourevaluationofourongoingperformance.

(g) Non-cashchargesrelatedtostock-basedcompensationprograms,whichvaryfromperiodtoperioddependingonvolumeandvestingtimingofawards.Weadjustforthesechargestofacilitatecomparisonsfromperiodtoperiod.

(h) LossrecordedasaresultoftherepaymentofthethenoutstandingtermloanfacilityandseniorsubordinatednotesinApril2012,andtheamendmentsmadetotheSeniorSecuredTermLoanFacilityinApril2013andNovember2013,whichwedonotconsiderinourevaluationofourongoingoperations.

(i) Realizedforeignexchangetransactionalgains/lossesourmanagementdoesnotconsiderinourevaluationofourongoingoperations.

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(8) Adjustednetincomeandadjustednetincomepercommonshare—dilutedhavebeenpresentedassupplementalmeasuresoffinancialperformancethatarenotrequiredby,orpresentedinaccordancewith,GAAP.Wedefineadjustednetincomeasnetincome(loss)availabletocommonshareholdersbeforedistributionsaccumulatedtopreferredshareholders,stock-basedcompensationandothercostsinconnectionwithourIPO,restructuringcharges,impairmentchargesrelatedtointangibleassets,lossesonextinguishmentofdebt,certaingainsondisposalofassetsandthetaximpactoftheseadjustmentsandotherunusualorinfrequenttaxitems.Wedefineadjustednetincomepercommonshare—dilutedasadjustednetincomedividedbythedilutedweightedaveragecommonsharesoutstanding;however,forfiscal2013andfiscal2012adjusteddilutedweightedaveragecommonsharesoutstandingarecalculatedbasedontheassumptionthatthenumberofsharesoutstandingasofMarch1,2014wasoutstandingatthebeginningoftheperiod.Weuseadjustednetincomeandadjustednetincomepercommonshare—dilutedtosupplementGAAPmeasuresofperformancetoevaluatetheeffectivenessofourbusinessstrategies,tomakebudgetingdecisionsandtocompareourperformanceagainstthatofotherpeercompaniesusingsimilarmeasures.Wepresentadjustednetincomeandadjustednetincomepercommonshare—dilutedbecausewebelievetheyassistinvestorsincomparingourperformanceacrossreportingperiodsonaconsistentbasisbyexcludingitemsthatwedonotbelieveareindicativeofourcoreoperatingperformanceandbecausewebelieveitisusefulforinvestorstoseethemeasuresthatmanagementusestoevaluatetheCompany.

AreconciliationoftheGAAPfinancialmeasuresofnetincome(loss)availabletocommonshareholdersanddilutednetincome(loss)percommonsharetothenon-GAAPfinancial

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(j) Otheradjustmentsincludeamountsourmanagementdoesnotconsiderinourevaluationofourongoingoperations,includingcertainseverance,costsincurredinpreparationforbeingapubliccompany,andothercharges.

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measuresofadjustednetincomeandadjustednetincomepercommonshare—dilutedissetforthbelow:

Fiscalyearended

April1,2017

April2,2016

February27,2016

February28,2015

March1,2014

March2,2013

(unaudited) Numerator: Netincome(loss)availabletocommonshareholders $ 14,953 $ 4,858 $ 5,142 $ 22,673 $ (51,581) $ (90,479)

Distributionsaccumulatedtopreferredshareholders(a) — — — — 59,747 90,349

IPOrelatedstock-basedcompensation*(b) — — — — 14,602 —

IPOcosts*(c) — — — — 1,259 —Restructuringcharges+(d) — — — — 532 6,369Goodwillandtradenameimpairment+(e) — — — — — 15,533

Gainondisposalofsubsidiaryandrealestate+(f) — — — (3,681) — —

Lossonextinguishmentofdebt*(g) — — — — 1,229 7,333

Taxes(h) — — — (2,491) (9,434) (12,946)Adjustednetincome $ 14,953 $ 4,858 $ 5,142 $ 16,501 $ 16,354 $ 16,159

Denominator:

Weightedaveragecommonsharesoutstanding—diluted 48,016,010 47,976,034 47,985,717 48,520,865 17,955,757 2,929,789

Adjustweightingfactorofoutstandingshares(i) — — — — 30,939,876 45,011,391

Adjustedweightedaveragecommonsharesoutstanding-diluted 48,016,010 47,976,034 47,985,717 48,520,865 48,895,633 47,941,180

Adjustednetincomepercommonshare—diluted $ 0.31 $ 0.10 $ 0.11 $ 0.34 $ 0.33 $ 0.34

(a) DistributionsaccumulatedtopreferredshareholdersinarrearswereeliminatedasofNovember6,2013throughtheDistributionandExchange(asdefinedinNote8toourauditedconsolidatedfinancialstatements),andarenotconsideredinourevaluationofongoingperformance.

(b) Non-cashchargesrelatedtostock-basedcompensationprogramsincurredinconnectionwithourIPO,whichwedonotconsiderinourevaluationofourongoingperformance.

(c) ChargesincurredinconnectionwithourIPO,whichwedonotexpecttorecuranddonotconsiderinourevaluationofongoingperformance.

(d) IncludeschargesincurredtorestructurebusinessoperationsatElfa,includingthesaleofasubsidiaryinGermanyandtheclosedownofamanufacturingfacilityinNorwayinfiscal2012,aswellastherelocationofcertainheadofficefunctionsinsalesandmarketingfromtheVästervik,Sweden,manufacturinglocationtothegroupheadquartersinMalmö,Swedeninfiscal2012,whichwedonotconsiderinourevaluationofourongoingperformance.

(e) Non-cashchargesrelatedtoimpairmentofintangibleassetsattheElfasegment,whichwedonotconsiderinourevaluationofourongoingperformance.

(f) GainrecordedasaresultofthesaleofaNorwegiansubsidiary,whoseprimaryassetwasamanufacturingfacilitythatwasshutdownandconsolidatedintoalikefacilityinSwedenaspartofElfa'srestructuringeffortsinfiscal2012,aswellasthesaleofabuildingatElfainfiscal2014,whichwedonotconsiderinourevaluationofongoingperformance.

(g) LossrecordedasaresultoftherepaymentofthethenoutstandingtermloanfacilityandseniorsubordinatednotesinApril2012,andtheamendmentsmadetotheSeniorSecuredTermLoanFacilityinApril2013andNovember2013,whichwedonotconsiderinourevaluationofourongoingperformance.

(h) Taximpactofadjustmentstonetincome(loss),aswellasotherunusualorinfrequenttaxitems,includingtheimpactofa$1.8millionreductionintaxexpenserecordedinfiscal2014primarilyrelatedtoarefundoftaxpaidinapriorperiod,theexclusionofataxbenefitrecordedinthethirdquarteroffiscal2012asaresultofareductionin

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(9) Networkingcapitalisdefinedascurrentassets(excludingcash)lesscurrentliabilities(excludingthecurrentportionoflong-termdebtandrevolvinglinesofcredit).

(10) Inthefirstquarteroffiscal2016,TCSretrospectivelyadoptedAccountingStandardsUpdate("ASU")2015-03,Interest—ImputationofInterest:SimplifyingthePresentationofDebtIssuanceCosts.Assuch,thetotalassetandlong-termdebtamountspresentedabovereflecttheadjustmentstoreclassifydeferredfinancingcostsfromnoncurrentassetstoareductionoflong-termdebtinaccordancewiththenewguidance.

(11) Long-termdebtconsistsofthecurrentandlong-termportionsoftheSeniorSecuredTermLoanFacility,the2014ElfaTermLoanFacility,ElfaTermLoanFacility,theRevolvingCreditFacility,capitalleaseliabilities,andothermortgagesandloans.

ITEM7.MANAGEMENT'SDISCUSSIONANDANALYSISOFFINANCIALCONDITIONANDRESULTSOFOPERATIONS

YoushouldreadthefollowingdiscussionandanalysisofourfinancialconditionandresultsofoperationstogetherwithourconsolidatedfinancialstatementsandtherelatednotesandotherfinancialinformationincludedelsewhereinthisAnnualReportonForm10-K.Someoftheinformationcontainedinthisdiscussionandanalysisorsetforthelsewhereinthisreport,includinginformationwithrespecttoourplansandstrategyforourbusiness,includesforward-lookingstatementsthatinvolverisksanduncertainties.Youshouldreviewthe"CautionaryNoteRegardingForward-LookingStatements"and"RiskFactors"sectionsofthisreportforadiscussionofimportantfactorsthatcouldcauseactualresultstodiffermateriallyfromtheresultsdescribedinorimpliedbytheforward-lookingstatementscontainedinthefollowingdiscussionandanalysis.

Overview

TheContainerStore®istheoriginalandleadingspecialtyretailerofstorageandorganizationproductsandsolutionsintheUnitedStatesandtheonlynationalretailersolelydevotedtothecategory.Weprovideacollectionofcreative,multifunctionalandcustomizablestorageandorganizationsolutionsthataresoldinourstoresandonlinethroughahigh-service,differentiatedshoppingexperience.Ourvisionistobeabelovedbrandandthefirstchoiceforpersonalizedorganizationsolutionsandservices.Ourcustomersarepredominantlyfemale,highlyeducatedandverybusy—fromcollegestudentstoemptynesters.Weservicethemwithstorageandorganizationsolutionsthatsavethemspaceandtimeandultimatelyimprovethequalityoftheirlives.Webelieveanorganizedlifeisahappylife.

Ouroperationsconsistoftwooperatingsegments:

• The Container Store ("TCS"), whichconsistsofourretailstores,websiteandcallcenter,aswellasourinstallationandorganizationalservicesbusiness.AsofApril12017,weoperated86storeswithanaveragesizeofapproximately25,000squarefeet(19,000sellingsquarefeet)in31statesandtheDistrictofColumbia.Wealsoofferallofourproductsdirectlytocustomersthroughourwebsite,responsivemobilesite,andcallcenter.Ourstoresreceiveallproductsdirectlyfromourdistributioncenterco-locatedwithourcorporateheadquartersandcallcenterinCoppell,Texas.

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theSwedishtaxratefrom26.3%to22.0%,aswellastheexclusionoftheimpactofcertainvaluationallowancesondeferredtaxassets,whichwedonotconsiderinourevaluationofongoingperformance.

(i) Fiscal2013and2012arecalculatedbasedontheassumptionthatthenumberofsharesoutstandingasofMarch1,2014wasoutstandingatthebeginningoftheapplicablefiscalyear.

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• Elfa, TheContainerStore,Inc.'swhollyownedSwedishsubsidiary,ElfaInternationalAB("Elfa"),whichdesignsandmanufacturescomponent-basedshelvinganddrawersystemsandmade-to-measureslidingdoors.Elfawasfoundedin1948andisheadquarteredinMalmö,Sweden.Elfa'sshelvinganddrawersystemsarecustomizableforanyareaofthehome,includingclosets,kitchens,officesandgarages.ElfaoperatesfourmanufacturingfacilitieswithtwolocatedinSweden,oneinFinlandandoneinPoland.TheContainerStorebegansellingelfa®productsin1978andacquiredElfain1999.TodayourTCSsegmentistheexclusivedistributorofelfa®productsintheU.S.Elfaalsosellsitsproductsonawholesalebasistovariousretailersinapproximately30countriesaroundtheworld,withaconcentrationintheNordicregionofEurope.

ManagementTransition

EffectiveJuly1,2016,MelissaReiff,formerPresidentandChiefOperatingOfficer,becametheretailer'sChiefExecutiveOfficer,succeedingWilliamA.("Kip")Tindell,III.SharonTindelladdedPresidenttoherChiefMerchandisingOfficertitleandKipTindell,formerChairmanandChiefExecutiveOfficer,retainedhisroleasChairmanoftheCompany'sBoardofDirectors.Inaddition,JodiTaylor,ChiefFinancialOfficerandSecretary,addedChiefAdministrativeOfficertohertitle.

Howweassesstheperformanceofourbusiness

Weconsideravarietyoffinancialandoperatingmeasuresinassessingtheperformanceofourbusiness.Thekeymeasuresweusetodeterminehowourbusinessisperformingarenetsales,grossprofit,grossmargin,andselling,generalandadministrativeexpenses.Inaddition,wealsoreviewotherimportantoperatingmetricssuchascomparablestoresalesandnon-GAAPmeasuressuchasEBITDA,AdjustedEBITDA,andadjustednetincome.

Optimization Plan

OnMay23,2017,theCompanyannouncedtheimplementationofafour-partoptimizationplantodriveimprovedsalesandprofitability(the"OptimizationPlan").Thisplanincludessalesinitiatives,certainfull-timepositioneliminationsatTCS,organizationalrealignmentatElfaandongoingsavingsandefficiencyefforts.Infiscal2016,theCompany'ssavingsprogramwasfocusedwithinselling,generalandadministrativeexpenses.However,aspartoftheOptimizationPlan,theCompanyalsointendstofocusonsavingsandefficiencyeffortswithincostofsales,inadditiontoselling,generalandadministrativeexpenses.

Net sales

Netsalesreflectoursalesofmerchandiseplusotherservicesprovided,suchasinstallation,shipping,delivery,andorganizationservices,lessreturnsanddiscounts.NetsalesalsoincludewholesalesalesbyElfa.RevenuefromourTCSsegmentisrecognizeduponreceiptoftheproductbyourcustomersoruponcompletionoftheservicetoourcustomers.Elfasegmentrevenueisrecordeduponshipmenttocustomers.

Theretailandwholesalebusinessesinwhichweoperatearecyclical,andconsequentlyoursalesareaffectedbygeneraleconomicconditions.Purchasesofourproductsaresensitivetotrendsinthelevelsofconsumerspending,whichareaffectedbyanumberoffactorssuchasconsumerdisposableincome,housingmarketconditions,stockmarketperformance,consumerdebt,interestrates,taxratesandoverallconsumerconfidence.

Ournetsalesaremoderatelyseasonal.Asaresult,ourrevenuesfluctuatefromquartertoquarter,whichoftenaffectsthecomparabilityofourinterimresults.NetsalesarehistoricallyhigherinthefourthquarterdueprimarilytotheimpactofOurAnnualelfa®Sale,whichtraditionallybeginsonor

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aboutDecember24thandrunsintoFebruary.However,duetothechangeinourfiscalyearendfromtheSaturdayclosesttoFebruary28totheSaturdayclosesttoMarch31,theCompanyexpectstorealizemoresalesinthefiscalthirdquartergoingforwardthanitdidinprioryears.ThefiscalyearchangebecameeffectivebeginningwiththeCompany's2016fiscalyear,whichbeganonApril3,2016andendedonApril1,2017.

Gross profit and gross margin

Grossprofitisequaltoournetsaleslesscostofsales.Grossprofitasapercentageofnetsalesisreferredtoasgrossmargin.CostofsalesinourTCSsegmentincludesthepurchasecostofinventorylessvendorrebates,in-boundfreight,aswellasinventoryshrinkage.Directinstallationandorganizationcosts,aswellascostsincurredtoshipordelivermerchandisetocustomers,arealsoincludedincostofsalesinourTCSsegment.Elfasegmentcostofsalesfrommanufacturingoperationsincludescostsassociatedwithproduction,primarilymaterial,wages,freightandothervariablecosts,andapplicablemanufacturingoverhead.Thecomponentsofourcostofsalesmaynotbecomparabletothecomponentsofcostofsalesorsimilarmeasuresbyotherretailers.Asaresult,datainthisreportregardingourgrossprofitandgrossmarginmaynotbecomparabletosimilardatamadeavailablebyotherretailers.

Ourgrossprofitisvariableinnatureandgenerallyfollowschangesinnetsales.Ourgrossmargincanbeimpactedbychangesinthemixofproductsandservicessold.Forexample,salesfromourTCSsegmenttypicallyprovideahighergrossmarginthansalestothirdpartiesfromourElfasegment.Additionally,salesofproductstypicallyprovideahighergrossmarginthansalesofservices.GrossmarginforourTCSsegmentisalsosusceptibletoforeigncurrencyriskaspurchasesofelfa®productsfromourElfasegmentareinSwedishkrona,whilesalesoftheseproductsareinU.S.dollars.Wemitigatethisriskthroughtheuseofforwardcontracts,wherebywehedgepurchasesofinventorybylockinginforeigncurrencyexchangeratesinadvance.Similarly,grossmarginforourElfasegmentissusceptibletoforeigncurrencyriskascertainpurchasesofrawmaterialsaretransactedincurrenciesotherthanSwedishkrona,whichisthefunctionalcurrencyofElfa.

Selling, general and administrative expenses

Selling,generalandadministrativeexpensesincludealloperatingcostsnotincludedincostofsales,stock-basedcompensation,andpre-openingcosts.ForourTCSsegment,theseincludepayrollandpayroll-relatedexpenses,marketingexpenses,occupancyexpenses(whichincluderent,realestatetaxes,commonareamaintenance,utilities,telephone,propertyinsurance,andrepairsandmaintenance),coststoshipproductfromthedistributioncentertoourstores,andsuppliesexpenses.Wealsoincurcostsforourdistributionandcorporateofficeoperations.ForourElfasegment,theseincludesalesandmarketingexpenses,productdevelopmentcosts,andallexpensesrelatedtooperationsatheadquarters.Depreciationandamortizationareexcludedfrombothgrossprofitandselling,generalandadministrativeexpenses.

Selling,generalandadministrativeexpensesincludebothfixedandvariablecomponentsand,therefore,isnotdirectlycorrelatedwithnetsales.Thecomponentsofourselling,generalandadministrativeexpensesmaynotbecomparabletothecomponentsofsimilarmeasuresofotherretailers.Weexpectthatourselling,generalandadministrativeexpenseswillincreaseinfutureperiodswithexpectedfuturestoregrowth.

Pre-opening costs

Non-capitalexpendituresassociatedwithopeningnewstoresandrelocatingstores,includingrent,marketingexpenses,travelandrelocationcosts,trainingcosts,andcertaincorporateoverheadcosts,areexpensedasincurredandareincludedinpre-openingcostsintheconsolidatedstatementofoperations.

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Comparable store sales

Astoreisincludedinthecomparablestoresalescalculationonthefirstdayofthesixteenthfullfiscalmonthfollowingthestore'sopening.Comparablestoresalesarenetofdiscountsandreturns.Whenastoreisrelocated,wecontinuetoconsidersalesfromthatstoretobecomparablestoresales.Netsalesfromourwebsiteandcallcenterarealsoincludedincalculationsofcomparablestoresales.Priortofiscal2015,thecomparablestoresalesgrowthoperatingmeasuredoesnotincludenetsalesfromservices.

Inthefirstquarteroffiscal2016,wechangedourcomparablestoresalesoperatingmeasuretoreflectthepointatwhichmerchandiseandserviceordersarefulfilledanddeliveredtocustomers,excludingshippinganddelivery.Priortothefirstquarteroffiscal2016,ourcomparablestoresalesoperatingmeasureinagivenperiodwasbasedonmerchandiseandserviceordersplacedinthatperiod,excludingshippinganddelivery,whichdidnotalwaysreflectthepointatwhichmerchandiseandserviceswerereceivedbythecustomerand,therefore,recognizedinourfinancialstatementsasnetsales.Webelievethatchangingthecomparablestoresalesoperatingmetrictobetteralignwithnetsalespresentedinourfinancialstatementswillassistinvestorsinevaluatingourfinancialperformance.

Comparablestoresalesallowustoevaluatehowourretailstorebaseisperformingbymeasuringthechangeinperiod-over-periodnetsalesinstoresthathavebeenopenforfifteenmonthsormore.Thecomparablestoresalesgrowthmetricisanoperatingmeasureintendedonlyassupplementalinformationandisnotasubstitutefornetsalespresentedinaccordancewithgenerallyacceptedaccountingprinciples.Variousfactorsaffectcomparablestoresales,including:

• nationalandregionaleconomictrendsintheUnitedStates;

• changesinourmerchandisemix;

• changesinpricing;

• changesintimingofpromotionaleventsorholidays;and

• weather.

Openingnewstoresispartofourgrowthstrategy.Aswecontinuetopursueourgrowthstrategy,weanticipatethataportionofournetsaleswillcomefromstoresnotincludedinourcomparablestoresalescalculation.Accordingly,comparablestoresalesisonlyonemeasureweusetoassessthesuccessofourgrowthstrategy.

EBITDA and Adjusted EBITDA

EBITDAandAdjustedEBITDAarekeymetricsusedbymanagement,ourboardofdirectorsandLGPtoassessourfinancialperformance.Inaddition,weuseAdjustedEBITDAinconnectionwithcovenantcompliance,executiveperformanceevaluations,andtosupplementGAAPmeasuresofperformancetoevaluatetheeffectivenessofourbusinessstrategies,tomakebudgetingdecisionsandtocompareourperformanceagainstthatofotherpeercompaniesusingsimilarmeasures.WebelieveitisusefulforinvestorstoseethemeasuresthatmanagementusestoevaluatetheCompany,itsexecutivesandourcovenantcompliance,asapplicable.EBITDAandAdjustedEBITDAarealsofrequentlyusedbyanalysts,investorsandotherinterestedpartiestoevaluatecompaniesinourindustry.

WedefineEBITDAasnetincome(loss)beforeinterest,taxes,depreciation,andamortization.AdjustedEBITDAiscalculatedinaccordancewiththeSeniorSecuredTermLoanFacilityandtheRevolvingCreditFacilityandisoneofthecomponentsforperformanceevaluationunderourexecutivecompensationprograms.AdjustedEBITDAreflectsfurtheradjustmentstoEBITDAtoeliminatetheimpactofcertainitems,includingcertainnon-cashandotheritems,thatwedonotconsider

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representativeofourongoingoperatingperformance.ForreconciliationofAdjustedEBITDAtothemostdirectlycomparableGAAPmeasure,referto"Item 6:Selected Financial and Operating Data. "

Adjusted net income and adjusted net income per common share—diluted

Weuseadjustednetincomeandadjustednetincomepercommonshare—dilutedtosupplementGAAPmeasuresofperformancetoevaluatetheeffectivenessofourbusinessstrategies,tomakebudgetingdecisionsandtocompareourperformanceagainstthatofotherpeercompaniesusingsimilarmeasures.Wepresentadjustednetincomeandadjustednetincomepercommonshare—dilutedbecausewebelievetheyassistinvestorsincomparingourperformanceacrossreportingperiodsonaconsistentbasisbyexcludingitemsthatwedonotbelieveareindicativeofourcoreoperatingperformanceandbecausewebelieveitisusefulforinvestorstoseethemeasuresthatmanagementusestoevaluatetheCompany.Adjustednetincomeisasupplementalmeasureoffinancialperformancethatisnotrequiredby,orpresentedinaccordancewith,GAAP.

Wedefineadjustednetincomeasnetincome(loss)availabletocommonshareholdersbeforedistributionsaccumulatedtopreferredshareholders,stock-basedcompensationandothercostsinconnectionwithourIPO,restructuringcharges,lossesonextinguishmentofdebt,certaingainsondisposalofassetsandthetaximpactoftheseadjustmentsandunusualorinfrequenttaxitems.Wedefineadjustednetincomepercommonshare—dilutedasadjustednetincomedividedbythedilutedweightedaveragecommonsharesoutstanding;howeverforfiscal2013adjusteddilutedweightedcommonsharesoutstandingarecalculatedbasedontheassumptionthatthenumberofsharesoutstandingasofMarch1,2014wasoutstandingatthebeginningofthefiscalyear.ForareconciliationofadjustednetincometothemostdirectlycomparableGAAPmeasure,referto"Item 6: Selected Financial and Operating Data. "

Adjustment for currency exchange rate fluctuations

Additionally,thisManagement'sDiscussionandAnalysisalsoreferstoElfathirdpartynetsalesaftertheconversionofElfa'snetsalesfromSwedishkronatoU.S.dollarsusingtheprioryear'sconversionrate.TheCompanybelievesthedisclosureofElfathirdpartynetsaleswithouttheeffectsofcurrencyexchangeratefluctuationshelpsinvestorsunderstandtheCompany'sunderlyingperformance.

NoteonDollarAmounts

AlldollaramountsinthisManagement'sDiscussionandAnalysisofFinancialConditionandResultsofOperationsareinthousands,exceptpershareamounts,unlessotherwisestated.

ResultsofOperations

ThefollowingdatarepresentstheamountsshowninourauditedconsolidatedstatementsofoperationsforthefiscalyearsendedApril1,2017,February27,2016,February28,2015andthefive-weeksendedApril2,2016alongwithcomparableunauditeddatafortherecastfiscalyearendedApril2,2016andfive-weeksendedApril4,2015expressedindollarsandasapercentageofnetsalesandcertainoperatingdataandnon-GAAPfinancialinformation(categoriesthatareonlyapplicabletoourTCSsegmentarenotedwith(*)andtoourElfasegmentwith(+)).Forsegmentdata,seeNote14

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toourauditedconsolidatedfinancialstatementsincludedelsewhereinthisAnnualReportonForm10-K.

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Fiscalyearended FiveWeeksEnded Fiscalyearended

April1,2017

April2,2016

April2,2016

April4,2015

February27,2016

February28,2015

(unaudited) (unaudited) Netsales $ 819,930 $ 797,087 $ 69,218 $ 66,761 $ 794,630 $ 781,866Costofsales(excludingdepreciationandamortization) 343,860 332,594 29,023 27,507 331,079 323,800

Grossprofit 476,070 464,493 40,195 39,254 463,551 458,066Selling,general,andadministrativeexpenses(excludingdepreciationandamortization) 387,948 394,585 34,504 33,728 393,810 372,867

Stock-basedcompensation* 1,989 1,575 147 129 1,556 1,289Pre-openingcosts* 6,852 9,004 191 220 9,033 8,283Depreciationandamortization 37,124 34,628 3,009 2,612 34,230 31,011Otherexpenses 1,058 102 102 — — 1,132Loss(gain)ondisposalofassets 57 62 — — 61 (3,487)Incomefromoperations 41,042 24,537 2,242 2,565 24,861 46,971Interestexpense 16,687 16,772 1,550 1,587 16,810 17,105Incomebeforetaxes 24,355 7,765 692 978 8,051 29,866Provisionforincometaxes 9,402 2,907 338 340 2,909 7,193Netincome $ 14,953 $ 4,858 $ 354 $ 638 $ 5,142 $ 22,673

Fiscalyearended FiveWeeksEnded(3) Fiscalyearended

April1,2017

April2,2016

April2,2016

April4,2015

February27,2016

February28,2015

(unaudited) (unaudited) Percentageofnetsales: Netsales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%Costofsales(excludingdepreciationandamortization) 41.9% 41.7% 41.9% 41.2% 41.7% 41.4%

Grossprofit 58.1% 58.3% 58.1% 58.8% 58.3% 58.6%Selling,general,andadministrativeexpenses(excludingdepreciationandamortization) 47.3% 49.5% 49.8% 50.5% 49.6% 47.7%

Stock-basedcompensation* 0.2% 0.2% 0.2% 0.2% 0.2% 0.2%Pre-openingcosts* 0.8% 1.1% 0.3% 0.3% 1.1% 1.1%Depreciationandamortization 4.5% 4.3% 4.3% 3.9% 4.3% 4.0%Otherexpenses 0.1% 0.0% 0.1% 0.0% 0.0% 0.1%Loss(gain)ondisposalofassets 0.0% 0.0% 0.0% 0.0% 0.0% (0.4%)Incomefromoperations 5.0% 3.1% 3.2% 3.8% 3.1% 6.0%Interestexpense 2.0% 2.1% 2.2% 2.4% 2.1% 2.2%Incomebeforetaxes 3.0% 1.0% 1.0% 1.5% 1.0% 3.8%Provisionforincometaxes 1.1% 0.4% 0.5% 0.5% 0.4% 0.9%Netincome 1.8% 0.6% 0.5% 1.0% 0.6% 2.9%Operatingdata: Comparablestoresalesgrowthfortheperiod(1)* (2.4%) (0.8%) 0.0% (1.4%)

Numberofstoresopenatendofperiod* 86 79 79 70Non-GAAPmeasures(2): AdjustedEBITDA(2) $ 86,559 $ 68,362 $ 68,159 $ 88,230Adjustednetincome(2) $ 14,953 $ 4,858 $ 5,142 $ 16,501Adjustednetincomepercommonshare—diluted(2) $ 0.31 $ 0.10 $ 0.11 $ 0.34

(1) Astoreisincludedinthecomparablestoresalescalculationonthefirstdayofthesixteenthfullfiscalmonthfollowingthestore'sopening.Comparablestoresalesarenetofdiscountsandreturns.Whenastoreisrelocated,we

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YearEndedApril1,2017comparedtoYearEndedApril2,2016

Net sales

ThefollowingtablesummarizesournetsalesforeachofthefiscalyearsendedApril1,2017andApril2,2016:

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continuetoconsidersalesfromthatstoretobecomparablestoresales.Netsalesfromourwebsiteandcallcenterarealsoincludedincalculationsofcomparablestoresales.Priortofiscal2015,thecomparablestoresalesgrowthoperatingmeasuredoesnotincludenetsalesfromservices.

Inthefirstquarteroffiscal2016,wechangedourcomparablestoresalesoperatingmeasuretoreflectthepointatwhichmerchandiseandserviceordersarefulfilledanddeliveredtocustomers,excludingshippinganddelivery.Priortothefirstquarteroffiscal2016,ourcomparablestoresalesoperatingmeasureinagivenperiodwasbasedonmerchandiseandserviceordersplacedinthatperiod,excludingshippinganddelivery,whichdidnotalwaysreflectthepointatwhichmerchandiseandserviceswerereceivedbythecustomerand,therefore,recognizedinourfinancialstatementsasnetsales.Webelievethatchangingthecomparablestoresalesoperatingmetrictobetteralignwithnetsalespresentedinourfinancialstatementswillassistinvestorsinevaluatingourfinancialperformance.Thecomparablestoresalesgrowthmetricisanoperatingmeasureintendedonlyassupplementalinformationandisnotasubstitutefornetsalespresentedinaccordancewithgenerallyacceptedaccountingprinciples("GAAP").

(2) WehavepresentedEBITDA,AdjustedEBITDA,adjustednetincome,andadjustednetincomepercommonshare—dilutedassupplementalmeasuresoffinancialperformancethatarenotrequiredby,orpresentedinaccordancewith,GAAP.Thesenon-GAAPmeasuresshouldnotbeconsideredasalternativestonetincome(loss)asameasureoffinancialperformanceorcashflowsfromoperationsasameasureofliquidity,oranyotherperformancemeasurederivedinaccordancewithGAAPandtheyshouldnotbeconstruedasaninferencethatourfutureresultswillbeunaffectedbyunusualornon-recurringitems.Thesenon-GAAPmeasuresarekeymetricsusedbymanagement,ourboardofdirectors,andLGPtoassessourfinancialperformance.Wepresentthesenon-GAAPmeasuresbecausewebelievetheyassistinvestorsincomparingourperformanceacrossreportingperiodsonaconsistentbasisbyexcludingitemsthatwedonotbelieveareindicativeofourcoreoperatingperformanceandbecausewebelieveitisusefulforinvestorstoseethemeasuresthatmanagementusestoevaluatetheCompany.Thesenon-GAAPmeasuresarealsofrequentlyusedbyanalysts,investorsandotherinterestedpartiestoevaluatecompaniesinourindustry.Inevaluatingthesenon-GAAPmeasures,youshouldbeawarethatinthefuturewewillincurexpensesthatarethesameasorsimilartosomeoftheadjustmentsinthispresentation.Ourpresentationofthesenon-GAAPmeasuresshouldnotbeconstruedtoimplythatourfutureresultswillbeunaffectedbyanysuchadjustments.ManagementcompensatesfortheselimitationsbyrelyingonourGAAPresultsinadditiontousingnon-GAAPmeasuressupplementally.Ournon-GAAPmeasuresarenotnecessarilycomparabletoothersimilarlytitledcaptionsofothercompaniesduetodifferentmethodsofcalculation.FormoreinformationregardingouruseofEBITDAandAdjustedEBITDAandareconciliationofEBITDAandAdjustedEBITDAtotheGAAPfinancialmeasureofnetincome(loss)see"Howweassesstheperformanceofourbusiness"aboveand"Item 6: Selected Financial and OperatingData. "Formoreinformationregardingouruseofadjustednetincomeandadjustednetincomepercommonshare—diluted,andareconciliationofadjustednetincomeandadjustednetincomepercommonshare—dilutedtotheGAAPfinancialmeasuresofnetincome(loss)availabletocommonshareholdersanddilutednetincome(loss)percommonshare,see"Howweassesstheperformanceofourbusiness"aboveand"Item 6: Selected Financial and Operating Data ."

(3) Wehavenotpresentedoperatingdataornon-GAAPmeasuresforthefiveweekperiodsendedApril2,2016andApril4,2015.

April1,2017 %total April2,2016 %total TCSnetsales $ 752,675 91.8%$ 727,659 91.3%Elfathirdpartynetsales 67,255 8.2% 69,428 8.7%Netsales $ 819,930 100.0%$ 797,087 100.0%

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NetsalesinthefiscalyearendedApril1,2017increasedby$22,843,or2.9%,comparedtothefiscalyearendedApril2,2016.Thisincreaseiscomprisedofthefollowingcomponents:

Inthefifty-twoweeksendedApril1,2017,seventeennewstoresgenerated$41,715ofincrementalnetsales,tenofwhichwereopenedpriortoApril2,2016andsevenofwhichwereopenedinfiscal2016.Theincreaseinnetsalesgeneratedbynewstoreswaspartiallyoffsetbya$17,234,or2.4%,decreaseinsalesfromcomparablestores.Elfathirdpartynetsalesdecreased$2,173duringfiscal2016.AfterconvertingElfa'sthirdpartynetsalesfromSwedishkronatoU.S.dollarsusingtheprioryear'sconversionrateforfiscal2016andfiscal2015,Elfathirdpartynetsalesdecreased$490primarilyduetolowernetsalesinRussia.

Gross profit and gross margin

GrossprofitinthefiscalyearendedApril1,2017increasedby$11,577,or2.5%,comparedtothefiscalyearendedApril2,2016.Theincreaseingrossprofitwasprimarilytheresultofincreasedsales,partiallyoffsetbylowergrossmargins.ThefollowingtablesummarizesthegrossmarginforthefiscalyearendedApril1,2017andthefiscalyearendedApril2,2016bysegmentandtotal.Thesegmentmarginsincludetheimpactofinter-segmentsalesfromtheElfasegmenttotheTCSsegment:

TCSgrossmargindecreased60basispointsduringfiscal2016,primarilyduetoanincreasedmixoflower-marginproductandservicesales,combinedwithincreasedsalesassociatedwithpromotionalactivitiesandpartiallyoffsetbytheimpactofastrongerU.S.dollar.Elfasegmentgrossmarginincreased120basispoints,primarilyduetoimprovedproductionefficiencies.Onaconsolidatedbasis,grossmargindeclined20basispoints,astheimprovementinElfagrossmarginwasmorethanoffsetbythedeclineinTCSgrossmargin,duetoalargerpercentageofconsolidatednetsalescomingfromtheTCSsegment.

Selling, general and administrative expenses

Selling,generalandadministrativeexpensesinthefiscalyearendedApril1,2017decreasedby$6,637,or1.7%,comparedtothefiscalyearendedApril2,2016.Asapercentageofconsolidatednetsales,selling,generalandadministrativeexpensesdecreasedby220basispoints.Thefollowingtable

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Netsales NetsalesforthefiscalyearendedApril2,2016 $ 797,087Incrementalnetsalesincrease(decrease)dueto: Newstores 41,715Comparablestores(includinga$2,607,or4.4%,decreaseinonlinesales) (17,234)Elfathirdpartynetsales(excludingimpactofforeigncurrencytranslation) (490)ImpactofforeigncurrencytranslationonElfathirdpartynetsales (1,683)Shippinganddelivery 535NetsalesforthefiscalyearendedApril1,2017 $ 819,930

April1,2017 April2,2016 TCSgrossmargin 57.1% 57.7%Elfagrossmargin 39.9% 38.7%Totalgrossmargin 58.1% 58.3%

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summarizesselling,generalandadministrativeexpensesasapercentageofconsolidatednetsalesforthefiscalyearendedApril1,2017andthefiscalyearendedApril2,2016:

TCSselling,generalandadministrativeexpensesdecreasedby180basispointsasapercentageofconsolidatednetsales.ThedecreasewasprimarilyaresultoftheCompany'sSG&Asavingsprogramwhichcontributedtodecreasedspending,includingon401(k)costs,storepayroll,andcertainmajorinitiatives.Additionally,weexperiencedlowerhealthcarecostsduringfiscal2016.Also,theimpactofamendedandrestatedemploymentagreementsenteredintowithkeyexecutivesduringthefirstquarteroffiscal2016contributedtothedecreaseofselling,generalandadministrativeexpensesduetothereversalofaccrueddeferredcompensationassociatedwiththeoriginalemploymentagreements,netofcostsincurredtoexecutetheagreements,of$3,910,or50basispoints.Thepositiveimpactoftheseitemswaspartiallyoffsetbydeleveragingofoccupancycostsassociatedwithnegativecomparablestoresalesgrowth.Elfaselling,generalandadministrativeexpensesdecreasedby40basispointsasapercentageofconsolidatednetsalesprimarilyduetoapositiveimpactfromforeigncurrencyexchangeratesandasmallerpercentageofconsolidatednetsalescomingfromtheElfasegment.

Pre-opening costs

Pre-openingcostsdecreasedby$2,152,or23.9%inthefiscalyearendedApril1,2017to$6,852,ascomparedto$9,004inthefiscalyearendedApril2,2016.Thedecreasewastheresultofopeningsevennewstoresinfiscal2016,ascomparedtoopeningofninenewstoresandrelocatingonestoreinfiscal2015.

Depreciation and amortization

Depreciationandamortizationincreasedby$2,496,or7.2%,inthefiscalyearendedApril1,2017to$37,124,ascomparedto$34,628inthefiscalyearendedApril2,2016.Theincreaseindepreciationandamortizationisprimarilyrelatedtoanincreaseinthenumberofstores.

Other expenses

InthefiscalyearendedApril1,2017,werecorded$1,058ofotherexpenses,whichwereprimarilyrelatedtomanagementtransitioncosts.

Taxes

TheprovisionforincometaxesinthefiscalyearendedApril1,2017was$9,402ascomparedto$2,907inthefiscalyearendedApril2,2016.TheeffectivetaxratefortheyearendedApril1,2017was38.6%,ascomparedto37.4%intheyearendedApril2,2016.Theincreaseintheeffectivetaxrateisprimarilyduetochangesinthemixofdomesticandforeignearnings,combinedwiththeexpensingofcertaindeferredtaxassetsduetotheexpirationofcertainstockbasedcompensationawards.

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April1,2017%ofnetsales

April2,2016%ofnetsales

TCSselling,generalandadministrative 43.1% 44.9%Elfaselling,generalandadministrative 4.2% 4.6%Totalselling,generalandadministrative 47.3% 49.5%

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Five-weekauditedtransitionperiodendedApril2,2016comparedtofive-weekunauditedperiodendedApril4,2015

Netsalesinthefive-weektransitionperiodendedApril2,2016increasedby$2,457,or3.7%,comparedtothefive-weekperiodendedApril4,2015.Theincreasewasprimarilyduetoincrementalsalesfromtennewstores,partiallyoffsetbyadecreaseinElfathird-partysalesandadecreaseinshippinganddeliverysalesduetotheintroductionoffreeshippingonordersover$75inApril2015.Grossprofitincreasedby$941,or2.4%,comparedtotheprioryearcomparableperiod,primarilyduetotheincreaseinnetsalesandpartiallyoffsetbya70basispointsdeclineingrossmargin.ThedeclineingrossmarginisprimarilyduetoashiftintimingofOurAnnualelfa®Saleextension,whichresultedindecreasedsalesofelfa®productinthefive-weeksendedApril2,2016ascomparedtotheprioryearcomparableperiod.Selling,generalandadministrativeexpensesincreasedby$776,or2.3%,comparedtotheprioryearcomparableperiod,primarilyduetotheincreaseinsales.Asapercentofnetsales,selling,generalandadministrativeexpensesdeclined70basispoints,primarilyduetoimprovedleverageonstorepayrollduringthemonth.Basicanddilutedearningspershareremainedconsistentat$0.01inthefive-weektransitionperiodendedApril2,2016ascomparedtothefive-weekperiodendedApril4,2015.

Fiscal2015comparedtofiscal2014

Net sales

Thefollowingtablesummarizesournetsalesforfiscal2015andfiscal2014:

Netsalesinfiscal2015increasedby$12,764,or1.6%,comparedtofiscal2014.Thisincreaseiscomprisedofthefollowingcomponents:

Theincreaseinnetsaleswasdrivenbynewstores,withsixteenstoresgenerating$35,005ofincrementalsales,nineofwhichwereopenedinfiscal2015andsevenofwhichwereopenedinfiscal2014.Theincreaseinsalesgeneratedbynewstoreswaspartiallyoffsetbya$9,359decreaseinsalesfromotherstores,primarilyduetoincreasedpromotionalactivitiesinfiscal2015.Elfathirdpartynetsaleswerenegativelyimpactedbyforeigncurrencytranslationof$13,103duringfiscal2015.AfterconvertingElfa'sthirdpartynetsalesfromSwedishkronatoU.S.dollarsusingthefiscal2014conversionrateforbothfiscal2015andfiscal2014,ElfathirdpartynetsalesdeclinedslightlyasaresultoflowersalesinRussiaandNorway.ThisdeclinewasalmostcompletelyoffsetbyimprovedsalesinSweden.

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Fiscal2015 %total Fiscal2014 %total TCSnetsales $ 724,079 91.1%$ 697,699 89.2%Elfathirdpartynetsales 70,551 8.9% 84,167 10.8%Netsales $ 794,630 100.0%$ 781,866 100.0%

Netsales Netsalesforfiscal2014 $ 781,866Incrementalnetsalesincrease(decrease)dueto: Newstores 35,005Otherstores(includinga$20,341,or56.4%,increaseinonlinesales) (9,359)Elfathirdpartynetsales(excludingimpactofforeigncurrencytranslation) (513)ImpactofforeigncurrencytranslationonElfathirdpartynetsales (13,103)Servicesandother 734Netsalesforfiscal2015 $ 794,630

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Gross profit and gross margin

Grossprofitinfiscal2015increasedby$5,485,or1.2%,comparedtofiscal2014.Theincreaseingrossprofitwasprimarilytheresultofincreasedsales,partiallyoffsetbylowergrossmargins.Thefollowingtablesummarizesthegrossmarginforfiscal2015andfiscal2014bysegmentandtotal.Thesegmentmarginsincludetheimpactofinter-segmentsalesfromtheElfasegmenttotheTCSsegment:

TCSgrossmargindecreased60basispointsduringfiscal2015,largelyduetoincreasedpromotionalactivities,theApril2015introductionofeverydayfreeshippingonordersover$75,andagrowingmixoflower-marginservicesalesinfiscal2015ascomparedtofiscal2014.ThiswaspartiallyoffsetbytheimpactofthestrongerU.S.dollar.Whiletheintroductionofeverydayfreeshippingonordersover$75hasreducedthegrossmarginrate,increasedsalesvolumesassociatedwiththestrategymorethanoffsettherelatedcosts.Elfasegmentgrossmarginincreased110basispointsprimarilyduetoimprovedproductionefficienciesandstabilizationoffreightcosts,partiallyoffsetbyincreaseddirectmaterialscosts.Onaconsolidatedbasis,grossmargindeclined30basispoints,asthedeclineinTCSgrossmarginmorethanoffsettheimprovementinElfagrossmarginduetoalargerpercentageofnetsalescomingfromtheTCSsegment.

Selling, general and administrative expenses

Selling,generalandadministrativeexpensesinfiscal2015increasedby$20,943,or5.6%,comparedtofiscal2014.Asapercentageofconsolidatednetsales,selling,generalandadministrativeexpensesincreasedby190basispoints.Thefollowingtablesummarizesselling,generalandadministrativeexpensesasapercentageofconsolidatednetsalesforfiscal2015andfiscal2014:

TCSselling,generalandadministrativeexpensesincreasedby220basispointsasapercentageoftotalnetsales,primarilyduetoalargerpercentageoftotalnetsalescomingfromtheTCSsegment,costsincurredrelatedtomajorinitiatives,increasedinvestmentinstorepayrollforenhancedsalesfloorcoverageanddistributioncenterpayrollduetofulfillmentofanincreasednumberofordersshippeddirectlytocustomers,andanincreaseinhealthcarecosts.Fiscal2015servedasaninvestmentyearfortheCompanytosupportourstrategicinitiatives.Elfaselling,generalandadministrativeexpensesdecreasedby30basispointsasapercentageoftotalnetsales,primarilyduetoasmallerpercentageoftotalnetsalescomingfromtheElfasegment.

Pre-opening costs

Pre-openingcostsincreasedby$750,or9.1%infiscal2015to$9,033,ascomparedto$8,283infiscal2014.Theincreasewastheresultoftheopeningofninenewstoresandrelocationofonestoreinfiscal2015,ascomparedtotheopeningofsevennewstoresandrelocationofonestoreinfiscal2014.

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Fiscal2015 Fiscal2014 TCSgrossmargin 57.7% 58.3%Elfagrossmargin 39.0% 37.9%Totalgrossmargin 58.3% 58.6%

Fiscal2015%ofnetsales Fiscal2014%ofnetsales TCSselling,generalandadministrative 44.9% 42.7%Elfaselling,generalandadministrative 4.7% 5.0%Totalselling,generalandadministrative 49.6% 47.7%

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Depreciation and amortization

Depreciationandamortizationincreasedby$3,219,or10.4%,infiscal2015to$34,230,ascomparedto$31,011infiscal2014.Theincreaseindepreciationandamortizationisprimarilyrelatedtoanincreaseinthenumberofstores.

Loss (gain) on disposal of assets

Infiscal2015,werecordedanetlossof$61onthedisposalofassets,ascomparedtoanetgainonthedisposalofassetsof$3,487infiscal2014.OnOctober3,2014,theCompanycompletedthesaleofaNorwegiansubsidiary,whoseprimaryassetwasamanufacturingfacilitythatwasshutdownandconsolidatedintoalikefacilityinSwedenaspartofElfa'srestructuringeffortsinfiscal2012.TheCompanyreceivednetproceedsof$3,846andrecordedagaininconnectionwiththesaleofthissubsidiaryof$3,138infiscal2014.Additionally,onOctober31,2014,theCompanycompletedthesaleofabuildingatElfa.TheCompanyreceivednetproceedsof$912andrecordedagaininconnectionwiththesaleofthebuildingof$543infiscal2014.

Taxes

Theprovisionforincometaxesinfiscal2015was$2,909ascomparedto$7,193infiscal2014.Theeffectivetaxrateforfiscal2015was36.1%,ascomparedto24.1%infiscal2014.Theincreaseintheeffectivetaxrateisprimarilyduetoa$1.8millionreductionintaxexpenserecordedinthesecondquarteroffiscal2014relatedtoarefundoftaxpaidinapriorperiod,aswellasashiftinthemixofdomesticandforeignearnings.

Seasonality

Ourstorageandorganizationproductofferingmakesuslesssusceptibletoholidayshoppingpatternsthanmanyretailers.Historically,ourbusinesshasrealizedahigherportionofnetsales,operatingincomeandcashflowsfromoperationsinthefourthfiscalquarter,attributableprimarilytotheimpactofOurAnnualelfa®Sale,whichtraditionallystartsonoraboutDecember24thandrunsintoFebruary.Overhalfofouradjustednetincomewasderivedinthefiscalfourthquarterinfiscalyears2016,2015,and2014.

LiquidityandCapitalResources

Werelyoncashflowsfromoperations,a$100,000asset-basedrevolvingcreditagreement(the"RevolvingCreditFacility"asfurtherdiscussedunder"RevolvingCreditFacility"below),andtheSEK140.0million(approximately$15,669asofApril1,2017)2014Elfarevolvingcreditfacility(the"2014ElfaRevolvingCreditFacility"asfurtherdiscussedunder"ElfaSeniorSecuredCreditFacilitiesand2014ElfaSeniorSecuredCreditFacilities"below)asourprimarysourcesofliquidity.Ourprimarycashneedsareformerchandiseinventories,directmaterials,payroll,storerent,capitalexpendituresassociatedwithopeningnewstoresandupdatingexistingstores,aswellasinformationtechnologyandinfrastructure,includingdistributioncenterandElfamanufacturingfacilityenhancements.Themostsignificantcomponentsofouroperatingassetsandliabilitiesaremerchandiseinventories,accountsreceivable,prepaidexpensesandotherassets,accountspayable,othercurrentandnon-currentliabilities,taxesreceivableandtaxespayable.Ourliquidityfluctuatesasaresultofourbuildinginventoryforkeysellingperiods,andasaresult,ourborrowingsaregenerallyhigherduringtheseperiodswhencomparedtotherestofourfiscalyear.OurborrowingsgenerallyincreaseinoursecondandthirdfiscalquartersasweprepareforourAnnualShelvingSale,theholidayseason,andOurAnnualelfa®Sale.WebelievethatcashexpectedtobegeneratedfromoperationsandtheavailabilityofborrowingsundertheRevolvingCreditFacilityandthe2014ElfaRevolvingCreditFacilitywillbe

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sufficienttomeetliquidityrequirements,anticipatedcapitalexpendituresandpaymentsdueunderourexistingcreditfacilitiesforatleastthenext12months.

AtApril1,2017,wehad$10,736ofcashand$73,189ofadditionalavailabilityundertheRevolvingCreditFacilityandapproximately$15,669ofadditionalavailabilityunderthe2014ElfaRevolvingCreditFacility.Therewere$4,143inlettersofcreditoutstandingundertheRevolvingCreditFacilityandothercontractsatthatdate.

Cash flow analysis

Asummaryofouroperating,investingandfinancingactivitiesareshowninthefollowingtable:

Net cash provided by operating activities

Cashfromoperatingactivitiesconsistsprimarilyofnetincomeadjustedfornon-cashitems,includingdepreciationandamortization,deferredtaxesandtheeffectofchangesinoperatingassetsandliabilities.

Netcashprovidedbyoperatingactivitieswas$44,639forthefiscalyearendedApril1,2017,asnon-cashitems(primarilydepreciationandamortizationaswellasstock-basedcompensationcharges)of$40,966werecombinedwith$14,953ofnetincomeandpartiallyoffsetbyanincreaseinworkingcapitalof$11,280.Theincreaseinworkingcapitalduringfiscal2016wasprimarilyduetoanincreaseininventoryandaccountsreceivable,partiallyoffsetbyincreasesinaccountspayableandaccruedliabilitiesandincometaxespayable.Theincreaseininventory,aswellastheincreaseinaccountspayableandaccruedliabilities,isprimarilyduetoachangeinpromotionalcampaigncadency,combinedwithanincreaseinthenumberofstores.Theincreaseinaccountsreceivableisprimarilyrelatedtoanincreaseintradereceivablesforbusinesssales,aswellasashiftintimingofreceiptofrebateandlandlordreceivablesduringthefiscalyear.Theincreaseinincometaxespayablewasprimarilyrelatedtoashiftinthetimingoftaxpaymentsduringthefiscalyear.

Netcashprovidedbyoperatingactivitieswas$42,307forthefiscalyearendedFebruary27,2016,asnon-cashitems(primarilydepreciationandamortizationaswellasstock-basedcompensationcharges)of$39,047werecombinedwith$5,142ofnetincomeandpartiallyoffsetbyanincreaseinworkingcapitalof$1,882.Theincreaseinworkingcapitalduringfiscal2015wasprimarilyduetoanincreaseinaccountsreceivableandinventory,partiallyoffsetbyanincreaseinaccountspayableandaccruedliabilities.Theincreaseinaccountsreceivable,aswellastheincreaseinaccountspayableandaccruedliabilities,wasprimarilyrelatedtoashiftintimingoftheendofOurAnnualelfa®Saleinfiscal2015.Theincreaseininventorywasprimarilyrelatedtotheadditionofninenewstoresduringthefiscalyear.

Netcashprovidedbyoperatingactivitieswas$64,625forthefiscalyearendedFebruary28,2015,asnon-cashitems(primarilydepreciationandamortizationaswellasstock-basedcompensationcharges)of$31,692werecombinedwith$22,673ofnetincomeandadecreaseinworkingcapitalof

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FiscalYearEnded

FiveWeeksEnded

April1,2017

February27,2016

February28,2015

April2,2016

Netcashprovidedby(usedin)operatingactivities $ 44,639 $ 42,307 $ 64,625 $ (9,540)Netcashusedininvestingactivities (28,508) (45,750) (43,944) (2,434)Netcash(usedin)providedbyfinancingactivities (13,981) (7,516) (12,527) 6,942Effectofexchangeratechangesoncash (223) (426) (1,206) 232Netincrease(decrease)incash $ 1,927 $ (11,385) $ 6,948 $ (4,800)

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$10,260.Thedecreaseinworkingcapitalduringfiscal2014wasprimarilyduetoincreasedcollectionsoncreditcardreceivablesinfiscal2014duetotheextensionofthefiscal2013Annualelfa®Saleaswellasincreasedcollectionsfromlandlordsfortenantimprovementallowancesduringfiscal2014.

Netcashusedinoperatingactivitieswas$9,540forthefive-weeksendedApril2,2016,asanincreaseinworkingcapitalof$14,073waspartiallyoffsetbynon-cashitems(primarilydepreciationandamortizationaswellasstock-basedcompensationcharges)of$4,179,combinedwith$354ofnetincome.TheincreaseinworkingcapitalduringthefiveweeksendedApril2,2016wasprimarilyduetoadecreaseinaccountspayableandaccruedliabilities,whichwasprimarilyrelatedtodeliveryofcustomerordersrelatedtotheendofOurAnnualelfa®Saleinfiscal2015,interestpaymentsonlong-termdebt,andashiftintimingofotherpaymentsduringthefiveweeksendedApril2,2016.

Net cash used in investing activities

Investingactivitiesconsistprimarilyofcapitalexpendituresfornewstoreopenings,existingstoreremodels,infrastructure,informationsystems,andourdistributioncenter.

OurtotalcapitalexpendituresforthefiscalyearendedApril1,2017were$28,515withnewstoreopeningsandexistingstoreremodelsaccountingfor$16,001.Theremainingcapitalexpendituresof$12,514wereprimarilyforinvestmentsininformationsystemsanddistributioncenterequipment,aswellasElfamanufacturingfacilityenhancements.

OurtotalcapitalexpendituresforthefiscalyearendedFebruary27,2016were$46,431withnewstoreopeningsandexistingstoreremodelsaccountingfor$19,226.Theremainingcapitalexpendituresof$27,205wereprimarilyforstrategicinitiativesanddistributioncenterautomation,aswellasinvestmentsininfrastructuretosupportgrowthandElfamanufacturingfacilityenhancements.

OurtotalcapitalexpendituresforthefiscalyearendedFebruary28,2015were$48,740withnewstoreopeningsandexistingstoreremodelsaccountingforthemajorityofspendingat$30,299.Theremainingcapitalexpendituresof$18,441wereprimarilyforinvestmentsininfrastructuretosupportgrowthandstrategicinitiatives,aswellasElfamanufacturingfacilityenhancements.Additionally,theCompanyreceivednetproceedsof$4,796duringfiscal2014,ofwhich$3,846relatedtothesaleofaNorwegiansubsidiary,whoseprimaryassetwasamanufacturingfacilitythatwasshutdownandconsolidatedintoalikefacilityinSwedenaspartofElfa'srestructuringeffortsinfiscal2012,and$912relatedtothesaleofabuildingatElfa.

Ourtotalcapitalexpendituresforthefive-weeksendedApril2,2016were$2,435withnewstoreopeningsandexistingstoreremodelsaccountingfor$790.Theremainingcapitalexpendituresof$1,645wereprimarilyforinvestmentsininformationsystemsandElfamanufacturingfacilityenhancements,aswellasdistributioncenterequipment.

Net cash used in financing activities

FinancingactivitiesconsistprimarilyofborrowingsandpaymentsundertheSeniorSecuredTermLoanFacility,theRevolvingCreditFacility,theElfaSeniorSecuredCreditFacilities,andthe2014ElfaSeniorSecuredCreditFacilities.

Netcashusedinfinancingactivitieswas$13,981forthefiscalyearendedApril1,2017,whichwasmainlyattributabletopaymentsof$5,496primarilyonindebtednessoutstandingundertheSeniorSecuredTermLoanFacilityandthe2014ElfaSeniorSecuredTermLoanFacility.Inaddition,theCompanymadenetpaymentsof$5,000ontheRevolvingCreditFacilityduringfiscal2016,andmadenetpaymentsof$3,485onthe2014ElfaRevolvingCreditFacility.

Netcashusedinfinancingactivitieswas$7,516forthefiscalyearendedFebruary27,2016,whichwasmainlyattributabletopaymentsof$5,246onindebtednessoutstandingundertheSeniorSecured

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TermLoanFacilityandthe2014ElfaSeniorSecuredTermLoanFacility.TheCompanyborrowedandrepaid$33,000ontheRevolvingCreditFacilityduringfiscal2015,andmadenetpaymentsof$2,063onthe2014ElfaRevolvingCreditFacility(asfurtherdiscussedanddefinedunder"ElfaSeniorSecuredCreditFacilitiesand2014ElfaSeniorSecuredCreditFacilities"below).TheCompanyalsopaid$266indebtissuancecostsrelatedtoAmendmentNo.2totheRevolvingCreditFacility(asfurtherdiscussedanddefinedunder"RevolvingCreditFacility"below).Inaddition,theCompanyreceivedproceedsof$59fromtheexerciseofstockoptions.

Netcashusedinfinancingactivitieswas$12,527forthefiscalyearendedFebruary28,2015,whichwasmainlyattributabletonetpaymentsof$11,063ontheElfaRevolvingCreditFacility,2014ElfaRevolvingCreditFacility,andtheShortTermCreditFacility(asfurtherdiscussedanddefinedunder"ElfaSeniorSecuredCreditFacilitiesand2014ElfaSeniorSecuredCreditFacilities"below).TheCompanymadepaymentsof$36,591onindebtednessoutstandingundertheElfaTermLoanFacility,the2014ElfaTermLoanFacility,theSeniorSecuredTermLoanFacility,andtheRevolvingCreditFacility,whichwerepartiallyoffsetbyborrowingsof$26,000ontheRevolvingCreditFacilityandborrowingsof$8,389relatedtothenew2014ElfaTermLoanFacility.Inaddition,theCompanyreceivedproceedsof$742fromtheexerciseofstockoptions.

Netcashusedinfinancingactivitieswas$6,942forthefive-weeksendedApril2,2016,whichwasmainlyattributabletoborrowingsof$5,000ontheRevolvingCreditFacilityandnetborrowingsof$2,886onthe2014ElfaRevolvingCreditFacility.TheCompanyalsomadepaymentsof$944primarilyonindebtednessoutstandingundertheSeniorSecuredTermLoanFacilityduringtheperiod.

AsofApril1,2017,wehadatotalof$73,189ofunusedborrowingavailabilityundertheRevolvingCreditFacility,and$3,590inlettersofcreditissuedundertheRevolvingCreditFacility.TherewerenoborrowingsoutstandingundertheRevolvingCreditFacilityasofApril1,2017.

AsofApril1,2017,Elfahadatotalof$15,669ofunusedborrowingavailabilityunderthe2014ElfaRevolvingCreditFacilityandnoborrowingsoutstandingunderthe2014ElfaRevolvingCreditFacility.

Senior Secured Term Loan Facility

OnApril6,2012,TheContainerStoreGroup,Inc.,TheContainerStore,Inc.andcertainofitsdomesticsubsidiariesenteredintoacreditagreementwithJPMorganChaseBank,N.A.,asAdministrativeAgentandCollateralAgent,andthelenderspartythereto(asamended,the"SeniorSecuredTermLoanFacility").UndertheSeniorSecuredTermLoanFacility,wehad$316,760inoutstandingborrowingsasofApril1,2017andtheinterestrateonsuchborrowingsisLIBOR+3.25%,subjecttoaLIBORfloorof1.00%.TheSeniorSecuredTermLoanFacilityprovidesthatwearerequiredtomakequarterlyprincipalrepaymentsof$906throughDecember31,2018,withaballoonpaymentfortheremainingbalancedueonApril6,2019.

TheSeniorSecuredTermLoanFacilityissecuredby(a)afirstprioritysecurityinterestinsubstantiallyallofourassets(excludingstockinforeignsubsidiariesinexcessof65%,assetsofnon-guarantorsandsubjecttocertainotherexceptions)(otherthanthecollateralthatsecurestheRevolvingCreditFacilitydescribedbelowonafirst-prioritybasis)and(b)asecondprioritysecurityinterestintheassetssecuringtheRevolvingCreditFacilitydescribedbelowonafirst-prioritybasis.ObligationsundertheSeniorSecuredTermLoanFacilityareguaranteedbyTheContainerStoreGroup,Inc.andeachofTheContainerStore,Inc.'sU.S.subsidiaries.TheSeniorSecuredTermLoanFacilitycontainsanumberofcovenantsthat,amongotherthings,restrictourability,subjecttospecifiedexceptions,toincuradditionaldebt;incuradditionalliensandcontingentliabilities;sellordisposeofassets;mergewithoracquireothercompanies;liquidateordissolveourselves,engageinbusinessesthatarenotinarelatedlineofbusiness;makeloans,advancesorguarantees;engageintransactionswithaffiliates;andmakeinvestments.Inaddition,thefinancingagreementscontaincertain

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cross-defaultprovisions.AsofApril1,2017,wewereincompliancewithallcovenantsandnoEventofDefault(assuchtermisdefinedintheSeniorSecuredTermLoanFacility)hadoccurred.

Revolving Credit Facility

OnApril6,2012,TheContainerStoreGroup,Inc.,TheContainerStore,Inc.andcertainofitsdomesticsubsidiariesenteredintoanasset-basedrevolvingcreditagreementwiththelenderspartythereto,JPMorganChaseBank,N.A.,asAdministrativeAgentandCollateralAgent,andWellsFargoBank,NationalAssociation,asSyndicationAgent(asamended,the"RevolvingCreditFacility").Theaggregateprincipalamountofthefacilityis$100,000.BorrowingsundertheRevolvingCreditFacilityaccrueinterestatLIBOR+1.25%andthematuritydateistheearlierof(x)October8,2020and(y)January6,2019,ifanyofTheContainerStore,Inc.'sobligationsunderitstermloancreditfacilityremainoutstandingonsuchdateandhavenotbeenrefinancedwithdebtthathasafinalmaturitydatethatisnoearlierthanApril6,2019orsubordinateddebt.Inaddition,theRevolvingCreditFacilityincludesanuncommittedincrementalrevolvingfacilityintheamountof$50,000,whichissubjecttoreceiptoflendercommitmentsandsatisfactionofspecifiedconditions.

TheRevolvingCreditFacilityprovidesthatproceedsaretobeusedforworkingcapitalandothergeneralcorporatepurposes,andallowsforswinglineadvancesofupto$15,000andtheissuanceoflettersofcreditofupto$40,000.

TheavailabilityofcreditatanygiventimeundertheRevolvingCreditFacilityislimitedbyreferencetoaborrowingbaseformulabaseduponnumerousfactors,includingthevalueofeligibleinventory,eligibleaccountsreceivable,andreservesestablishedbytheadministrativeagent.Asaresultoftheborrowingbaseformula,theactualborrowingavailabilityundertheRevolvingCreditFacilitycouldbelessthanthestatedamountoftheRevolvingCreditFacility(asreducedbytheactualborrowingsandoutstandinglettersofcreditundertheRevolvingCreditFacility).

TheRevolvingCreditFacilityissecuredby(a)afirst-prioritysecurityinterestinsubstantiallyallofourpersonalproperty,consistingofinventory,accountsreceivable,cash,depositaccounts,andothergeneralintangibles,and(b)asecond-prioritysecurityinterestinthecollateralthatsecurestheSeniorSecuredTermLoanFacilityonafirst-prioritybasis,asdescribedabove(excludingstockinforeignsubsidiariesinexcessof65%,andassetsofnon-guarantorsubsidiariesandsubjecttocertainotherexceptions).ObligationsundertheRevolvingCreditFacilityareguaranteedbyTheContainerStoreGroup,Inc.andeachofTheContainerStore,Inc.'sU.S.subsidiaries.

TheRevolvingCreditFacilitycontainsanumberofcovenantsthat,amongotherthings,restrictourability,subjecttospecifiedexceptions,toincuradditionaldebt;incuradditionalliensandcontingentliabilities;sellordisposeofassets;mergewithoracquireothercompanies;liquidateordissolveourselves,engageinbusinessesthatarenotinarelatedlineofbusiness;makeloans,advancesorguarantees;engageintransactionswithaffiliates;andmakeinvestments.Inaddition,thefinancingagreementscontaincertaincross-defaultprovisions.Wearerequiredtomaintainaconsolidatedfixed-chargecoverageratioof1.0to1.0ifexcessavailabilityislessthan$10,000atanytime.AsofApril1,2017,wewereincompliancewithallcovenantsandnoEventofDefault(assuchtermisdefinedintheRevolvingCreditFacility)hadoccurred.

Elfa Senior Secured Credit Facilities and 2014 Elfa Senior Secured Credit Facilities

OnApril27,2009,ElfaenteredintotheElfaSeniorSecuredCreditFacilitieswithTjustbygdensSparbankAB,whichwerefertoasSparbank,whichconsistedofaSEK137.5milliontermloanfacility,whichwerefertoastheElfaTermLoanFacility,andtheElfaRevolvingCreditFacilityand,togetherwiththeElfaTermLoanFacility,theElfaSeniorSecuredCreditFacilities.OnJanuary27,2012,Sparbanktransferredallofitscommitments,rightsandobligationsundertheElfaSeniorSecuredCreditFacilitiestoSwedbankAB.BorrowingsundertheElfaSeniorSecuredCreditFacilitiesaccrued

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interestatarateofSTIBOR+1.775%.ElfawasrequiredtomakequarterlyprincipalrepaymentsundertheElfaTermLoanFacilityofSEK6.25millionthroughmaturity.TheElfaSeniorSecuredCreditFacilitiesweresecuredbyfirstprioritysecurityinterestsinsubstantiallyallofElfa'sassets.TheElfaTermLoanFacilityandtheElfaRevolvingCreditFacilitymaturedonAugust30,2014andwerereplacedwiththe2014ElfaSeniorSecuredCreditFacilitiesasdiscussedbelow.

OnApril1,2014,ElfaenteredintoamastercreditagreementwithNordeaBankAB("Nordea"),whichconsistsofaSEK60.0million(approximately$6,715asofApril1,2017)termloanfacility(the"2014ElfaTermLoanFacility")andaSEK140.0million(approximately$15,669asofApril1,2017)revolvingcreditfacility(the"2014ElfaRevolvingCreditFacility,"andtogetherwiththe2014ElfaTermLoanFacility,the"2014ElfaSeniorSecuredCreditFacilities").The2014ElfaSeniorSecuredCreditFacilitiestermbeganonAugust29,2014andmaturesonAugust29,2019.Elfaisrequiredtomakequarterlyprincipalpaymentsunderthe2014ElfaTermLoanFacilityintheamountofSEK3.0million(approximately$336asofApril1,2017)throughmaturity.The2014ElfaTermLoanFacilitybearsinterestatSTIBOR+1.7%andthe2014ElfaRevolvingCreditFacilitybearsinterestatNordea'sbaserate+1.4%.Inthefourthquarteroffiscal2016,ElfaandNordeaagreedthatthestatedrateswouldapplythroughmaturity.

The2014ElfaSeniorSecuredCreditFacilitiescontainsanumberofcovenantsthat,amongotherthings,restrictElfa'sability,subjecttospecifiedexceptions,toincuradditionalliens,sellordisposeofassets,mergewithothercompanies,engageinbusinessesthatarenotinarelatedlineofbusinessandmakeguarantees.Inaddition,Elfaisrequiredtomaintain(i)aconsolidatedequityratio(asdefinedinthe2014ElfaSeniorSecuredCreditFacilities)ofnotlessthan30%inyearoneandnotlessthan32.5%thereafterand(ii)aconsolidatedratioofnetdebttoEBITDA(asdefinedinthe2014ElfaSeniorSecuredCreditFacilities)oflessthan3.2,theconsolidatedequityratiotestedattheendofeachcalendarquarterandtheratioofnetdebttoEBITDAtestedasoftheendofeachfiscalquarter.AsofApril1,2017,ElfawasincompliancewithallcovenantsandnoEventofDefault(asdefinedinthe2014ElfaSeniorSecuredCreditFacilities)hadoccurred.

OnMay13,2014,ElfaenteredintoacreditfacilitywithNordeaforSEK15.0million(the"ShortTermCreditFacility").TheShortTermCreditFacilityaccruedinterestat2.53%andmaturedonAugust28,2014,atwhichtimeallborrowingsundertheagreementwerepaidinfulltoNordea(approximately$2,152asofAugust28,2014).ThetotalamountofborrowingsavailableundertheShortTermCreditFacilitywasusedtopayamortgageowedonthePolandmanufacturingfacilityinfullinthefirstquarteroffiscal2014.

Criticalaccountingpoliciesandestimates

ThepreparationoffinancialstatementsinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesrequiresmanagementtomakeestimatesandassumptionsaboutfutureeventsthataffectamountsreportedinourconsolidatedfinancialstatementsandrelatednotes,aswellastherelateddisclosureofcontingentassetsandliabilitiesatthedateofthefinancialstatements.Managementevaluatesitsaccountingpolicies,estimates,andjudgmentsonanon-goingbasis.Managementbasesitsestimatesandjudgmentsonhistoricalexperienceandvariousotherfactorsthatarebelievedtobereasonableunderthecircumstances.Actualresultsmaydifferfromtheseestimatesunderdifferentassumptionsandconditions.

Managementevaluatedthedevelopmentandselectionofitscriticalaccountingpoliciesandestimatesandbelievesthatthefollowinginvolveahigherdegreeofjudgmentorcomplexityandaremostsignificanttoreportingourresultsofoperationsandfinancialposition,andarethereforediscussedascritical.Thefollowingcriticalaccountingpoliciesreflectthesignificantestimatesandjudgmentsusedinthepreparationofourconsolidatedfinancialstatements.Withrespecttocriticalaccountingpolicies,evenarelativelyminorvariancebetweenactualandexpectedexperiencecan

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potentiallyhaveamateriallyfavorableorunfavorableimpactonsubsequentresultsofoperations.MoreinformationonallofoursignificantaccountingpoliciescanbefoundinNote1—Nature of Business and Summary of Significant Accounting Policies toourauditedconsolidatedfinancialstatementsincludedelsewhereinthisAnnualReportonForm10-K.

Revenue recognition

WerecognizerevenuesandtherelatedcostofgoodssoldforourTCSsegmentwhenmerchandiseisreceivedbyourcustomers,whichreflectsanestimateofshipmentsthathavenotyetbeenreceivedbythecustomer.Thisestimateisbasedonshippingtermsandhistoricaldeliverytimes.WerecognizerevenuesandtherelatedcostofgoodssoldforourElfasegmentuponshipment.

Werecognizeshippingandhandlingfeesasrevenuewhenthemerchandiseisshippedtothecustomer.Costsofshippingandhandlingareincludedincostofgoodssold.Werecognizefeesforinstallationandotherservicesasrevenueuponcompletionoftheservicetothecustomer.Costsofinstallationandotherservicesareincludedincostofgoodssold.

Salestaxcollectedisnotrecognizedasrevenueasitisultimatelyremittedtogovernmentalauthorities.

Wereserveforprojectedmerchandisereturnsbasedonhistoricalexperienceandvariousotherassumptionsthatwebelievetobereasonable.Thereservereducessalesandcostofsales,accordingly.Merchandiseexchangesofsimilarproductandpricearenotconsideredmerchandisereturnsand,therefore,areexcludedwhencalculatingthesalesreturnsreserve.

Inventories

Inventoriesatretailstoresarecomprisedoffinishedgoodsandarevaluedatthelowerofcostorestimatednetrealizablevalue,withcostdeterminedonaweighted-averagecostmethodincludingassociatedfreightcosts.Manufacturinginventoriesarecomprisedofrawmaterials,workinprocess,andfinishedgoodsandarevaluedonafirst-in,firstoutbasisusingfullabsorptionaccountingwhichincludesmaterial,labor,othervariablecosts,andotherapplicablemanufacturingoverhead.Todetermineifthevalueofinventoryisrecoverableatcost,weconsidercurrentandanticipateddemand,customerpreferenceandthemerchandiseage.Thesignificantestimatesusedininventoryvaluationareobsolescence(includingexcessandslow-movinginventory)andestimatesofinventoryshrinkage.Weadjustourinventoryforobsolescencebasedonhistoricaltrends,agingreports,specificidentificationandourestimatesoffutureretailsalesprices.

Reservesforshrinkageareestimatedandrecordedthroughouttheperiodasapercentageofcostofsalesbasedonhistoricalshrinkageresultsandcurrentinventorylevels.Actualshrinkageisrecordedthroughouttheyearbaseduponperiodiccyclecounts.Actualinventoryshrinkagecanvaryfromestimatesduetofactorsincludingthemixofourinventoryandexecutionagainstlosspreventioninitiativesinourstoresanddistributioncenter.

Duetothesefactors,ourobsolescenceandshrinkagereservescontainuncertainties.Bothestimateshavecalculationsthatrequiremanagementtomakeassumptionsandtoapplyjudgmentsregardinganumberoffactors,includingmarketconditions,thesellingenvironment,historicalresultsandcurrentinventorytrends.Ifactualobsolescenceorshrinkageestimateschangefromouroriginalestimates,wewilladjustourinventoryreservesaccordinglythroughouttheperiod.Managementdoesnotbelievethatchangesintheassumptionsusedintheseestimateswouldhaveasignificanteffectonourinventorybalances.Wehavenotmadeanymaterialchangestoourassumptionsincludedinthecalculationsoftheobsolescenceandshrinkagereservesduringtheperiodspresented.

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Income taxes

WeaccountforincometaxesutilizingFASBASC740,Income Taxes ("ASC740").ASC740requiresanassetandliabilityapproach,whichrequirestherecognitionofdeferredtaxliabilitiesandassetsfortheexpectedfuturetaxconsequencesoftemporarydifferencesbetweenthecarryingamountsandthetaxbasesofassetsandliabilities.Valuationallowancesareestablishedagainstdeferredtaxassetswhenitismore-likely-than-notthattherealizationofthosedeferredtaxassetswillnotoccur.Valuationallowancesarereleasedaspositiveevidenceoffuturetaxableincomesufficienttorealizetheunderlyingdeferredtaxassetsbecomesavailable(e.g.,three-yearcumulativefinancialincome).

Deferredtaxassetsandliabilitiesaremeasuredusingtheenactedtaxratesineffectintheyearswhenthosetemporarydifferencesareexpectedtoreverse.Theeffectondeferredtaxesfromachangeinthetaxrateisrecognizedthroughcontinuingoperationsintheperiodthatincludestheenactmentofthechange.Changesintaxlawsandratescouldaffectrecordeddeferredtaxassetsandliabilitiesinthefuture.

WeoperateincertainjurisdictionsoutsidetheUnitedStates.ASC740-30providesthattheundistributedearningsofaforeignsubsidiarybeaccountedforasatemporarydifferenceunderthepresumptionthatallundistributedearningswillbedistributedtotheparentcompanyasadividend.Sufficientevidenceoftheintenttopermanentlyreinvesttheearningsinthejurisdictionwhereearnedprecludesacompanyfromrecordingthetemporarydifference.ForpurposesofASC740-30,wearepartiallyreinvestedinourSwedishsubsidiaryElfaandthusdonotrecordatemporarydifference.WearepartiallyreinvestedsincewehavepermanentlyreinvestedourpastearningsatElfa;however,wedonotassertthatallfutureearningswillbereinvestedintoElfa.

Leases

Rentexpenseonoperatingleases,includingrentholidaysandscheduledrentincreases,isrecordedonastraight-linebasisoverthetermofthelease,commencingonthedatewetakepossessionoftheleasedproperty.Rentexpenseisrecordedinselling,generalandadministrativeexpenses.Pre-openingrentexpenseisrecordedinpre-openingcostsintheconsolidatedstatementofoperations.Thenetexcessofrentexpenseovertheactualcashpaidhasbeenrecordedasdeferredrentintheaccompanyingconsolidatedbalancesheets.Tenantimprovementallowancesarealsoincludedintheaccompanyingconsolidatedbalancesheetsasdeferredrentliabilitiesandareamortizedasareductionofrentexpenseoverthetermoftheleasefromthepossessiondate.Contingentrentalpayments,typicallybasedonapercentageofsales,arerecognizedinrentexpensewhenpaymentofthecontingentrentisprobable.

Stock-based compensation

TheCompanyaccountsforstock-basedcompensationinaccordancewithFASBASC718,Compensation-Stock Compensation ("ASC718"),whichrequiresthefairvalueofstock-basedpaymentstoberecognizedintheconsolidatedfinancialstatementsascompensationexpenseovertherequisiteserviceperiod.Fortime-basedawards,compensationexpenseisrecognizedonastraightlinebasis,netofforfeitures,overtherequisiteserviceperiodforawardsthatactuallyvest.Forperformance-basedawards,compensationexpenseisestimatedbasedonachievementoftheperformanceconditionandisrecognizedusingtheacceleratedattributionmethodovertherequisiteserviceperiodforawardsthatactuallyvest.Stock-basedcompensationexpenseisrecordedinthestock-basedcompensationlineintheconsolidatedstatementsofoperations.

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StockOptions

TheCompanyestimatesthefairvalueofeachstockoptiongrantonthedateofgrantbasedupontheBlack-Scholesoption-pricingmodel.Thismodelrequiresvarioussignificantjudgmentalassumptionsinordertoderiveafinalfairvaluedeterminationforeachtypeofawardincluding:

• ExpectedTerm—Theexpectedtermoftheoptionsrepresentstheperiodoftimebetweenthegrantdateoftheoptionsandthedatetheoptionsareeitherexercisedorcanceled,includinganestimateofoptionsstilloutstanding.

• ExpectedVolatility—Theexpectedvolatilityincorporateshistoricalandimpliedvolatilityofcomparablepubliccompaniesforaperiodapproximatingtheexpectedterm.

• ExpectedDividendYield—TheexpecteddividendyieldisbasedontheCompany'sexpectationofnotpayingdividendsonitscommonstockfortheforeseeablefuture.

• Risk-FreeInterestRate—Therisk-freeinterestrateisbasedontheU.S.Treasuryyieldcurveineffectatthetimeofgrantandwithamaturitythatapproximatestheexpectedterm.

RestrictedStockAwards

ThefairvalueofeachrestrictedstockawardisdeterminedbasedontheclosingpriceoftheCompany'scommonstockasreportedonTheNewYorkStockExchangeonthegrantdate.

Intangibles and long-lived assets

Goodwill

Weevaluategoodwillannuallytodeterminewhetheritisimpaired.Goodwillisalsotestedbetweenannualimpairmenttestsifaneventoccursorcircumstanceschangethatwouldindicatethatthefairvalueofareportingunitislessthanitscarryingamount.Conditionsthatmayindicateimpairmentinclude,butarenotlimitedto,asignificantadversechangeincustomerdemandorbusinessclimatethatcouldaffectthevalueofanasset.Ifanimpairmentindicatorexists,wetestgoodwillforrecoverability.Wehaveidentifiedtworeportingunitsandwehaveselectedthefirstdayofthefourthfiscalquartertoperformourannualgoodwillimpairmenttesting.

Priortotestinggoodwillforimpairment,weperformaqualitativeassessmenttodeterminewhetheritismorelikelythannotthatgoodwillisimpairedforeachreportingunit.Iftheresultsofthequalitativeassessmentindicatethatthelikelihoodofimpairmentisgreaterthan50%,thenweperformatwo-stepimpairmenttestongoodwill.Inthefirststep,wecomparethefairvalueofthereportingunittoitscarryingvalue.Ifthefairvalueofthereportingunitexceedsthecarryingvalueofthenetassetsassignedtothatunit,goodwillisconsiderednotimpairedandwearenotrequiredtoperformfurthertesting.Ifthecarryingvalueofthenetassetsassignedtothereportingunitexceedsthefairvalueofthereportingunit,thenwemustperformthesecondstepoftheimpairmenttestinordertodeterminetheimpliedfairvalueofthereportingunit'sgoodwill.Ifthecarryingvalueofareportingunit'sgoodwillexceedsitsimpliedfairvalue,thenwewouldrecordanimpairmentlossequaltothedifference.

Thefairvalueofeachreportingunitisdeterminedbyusingadiscountedcashflowanalysisusingtheincomeapproach,aswellasamarketapproachtocomparetheestimatedfairvaluetocomparablecompanies.Thedeterminationoffairvaluerequiresassumptionsandestimatesofmanycriticalfactors,includingamongothers,ournatureandourhistory,financialandeconomicconditionsaffectingus,ourindustryandthegeneraleconomy,pastresults,ourcurrentoperationsandfutureprospects,salesofsimilarbusinessesorcapitalstockofpubliclyheldsimilarbusinesses,aswellasprices,termsandconditionsaffectingpastsalesofsimilarbusinesses.Forecastsoffutureoperationsarebased,inpart,onoperatingresultsandmanagement'sexpectationsastofuturemarketconditions.Thesetypesof

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analysescontainuncertaintiesbecausetheyrequiremanagementtomakeassumptionsandtoapplyjudgmentstoestimateindustryeconomicfactorsandtheprofitabilityoffuturebusinessstrategies.Ifactualresultsarenotconsistentwithourestimatesandassumptions,wemaybeexposedtofutureimpairmentlossesthatcouldbematerial.

Tradenames

Weannuallyevaluatewhetherthetradenamescontinuetohaveanindefinitelife.Tradenamesarereviewedforimpairmentannuallyinthefourthquarterandmaybereviewedmorefrequentlyifindicatorsofimpairmentarepresent.Conditionsthatmayindicateimpairmentinclude,butarenotlimitedto,asignificantadversechangeincustomerdemandorbusinessclimatethatcouldaffectthevalueofanasset,aproductrecalloranadverseactionorassessmentbyaregulator.

Theimpairmentreviewisperformedbycomparingthecarryingvaluetotheestimatedfairvalue,determinedusingadiscountedcashflowmethodology.Iftherecordedcarryingvalueofthetradenameexceedsitsestimatedfairvalue,animpairmentchargeisrecordedtowritethetradenamedowntoitsestimatedfairvalue.Factorsusedinthevaluationofintangibleassetswithindefinitelivesinclude,butarenotlimitedto,futurerevenuegrowthassumptions,estimatedmarketroyaltyratesthatcouldbederivedfromthelicensingofourtradenamestothirdparties,andarateusedtodiscounttheestimatedroyaltycashflowprojectionstotheirpresentvalue(orestimatedfairvalue).

Thevaluationoftradenamesrequiresassumptionsandestimatesofmanycriticalfactors,whichareconsistentwiththefactorsdiscussedunder"Goodwill"above.Forecastsoffutureoperationsarebased,inpart,onoperatingresultsandmanagement'sexpectationsastofuturemarketconditions.Thesetypesofanalysescontainuncertaintiesbecausetheyrequiremanagementtomakeassumptionsandtoapplyjudgmentstoestimateindustryeconomicfactorsandtheprofitabilityoffuturebusinessstrategies.Ifactualresultsarenotconsistentwithourestimatesandassumptions,wemaybeexposedtofutureimpairmentlossesthatcouldbematerial.

Long-livedassets

Long-livedassets,suchaspropertyandequipmentandintangibleassetssubjecttoamortization,arereviewedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountofanassetmaynotberecoverable.Conditionsthatmayindicateimpairmentinclude,butarenotlimitedto,asignificantadversechangeincustomerdemandorbusinessclimatethatcouldaffectthevalueofanasset,aproductrecalloranadverseactionorassessmentbyaregulator.Ifthesumoftheestimatedundiscountedfuturecashflowsrelatedtotheassetarelessthanthecarryingvalue,werecognizealossequaltothedifferencebetweenthecarryingvalueandthefairvalue,usuallydeterminedbytheestimateddiscountedcashflowanalysisoftheasset.

ForourTCSsegment,wegenerallyevaluatelong-livedtangibleassetsatthestorelevel,whichisthelowestlevelatwhichindependentcashflowscanbeidentified.Weevaluatecorporateassetsorotherlong-livedassetsthatarenotstore-specificattheconsolidatedlevel.ForourElfasegment,weevaluatelong-livedtangibleassetsatthesegmentlevel.

Sincethereistypicallynoactivemarketforourlong-livedtangibleassets,weestimatefairvaluesbasedontheexpectedfuturecashflows.Weestimatefuturecashflowsbasedonstore-levelhistoricalresults,currenttrends,andoperatingandcashflowprojections.Ourestimatesaresubjecttouncertaintyandmaybeaffectedbyanumberoffactorsoutsideourcontrol,includinggeneraleconomicconditionsandthecompetitiveenvironment.Whilewebelieveourestimatesandjudgmentsaboutfuturecashflowsarereasonable,futureimpairmentchargesmayberequirediftheexpectedcashflowestimates,asprojected,donotoccurorifeventschangerequiringustoreviseourestimates.

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Contractual obligations

Weenterintolong-termobligationsandcommitmentsinthenormalcourseofbusiness,primarilydebtobligationsandnon-cancelableoperatingleases.AsofApril1,2017,ourcontractualcashobligationsoverthenextseveralperiodswereasfollows:

Off Balance Sheet Arrangements

Wearenotpartytoanyoffbalancesheetarrangements.

Recent Accounting Pronouncements

PleaserefertoNote1—Nature of Business and Summary of Significant Accounting Policies toourauditedconsolidatedfinancialstatementsincludedelsewhereinthisAnnualReportonForm10-Kforasummaryofrecentaccountingpronouncements.

64

Paymentsduebyperiod

Total Within1Year 1-3Years 3-5Years After5Years

Recordedcontractualobligations Termloans $ 320,118 $ 4,966 $ 315,152 $ — $ —Revolvingloans — — — — —Capitalleaseobligations 901 379 522 — —Otherlong-termobligations 119 100 19 — —

Unrecordedcontractualobligations Estimatedinterest(1) 30,091 15,443 14,648 — —Operatingleases(2) 558,324 81,680 147,652 111,876 217,116Lettersofcredit 4,143 4,143 — — —Purchaseobligations(3) 33,600 27,812 5,579 209 —

Total(4) $ 947,296 $ 134,523 $ 483,572 $ 112,085 $ 217,116

(1) Forpurposesofthistable,interesthasbeenestimatedbasedoninterestratesineffectforourindebtednessasofApril1,2017,andestimatedborrowinglevelsinthefuture.Actualborrowinglevelsandinterestcostsmaydiffer.

(2) Weenterintooperatingleasesduringthenormalcourseofbusiness.Mostleasearrangementsprovideuswiththeoptiontorenewtheleasesatdefinedterms.Thefutureoperatingleaseobligationswouldchangeifweweretoexercisetheseoptions,orifweweretoenterintoadditionaloperatingleases.

(3) Purchaseobligationsincludelegallybindingcontractssuchasfirmcommitmentsforinventory,equipmentpurchases,marketing-relatedcontracts,softwareacquisition/licensecommitments,aswellascommitmentstomakecapitalexpenditures,andlegallybindingservicecontracts.Purchaseordersforotherservicesarenotincludedinthetableabove.Purchaseordersrepresentauthorizationstopurchaseratherthanbindingagreements.Forthepurposesofthistable,contractualobligationsforthepurchaseofgoodsorservicesaredefinedasagreementsthatareenforceableandlegallybindingandthatspecifyallsignificantterms,including:fixedorminimumquantitiestobepurchased;fixed,minimumorvariablepriceprovisions;andtheapproximatetimingofthetransaction.

(4) Thetableaboveexcludesdeferredleaseincentivesanddefinedbenefitpensionplanobligationswhichwereincludedin"Deferredrentandotherlong-termliabilities"intheconsolidatedbalancesheetasofApril1,2017.Deferredleaseincentiveswereexcludedfromthetableaboveassuchamountsdonotrepresentknowncontractualobligationsforfuturecashpayments.Definedbenefitpensionplanobligationswereexcludedfromthetableasthetimingoftheforthcomingcashpaymentsisuncertain.

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ITEM7A.QUANTITATIVEANDQUALITATIVEDISCLOSURESABOUTMARKETRISK

Foreign currency risk

WearesubjecttoforeigncurrencyriskinconnectionwiththeoperationsofourSwedishsubsidiary,Elfa.Allassetsandliabilitiesofforeignsubsidiariesaretranslatedatyearendratesofexchange,withtheexceptionofcertainassetsandliabilitiesthataretranslatedathistoricalratesofexchange.Revenues,expenses,andcashflowsofforeignsubsidiariesaretranslatedataverageratesofexchangefortheyear.ThefunctionalcurrencyofElfaistheSwedishkrona.BasedontheaverageexchangeratefromSwedishkronatoU.S.dollarduringfiscal2016,andresultsofoperationsinfunctionalcurrency,webelievethata10%increaseordecreaseintheexchangerateoftheSwedishkronawouldincreaseordecreasenetincome(loss)byapproximately$0.4million.

WearealsosubjecttoforeigncurrencyriskinconnectionwiththepurchaseofinventoryfromElfa.Weutilizeforeigncurrencyhedgeinstrumentstomitigatethisrisk.FortheyearendedApril1,2017andtheyearendedApril2,2016,weusedforwardcurrencyhedgeinstrumentsfor78%and50%ofinventorypurchasesinSwedishkronaatanaverageSEKrateof8.6and8.3eachyear,respectively.Currently,wehavehedged80%ofourplannedinventorypurchasesforfiscal2017atanaveragerateof9.0.

Interest rate risk

WearesubjecttointerestrateriskinconnectionwithborrowingsundertheSeniorSecuredTermLoanFacility,theRevolvingCreditFacilityandthe2014ElfaSeniorSecuredCreditFacilities,whichaccrueinterestatvariablerates.AtApril1,2017,borrowingssubjecttointerestrateriskwere$320.1million,wehad$73.2millionofadditionalavailabilityundertheRevolvingCreditFacilityandapproximately$15.7millionofadditionalavailabilityunderthe2014ElfaRevolvingCreditFacility.Wecurrentlydonotengageinanyinterestratehedgingactivity;howeverwewillcontinuetomonitortheinterestrateenvironment.BasedontheaverageinterestrateoneachoftheRevolvingCreditFacilityandthe2014ElfaRevolvingCreditFacilityduringfiscal2016,andtotheextentthatborrowingswereoutstanding,wedonotbelievethata10%changeintheinterestratewouldhaveamaterialeffectonourconsolidatedresultsofoperationsorfinancialcondition.

Impact of Inflation

Ourresultsofoperationsandfinancialconditionarepresentedbasedonhistoricalcost.Whileitisdifficulttoaccuratelymeasuretheimpactofinflationduetotheimprecisenatureoftheestimatesrequired,webelievetheeffectsofinflation,ifany,onourresultsofoperationsandfinancialconditionhavebeenimmaterial.

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ITEM8.FINANCIALSTATEMENTSANDSUPPLEMENTARYDATA

ReportofIndependentRegisteredPublicAccountingFirm

TheBoardofDirectorsandShareholdersofTheContainerStoreGroup,Inc.

WehaveauditedtheaccompanyingconsolidatedbalancesheetsofTheContainerStoreGroup,Inc.(theCompany)asofApril1,2017andFebruary27,2016,andtherelatedconsolidatedstatementsofoperations,comprehensiveincome,shareholders'equityandcashflowsfortheyearendedApril1,2017,eachoftheyearsinthetwo-yearperiodendedFebruary27,2016,andtherelatedconsolidatedstatementsofoperations,comprehensiveincomeandcashflowsforthefiveweektransitionperiodendedApril2,2016.OurauditsalsoincludedthefinancialstatementschedulelistedintheIndexatItem15(2).ThesefinancialstatementsandschedulearetheresponsibilityoftheCompany'smanagement.Ourresponsibilityistoexpressanopiniononthesefinancialstatementsandschedulebasedonouraudits.

WeconductedourauditsinaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates).Thosestandardsrequirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreeofmaterialmisstatement.WewerenotengagedtoperformanauditoftheCompany'sinternalcontroloverfinancialreporting.Ourauditsincludedconsiderationofinternalcontroloverfinancialreportingasabasisfordesigningauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheCompany'sinternalcontroloverfinancialreporting.Accordingly,weexpressnosuchopinion.Anauditalsoincludesexamining,onatestbasis,evidencesupportingtheamountsanddisclosuresinthefinancialstatements,assessingtheaccountingprinciplesusedandsignificantestimatesmadebymanagement,andevaluatingtheoverallfinancialstatementpresentation.Webelievethatourauditsprovideareasonablebasisforouropinion.

Inouropinion,thefinancialstatementsreferredtoabovepresentfairly,inallmaterialrespects,theconsolidatedfinancialpositionofTheContainerStoreGroup,Inc.atApril1,2017andFebruary27,2016,andtheconsolidatedresultsofitsoperationsanditscashflowsfortheyearendedApril1,2017,eachoftheyearsinthetwo-yearperiodendedFebruary27,2016,andthefiveweektransitionperiodendedApril2,2016inconformitywithU.S.generallyacceptedaccountingprinciples.Also,inouropinion,therelatedfinancialstatementschedule,whenconsideredinrelationtothebasicfinancialstatementstakenasawhole,presentsfairlyinallmaterialrespectstheinformationsetforththerein.

/s/ErnstandYoungLLPDallas,TexasJune1,2017

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TheContainerStoreGroup,Inc.

Consolidatedbalancesheets

Seeaccompanyingnotes.

67

(Inthousands) April1,2017

February27,2016

Assets Currentassets: Cash $ 10,736 $ 13,609Accountsreceivable,net 27,476 28,843Inventory 103,120 86,435Prepaidexpenses 10,550 8,692Incometaxesreceivable 16 157Othercurrentassets 10,787 8,695

Totalcurrentassets 162,685 146,431Noncurrentassets: Propertyandequipment,net 165,498 176,117Goodwill 202,815 202,815Tradenames 226,685 228,368Deferredfinancingcosts,net 320 419Noncurrentdeferredtaxassets,net 2,139 2,090Otherassets 1,692 1,879

Totalnoncurrentassets 599,149 611,688Totalassets $ 761,834 $ 758,119

(Inthousands,exceptshareandpershareamounts) April1,2017

February27,2016

Liabilitiesandshareholders'equity Currentliabilities: Accountspayable $ 44,762 $ 40,274Accruedliabilities 60,107 69,635Revolvinglinesofcredit — 721Currentportionoflong-termdebt 5,445 5,373Incometaxespayable 2,738 —

Totalcurrentliabilities 113,052 116,003Noncurrentliabilities: Long-termdebt 312,026 316,135Noncurrentdeferredtaxliabilities,net 80,679 80,720Deferredrentandotherlong-termliabilities 34,287 38,193

Totalnoncurrentliabilities 426,992 435,048Totalliabilities 540,044 551,051Commitmentsandcontingencies(Note 12) Shareholders'equity: Commonstock,$0.01parvalue,250,000,000sharesauthorized;48,045,114sharesissuedatApril1,2017,47,986,975sharesissuedatFebruary27,2016 480 480

Additionalpaid-incapital 859,102 856,879Accumulatedothercomprehensiveloss (22,643) (19,835)Retaineddeficit (615,149) (630,456)

Totalshareholders'equity 221,790 207,068Totalliabilitiesandshareholders'equity $ 761,834 $ 758,119

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TheContainerStoreGroup,Inc.

Consolidatedstatementsofoperations

Seeaccompanyingnotes.

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FiscalYearEnded

FiveWeeksEndedApril2,2016

(Inthousands,exceptshareandpershareamounts) April1,2017

February27,2016

February28,2015

Netsales $ 819,930 $ 794,630 $ 781,866 $ 69,218Costofsales(excludingdepreciationandamortization) 343,860 331,079 323,800 29,023Grossprofit 476,070 463,551 458,066 40,195Selling,general,andadministrativeexpenses(excludingdepreciationandamortization) 387,948 393,810 372,867 34,504

Stock-basedcompensation 1,989 1,556 1,289 147Pre-openingcosts 6,852 9,033 8,283 191Depreciationandamortization 37,124 34,230 31,011 3,009Otherexpenses 1,058 — 1,132 102Loss(gain)ondisposalofassets 57 61 (3,487) —Incomefromoperations 41,042 24,861 46,971 2,242Interestexpense 16,687 16,810 17,105 1,550Incomebeforetaxes 24,355 8,051 29,866 692Provisionforincometaxes 9,402 2,909 7,193 338Netincome $ 14,953 $ 5,142 $ 22,673 $ 354

Netincomepercommonshare—basicanddiluted $ 0.31 $ 0.11 $ 0.47 $ 0.01

Weighted-averagecommonshares—basic 47,996,746 47,985,717 47,971,243 47,986,975Weighted-averagecommonshares—diluted 48,016,010 47,985,717 48,520,865 47,986,975

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TheContainerStoreGroup,Inc.

Consolidatedstatementsofcomprehensiveincome

Seeaccompanyingnotes.

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Fiscalyearended

FiveWeeksEndedApril2,2016

(Inthousands) April1,2017

February27,2016

February28,2015

Netincome $ 14,953 $ 5,142 $ 22,673 $ 354Unrealized(loss)gainonfinancialinstruments,netoftax(benefit)provisionof$(85),$606,$(604)and$7 (138) 853 (935) 12

Pensionliabilityadjustment,netoftaxprovision(benefit)of$142,$39,$(4)and$0 (386) 175 (14) (66)

Foreigncurrencytranslationadjustment (6,283) (2,521) (19,076) 4,053Comprehensiveincome $ 8,146 $ 3,649 $ 2,648 $ 4,353

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TheContainerStoreGroup,Inc.

Consolidatedstatementsofshareholders'equity

Seeaccompanyingnotes.

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Commonstock

Accumulatedother

comprehensiveincome(loss)

Additionalpaid-incapital

Retaineddeficit

Totalshareholders'

equity

(Inthousands,exceptshareamounts) Parvalue Shares Amount BalanceatMarch1,2014 $ 0.01 47,941,180 $ 479 $ 853,295 $ 1,683 $ (658,271) $ 197,186Netincome — — — — 22,673 22,673Stock-basedcompensation — — 1,289 — — 1,289Excesstaxprovisionfromstock-basedcompensation — — (4) — — (4)

Stockoptionexercises 42,480 1 742 — — 743Foreigncurrencytranslationadjustment — — — (19,076) — (19,076)Unrealizedlossonfinancialinstruments,netof$604taxbenefit — — — (935) — (935)

Pensionliabilityadjustment,netof$4taxbenefit — — — (14) — (14)

BalanceatFebruary28,2015 47,983,660 480 855,322 (18,342) (635,598) 201,862Netincome — — — — 5,142 5,142Stock-basedcompensation — — 1,556 — — 1,556Excesstaxprovisionfromstock-basedcompensation — — (58) — — (58)

Stockoptionexercises 3,315 — 59 — — 59Foreigncurrencytranslationadjustment — — — (2,521) — (2,521)Unrealizedgainonfinancialinstruments,netof$606taxprovision — — — 853 — 853

Pensionliabilityadjustment,netof$39taxprovision — — — 175 — 175

BalanceatFebruary27,2016 47,986,975 480 856,879 (19,835) (630,456) 207,068Netincome — — — — 354 354Stock-basedcompensation — — 147 — — 147Foreigncurrencytranslationadjustment — — — 4,053 — 4,053Unrealizedgainonfinancialinstruments,netof$7taxprovision — — — 12 — 12

Pensionliabilityadjustment,netof$0taxprovision — — — (66) — (66)

BalanceatApril2,2016 47,986,975 480 857,026 (15,836) (630,102) 211,568Netincome — — — — 14,953 14,953Stock-basedcompensation — — 1,989 — — 1,989Vestingofrestrictedstockawards 31,216 — — — — —Taxesrelatedtonetsharesettlementofrestrictedstockawards — — (39) — — (39)

Commonstockgrantedtonon-employees 26,923 — 135 — — 135Excesstaxprovisionfromstock-basedcompensation — — (9) — — (9)

Foreigncurrencytranslationadjustment — — — (6,283) — (6,283)Unrealizedlossonfinancialinstruments,netof$85taxbenefit — — — (138) — (138)

Pensionliabilityadjustment,netof$142taxprovision — — — (386) — (386)

BalanceatApril1,2017 $ 0.01 48,045,114 $ 480 $ 859,102 $ (22,643) $ (615,149) $ 221,790

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TheContainerStoreGroup,Inc.

Consolidatedstatementsofcashflows

Seeaccompanyingnotes.

71

FiscalYearEnded

FiveWeeksEndedApril2,2016

(Inthousands) April1,2017

February27,2016

February28,2015

Operatingactivities Netincome $ 14,953 $ 5,142 $ 22,673 $ 354Adjustmentstoreconcilenetincometonetcashprovidedby(usedin)operatingactivities:

Depreciationandamortization 37,124 34,230 31,011 3,009Stock-basedcompensation 1,989 1,556 1,289 147Loss(gain)ondisposalofassets 57 61 (3,487) —Deferredtaxexpense (96) 859 1,423 818Noncashinterest 1,921 1,940 1,956 160Other (29) 401 (500) 45Changesinoperatingassetsandliabilities: Accountsreceivable (5,861) (5,338) 4,137 6,958Inventory (19,598) (1,929) (2,668) 1,516Prepaidexpensesandotherassets 4,028 487 4,705 (7,371)Accountspayableandaccruedliabilities 10,965 5,840 5,562 (14,258)Incometaxes 3,527 (1,330) (2,582) (719)Othernoncurrentliabilities (4,341) 388 1,106 (199)

Netcashprovidedby(usedin)operatingactivities 44,639 42,307 64,625 (9,540)

Investingactivities

Additionstopropertyandequipment (28,515) (46,431) (48,740) (2,435)Proceedsfrominvestmentgrant — 479 — —Proceedsfromsaleofsubsidiary,net — — 3,846 —Proceedsfromsaleofpropertyandequipment 7 202 950 1Netcashusedininvestingactivities (28,508) (45,750) (43,944) (2,434)

Financingactivities

Borrowingsonrevolvinglinesofcredit 42,731 55,872 74,411 4,958Paymentsonrevolvinglinesofcredit (46,216) (57,935) (85,474) (2,072)Borrowingsonlong-termdebt 30,000 33,000 34,389 5,000Paymentsonlong-termdebtandcapitalleases (40,496) (38,246) (36,591) (944)Paymentofdebtissuancecosts — (266) — —Proceedsfromtheexerciseofstockoptions — 59 738 —Netcash(usedin)providedbyfinancingactivities (13,981) (7,516) (12,527) 6,942Effectofexchangeratechangesoncash (223) (426) (1,206) 232Netincrease(decrease)incash 1,927 (11,385) 6,948 (4,800)Cashatbeginningoffiscalyear 8,809 24,994 18,046 13,609Cashatendoffiscalyear $ 10,736 $ 13,609 $ 24,994 $ 8,809

Supplementalinformation:

Cashpaidduringtheyearfor: Interest $ 14,656 $ 14,850 $ 15,255 $ 3,552Taxes $ 7,651 $ 891 $ 7,192 $ 236

Supplementalinformationfornon-cashinvestingandfinancingactivities:

Purchasesofpropertyandequipment(includedinaccountspayable) $ 138 $ 1,386 $ 4,918 $ 1,114Capitalleaseobligationincurred $ 691 $ 541 $ 513 $ 60

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TheContainerStoreGroup,Inc.

Notestoconsolidatedfinancialstatements

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

1.Natureofbusinessandsummaryofsignificantaccountingpolicies

Descriptionofbusiness

TheContainerStore,Inc.wasfoundedin1978inDallas,Texas,asaretailerwithamissiontoprovidecustomerswithstorageandorganizationsolutionsthroughanassortmentofinnovativeproductsandunparalleledcustomerservice.In2007,TheContainerStore,Inc.wassoldtoTheContainerStoreGroup,Inc.(the"Company"),aholdingcompany,ofwhichamajoritystakewaspurchasedbyLeonardGreenandPartners,L.P.("LGP"),withtheremainderheldbycertainemployeesofTheContainerStore,Inc.OnNovember6,2013,theCompanycompletedtheinitialpublicofferingofitscommonstock(the"IPO").Asthemajorityshareholder,LGPretainscontrollinginterestintheCompany.

TheContainerStore,Inc.consistsofourretailstores,websiteandcallcenter,aswellasourinstallationandorganizationalservicesbusiness.AsofApril1,2017,TheContainerStore,Inc.operated86storeswithanaveragesizeofapproximately25,000squarefeet(19,000sellingsquarefeet)in31statesandtheDistrictofColumbia.TheContainerStore,Inc.alsooffersallofitsproductsdirectlytoitscustomersthroughitswebsiteandcallcenter.TheContainerStore,Inc.'swhollyownedSwedishsubsidiary,ElfaInternationalAB("Elfa"),designsandmanufacturescomponent-basedshelvinganddrawersystemsthatarecustomizableforanyareaofthehome.elfa®brandedproductsaresoldexclusivelyintheUnitedStatesinTheContainerStore®retailstores,website,andcallcenterandElfasellstovariousretailersanddistributorsprimarilyintheNordicregionandthroughoutEuropeonawholesalebasis.

Basisofpresentation

TheaccompanyingconsolidatedfinancialstatementshavebeenpreparedinconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica(U.S.GAAP).

Basisofconsolidation

TheconsolidatedfinancialstatementsincludeouraccountsandthoseoftheCompany'swhollyownedsubsidiaries.TheCompanyeliminatesallsignificantintercompanybalancesandtransactions,includingintercompanyprofits,inconsolidation.

Fiscalyear

TheCompanyfollowsa4-4-5fiscalcalendar,wherebyeachfiscalquarterconsistsofthirteenweeksgroupedintotwofour-week"months"andonefive-week"month",anditsfiscalyearendsontheSaturdayclosesttoMarch31st.Elfa'sfiscalyearendsonthelastdayofthecalendarmonthofMarch.Priortofiscalyear2016,theCompany'sfiscalyearendedontheSaturdayclosesttoFebruary28th.

Allreferenceshereinto"fiscal2016"representtheresultsofthe52-weekfiscalyearendedApril1,2017,andreferencesto"fiscal2015"representtheresultsofthe52-weekfiscalyearendedFebruary27,2016.Inaddition,allreferenceshereinto"fiscal2014"representthe52-weekfiscalyearendedFebruary28,2015.

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TheContainerStoreGroup,Inc.

Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

1.Natureofbusinessandsummaryofsignificantaccountingpolicies(Continued)

Managementestimates

ThepreparationoftheCompany'sconsolidatedfinancialstatementsinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesrequiresmanagementtomakeestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesanddisclosureofcontingentassetsandliabilitiesandthereportedamountsofrevenuesandexpenses.Actualresultscoulddifferfromthoseestimates.Significantaccountingjudgmentsandestimatesincludefairvalueestimatesforindefinite-livedintangibleassets,inventorylossreserve,assessmentsoflong-livedassetimpairments,giftcardbreakage,andassessmentofvaluationallowancesondeferredtaxassets.

Revenuerecognition

Revenuefromsalesrelatedtoretailoperationsisrecognizedwhenthemerchandiseisdeliveredtothecustomeratthepointofsale.Revenuefromsalesthatareshippedordelivereddirectlytocustomersisrecognizeduponestimateddeliverytothecustomerandincludesapplicableshippingordeliveryrevenue.Revenuefromsalesthatareinstalledisrecognizeduponcompletionoftheinstallationservicetothecustomerandincludesapplicableinstallationrevenue.Revenuefromsalesofotherservicesisrecognizeduponthecompletionoftheservice.Revenuefromsalesrelatedtomanufacturingoperationsisrecordeduponshipment.Salesarerecordednetofsalestaxescollectedfromcustomers.Asalesreturnallowanceisrecordedforestimatedreturnsofmerchandisesubsequenttothebalancesheetdatethatrelatetosalespriortothebalancesheetdate.Thereturnsallowanceisbasedonhistoricalreturnpatternsandreducessalesandcostofsales,accordingly.Merchandiseexchangesofsimilarproductandpricearenotconsideredmerchandisereturnsand,therefore,areexcludedwhencalculatingthesalesreturnsallowance.

Giftcardsandmerchandisecredits

Giftcardsaresoldtocustomersinretailstores,throughthecallcenterandwebsite,andthroughcertainthirdparties.Weissuemerchandisecreditsinourstoresandthroughourcallcenter.Revenuefromsalesofgiftcardsandissuancesofmerchandisecreditsisrecognizedwhenthegiftcardisredeemedbythecustomer,orthelikelihoodofthegiftcardbeingredeemedbythecustomerisremote(giftcardbreakage).Thegiftcardbreakagerateisdeterminedbaseduponhistoricalredemptionpatterns.Anestimateoftherateofgiftcardbreakageisappliedovertheperiodofestimatedperformance(48monthsasoftheendoffiscal2016)andthebreakageamountsareincludedinnetsalesintheconsolidatedstatementofoperations.TheCompanyrecorded$1,072,$948,$978,and$73ofgiftcardbreakageinfiscalyears2016,2015,2014,andthefiveweeksendedApril2,2016,respectively.

Costofsales

Costofsalesrelatedtoretailoperationsincludesthepurchasecostofinventorysold(netofvendorrebates),in-boundfreight,aswellasinventorylossreserves.Costsincurredtoshipordelivermerchandisetocustomers,aswellasdirectinstallationandorganizationservicescosts,arealso

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TheContainerStoreGroup,Inc.

Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

1.Natureofbusinessandsummaryofsignificantaccountingpolicies(Continued)

includedincostofsales.Costofsalesfrommanufacturingoperationsincludescostsassociatedwithproduction,includingmaterials,wages,othervariableproductioncosts,andotherapplicablemanufacturingoverhead.

Leases

Rentexpenseonoperatingleases,includingrentholidaysandscheduledrentincreases,isrecordedonastraight-linebasisoverthetermofthelease,commencingonthedatetheCompanytakespossessionoftheleasedproperty.Rentexpenseisrecordedinselling,general,andadministrativeexpenses.Pre-openingrentexpenseisrecordedinpre-openingcostsintheconsolidatedincomestatement.Thenetexcessofrentexpenseovertheactualcashpaidhasbeenrecordedasdeferredrentintheaccompanyingconsolidatedbalancesheets.Tenantimprovementallowancesarealsoincludedintheaccompanyingconsolidatedbalancesheetsasdeferredrentliabilitiesandareamortizedasareductionofrentexpenseoverthetermoftheleasefromthepossessiondate.Contingentrentalpayments,typicallybasedonapercentageofsales,arerecognizedinrentexpensewhenpaymentofthecontingentrentisprobable.

Advertising

AlladvertisingcostsoftheCompanyareexpensedwhenincurred,oruponthereleaseoftheinitialadvertisement,exceptforproductioncostsrelatedtocatalogsanddirectmailingstocustomers,whichareinitiallycapitalized.Productioncostsrelatedtocatalogsanddirectmailingsconsistprimarilyofprintingandpostageandareexpensedwhenmailedtothecustomer,exceptfordirectmailingsrelatedtopromotionalcampaigns,whichareexpensedovertheperiodduringwhichthepromotionalsalesareexpectedtooccur.Advertisingcostsarerecordedinselling,general,andadministrativeexpenses.Pre-openingadvertisingcostsarerecordedinpre-openingcosts.

CataloganddirectmailingscostscapitalizedatApril1,2017andFebruary27,2016,amountedto$605and$938respectively,andarerecordedinprepaidexpensesontheaccompanyingconsolidatedbalancesheets.Totaladvertisingexpenseincurredforfiscalyears2016,2015,2014,andthefive-weeksendedApril2,2016was$31,525,$32,343,$35,388,and$2,164,respectively.

Pre-openingcosts

Non-capitalexpendituresassociatedwithopeningnewstores,includingrent,marketingexpenses,travelandrelocationcosts,andtrainingcosts,areexpensedasincurredandareincludedinpre-openingcostsintheconsolidatedstatementofoperations.

Incometaxes

WeaccountforincometaxesutilizingFinancialAccountingStandardsBoard("FASB")AccountingStandardsCodification("ASC")740,Income Taxes .ASC740requiresanassetandliabilityapproach,whichrequirestherecognitionofdeferredtaxliabilitiesandassetsfortheexpectedfuturetaxconsequencesoftemporarydifferencesbetweenthecarryingamountsandthetaxbasesofassetsand

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TheContainerStoreGroup,Inc.

Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

1.Natureofbusinessandsummaryofsignificantaccountingpolicies(Continued)

liabilities.Werecognizeinterestandpenaltiesrelatedtounrecognizedtaxbenefitsinincometaxexpense.TherewerenouncertaintaxpositionsrequiringaccrualasofApril1,2017andFebruary27,2016.Valuationallowancesareestablishedagainstdeferredtaxassetswhenitismore-likely-than-notthattherealizationofthosedeferredtaxassetswillnotoccur.Valuationallowancesarereleasedaspositiveevidenceoffuturetaxableincomesufficienttorealizetheunderlyingdeferredtaxassetsbecomesavailable.

Deferredtaxassetsandliabilitiesaremeasuredusingtheenactedtaxratesineffectintheyearswhenthosetemporarydifferencesareexpectedtoreverse.Theeffectondeferredtaxesfromachangeinthetaxrateisrecognizedthroughcontinuingoperationsintheperiodthatincludestheenactmentofthechange.Changesintaxlawsandratescouldaffectrecordeddeferredtaxassetsandliabilitiesinthefuture.

WeoperateincertainjurisdictionsoutsidetheUnitedStates.ASC740-30providesthattheundistributedearningsofaforeignsubsidiarybeaccountedforasatemporarydifferenceunderthepresumptionthatallundistributedearningswillbedistributedtotheparentcompanyasadividend.Sufficientevidenceoftheintenttopermanentlyreinvesttheearningsinthejurisdictionwhereearnedprecludesacompanyfromrecordingthetemporarydifference.ForpurposesofASC740-30,wearepartiallyreinvestedinourSwedishsubsidiaryElfaandthusdonotrecordatemporarydifference.WearepartiallyreinvestedsincewehavepermanentlyreinvestedourpastearningsatElfa;however,wedonotassertthatallfutureearningswillbereinvestedintoElfa.

Stock-basedcompensation

TheCompanyaccountsforstock-basedcompensationinaccordanceASC718,Compensation-Stock Compensation ,whichrequiresthefairvalueofstock-basedpaymentstoberecognizedintheconsolidatedfinancialstatementsascompensationexpenseovertherequisiteserviceperiod.Fortime-basedawards,compensationexpenseisrecognizedonastraightlinebasis,netofforfeitures,overtherequisiteserviceperiodforawardsthatactuallyvest.Forperformance-basedawards,compensationexpenseisestimatedbasedonachievementoftheperformanceconditionandisrecognizedusingtheacceleratedattributionmethodovertherequisiteserviceperiodforawardsthatactuallyvest.Stock-basedcompensationexpenseisrecordedinthestock-basedcompensationlineintheconsolidatedstatementsofoperations.

Stock Options

TheBoarddeterminestheexercisepriceofstockoptionsbasedontheclosingpriceoftheCompany'scommonstockasreportedonTheNewYorkStockExchangeonthegrantdate.TheCompanyestimatesthefairvalueofeachstockoptiongrantonthedateofgrantbaseduponthe

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TheContainerStoreGroup,Inc.

Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

1.Natureofbusinessandsummaryofsignificantaccountingpolicies(Continued)

Black-Scholesoption-pricingmodel.Thismodelrequiresvarioussignificantjudgmentalassumptionsinordertoderiveafinalfairvaluedeterminationforeachtypeofawardincluding:

• ExpectedTerm—Theexpectedtermoftheoptionsrepresentstheperiodoftimebetweenthegrantdateoftheoptionsandthedatetheoptionsareeitherexercisedorcanceled,includinganestimateofoptionsstilloutstanding.

• ExpectedVolatility—Theexpectedvolatilityincorporateshistoricalandimpliedvolatilityofcomparablepubliccompaniesforaperiodapproximatingtheexpectedterm.

• ExpectedDividendYield—TheexpecteddividendyieldisbasedontheCompany'sexpectationofnotpayingdividendsonitscommonstockfortheforeseeablefuture.

• Risk-FreeInterestRate—Therisk-freeinterestrateisbasedontheU.S.Treasuryyieldcurveineffectatthetimeofgrantandwithamaturitythatapproximatestheexpectedterm.

Restricted Stock Awards

ThefairvalueofeachrestrictedstockawardisdeterminedbasedontheclosingpriceoftheCompany'scommonstockasreportedonTheNewYorkStockExchangeonthegrantdate.

Accountsreceivable

Accountsreceivableconsistprimarilyoftradereceivables,receivablesfromTheContainerStore,Inc.'screditcardprocessorsforsalestransactions,andtenantimprovementallowancesfromTheContainerStore,Inc.'slandlordsinconnectionwithnewleases.Anallowancefordoubtfulaccountsisestablishedontradereceivables,ifnecessary,forestimatedlossesresultingfromtheinabilityofcustomerstomakerequiredpayments.Factorssuchaspaymentterms,historicallossexperience,andeconomicconditionsaregenerallyconsideredindeterminingtheallowancefordoubtfulaccounts.Accountsreceivablearepresentednetofallowancesfordoubtfulaccountsof$305and$128atApril1,2017andFebruary27,2016,respectively.

Inventories

Inventoriesatretailstoresarecomprisedoffinishedgoodsandarevaluedatthelowerofcostorestimatednetrealizablevalue,withcostdeterminedonaweighted-averagecostmethodincludingassociatedfreightcosts.Manufacturinginventoriesarecomprisedofrawmaterials,workinprocess,andfinishedgoodsandarevaluedonafirst-in,firstoutbasisusingfullabsorptionaccountingwhichincludesmaterial,labor,othervariablecosts,andotherapplicablemanufacturingoverhead.Todetermineifthevalueofinventoryisrecoverableatcost,weconsidercurrentandanticipateddemand,customerpreferenceandthemerchandiseage.Thesignificantestimatesusedininventoryvaluationareobsolescence(includingexcessandslow-movinginventory)andestimatesofinventoryshrinkage.Weadjustourinventoryforobsolescencebasedonhistoricaltrends,agingreports,specificidentificationandourestimatesoffutureretailsalesprices.

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Reservesforshrinkageareestimatedandrecordedthroughouttheperiodasapercentageofcostofsalesbasedonhistoricalshrinkageresultsandcurrentinventorylevels.Actualshrinkageisrecordedthroughouttheyearbaseduponperiodiccyclecounts.Actualinventoryshrinkagecanvaryfromestimatesduetofactorsincludingthemixofourinventoryandexecutionagainstlosspreventioninitiativesinourstoresanddistributioncenter.

Propertyandequipment

Propertyandequipmentarerecordedatcostlessaccumulateddepreciation.Significantadditionsandimprovementsarecapitalized,andexpendituresformaintenanceandrepairsareexpensed.Gainsandlossesonthedispositionofpropertyandequipmentarerecognizedintheperiodincurred.

Depreciation,includingamortizationofassetsrecordedundercapitalleaseobligations,isprovidedusingthestraight-linemethodovertheestimatedusefullivesofdepreciableassetsasfollows:

CostsofdevelopingorobtainingsoftwareforinternaluseordevelopingtheCompany'swebsite,suchasexternaldirectcostsofmaterialsorservicesandinternalpayrollcostsdirectlyrelatedtothesoftwaredevelopmentprojectsarecapitalized.ForthefiscalyearsendedApril1,2017,February27,2016,andFebruary28,2015,theCompanycapitalized$4,392,$3,272,and$5,017,respectively,andamortized$3,498,$3,258,and$2,992,respectively,ofcostsinconnectionwiththedevelopmentofinternallyusedsoftware.Forthefive-weekperiodendedApril2,2016,theCompanycapitalized$299andamortized$296ofcostsinconnectionwiththedevelopmentofinternallyusedsoftware.

Long-livedassets

Long-livedassets,suchaspropertyandequipmentandintangibleassetssubjecttoamortization,arereviewedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountofanassetmaynotberecoverable.Conditionsthatmayindicateimpairmentinclude,butarenotlimitedto,asignificantadversechangeincustomerdemandorbusinessclimatethatcouldaffectthevalueofanasset,aproductrecalloranadverseactionorassessmentbyaregulator.Ifthesumoftheestimatedundiscountedfuturecashflowsrelatedtotheassetislessthanthecarryingvalue,werecognizealossequaltothedifferencebetweenthecarryingvalueandthefairvalue,usuallydeterminedbytheestimateddiscountedcashflowanalysisoftheasset.

ForourTCSsegment,wegenerallyevaluatelong-livedtangibleassetsatastorelevel,oratthelowestlevelatwhichindependentcashflowscanbeidentified.Weevaluatecorporateassetsorotherlong-livedassetsthatarenotstore-specificattheconsolidatedlevel.ForourElfasegment,weevaluatelong-livedtangibleassetsatthesegmentlevel.

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Buildings 30yearsFurniture,fixtures,andequipment 3to10yearsComputersoftware 2to5yearsLeaseholdimprovements ShorterofusefullifeorleasetermCapitalleases Shorterofusefullifeorleaseterm

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Sincethereistypicallynoactivemarketforourlong-livedtangibleassets,weestimatefairvaluesbasedontheexpectedfuturecashflows.Weestimatefuturecashflowsbasedonstore-levelhistoricalresults,currenttrends,andoperatingandcashflowprojections.Ourestimatesaresubjecttouncertaintyandmaybeaffectedbyanumberoffactorsoutsideourcontrol,includinggeneraleconomicconditionsandthecompetitiveenvironment.Whilewebelieveourestimatesandjudgmentsaboutfuturecashflowsarereasonable,futureimpairmentchargesmayberequirediftheexpectedcashflowestimates,asprojected,donotoccurorifeventschangerequiringustoreviseourestimates.

Foreigncurrencyforwardcontracts

WeaccountforforeigncurrencyforwardcontractsinaccordancewithASC815,Derivatives and Hedging .IntheTCSsegment,wemayutilizeforeigncurrencyforwardcontractsinSwedishkronatostabilizeourretailgrossmarginsandtoprotectourdomesticoperationsfromdownwardcurrencyexposurebyhedgingpurchasesofinventoryfromourwhollyownedsubsidiary,Elfa.IntheElfasegment,wemayutilizeforeigncurrencyforwardcontractstohedgepurchasesofrawmaterialsthataretransactedincurrenciesotherthanSwedishkrona,whichisthefunctionalcurrencyofElfa.

Generally,theCompany'sforeigncurrencyforwardcontractshavetermsfrom1to12monthsandrequiretheCompanytoexchangecurrenciesatagreed-uponratesatsettlement.TheCompanydoesnotholdorenterintofinancialinstrumentsfortradingorspeculativepurposes.TheCompanyrecordsallforeigncurrencyforwardcontractsonitsconsolidatedbalancesheetatfairvalue.TheCompanyrecordsitsforeigncurrencyforwardcontractsonagrossbasis.Forwardcontractsnotdesignatedashedgesareadjustedtofairvaluethroughincomeasselling,generalandadministrativeexpenses.TheCompanyaccountsforitsforeigncurrencyhedgeinstrumentsascashflowhedges,asdefined.Changesinthefairvalueoftheforeigncurrencyhedgeinstrumentsthatareconsideredtobeeffective,asdefined,arerecordedinothercomprehensiveincome(loss)untilthehedgeditem(inventory)issoldtothecustomer,atwhichtimethedeferredgainorlossisrecognizedthroughcostofsales.Anyportionofachangeintheforeigncurrencyhedgeinstrument'sfairvaluethatisconsideredtobeineffective,asdefined,orthattheCompanyhaselectedtoexcludefromitsmeasurementofeffectiveness,isimmediatelyrecordedinearningsascostofsales.

Self-insuredliabilities

Weareprimarilyself-insuredforworkers'compensation,employeehealthbenefitsandgeneralliabilityclaims.Werecordself-insuranceliabilitiesbasedonclaimsfiled,includingthedevelopmentofthoseclaims,andanestimateofclaimsincurredbutnotyetreported.Factorsaffectingtheseestimatesincludefutureinflationrates,changesinseverity,benefitlevelchanges,medicalcostsandclaimsettlementpatterns.Shouldadifferentamountofclaimsoccurcomparedtowhatwasestimated,orcostsoftheclaimsincreaseordecreasebeyondwhatwasanticipated,reservesmayneedtobeadjustedaccordingly.Wedetermineourworkers'compensationliabilityandgeneralliabilityclaimsreservesbasedonananalysisofhistoricalclaimsdata.Self-insurancereservesforemployeehealthbenefits,workers'compensationandgeneralliabilityclaimsarerecordedintheaccruedliabilitieslineitemof

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theconsolidatedbalancesheetandwere$3,016and$3,471asofApril1,2017andFebruary27,2016,respectively.

Goodwill

Weevaluategoodwillannuallytodeterminewhetheritisimpaired.Goodwillisalsotestedbetweenannualimpairmenttestsifaneventoccursorcircumstanceschangethatwouldindicatethatthefairvalueofareportingunitislessthanitscarryingamount.Conditionsthatmayindicateimpairmentinclude,butarenotlimitedto,asignificantadversechangeincustomerdemandorbusinessclimatethatcouldaffectthevalueofanasset.Ifanimpairmentindicatorexists,wetestgoodwillforrecoverability.Wehaveidentifiedtworeportingunitsandwehaveselectedthefirstdayofthefourthfiscalquartertoperformourannualgoodwillimpairmenttesting.

Priortotestinggoodwillforimpairment,weperformaqualitativeassessmenttodeterminewhetheritismorelikelythannotthatgoodwillisimpairedforeachreportingunit.Iftheresultsofthequalitativeassessmentindicatethatthelikelihoodofimpairmentisgreaterthan50%,thenweperformatwo-stepimpairmenttestongoodwill.Inthefirststep,wecomparethefairvalueofthereportingunittoitscarryingvalue.Ifthefairvalueofthereportingunitexceedsthecarryingvalueofthenetassetsassignedtothatunit,goodwillisconsiderednotimpairedandwearenotrequiredtoperformfurthertesting.Ifthecarryingvalueofthenetassetsassignedtothereportingunitexceedsthefairvalueofthereportingunit,thenwemustperformthesecondstepoftheimpairmenttestinordertodeterminetheimpliedfairvalueofthereportingunit'sgoodwill.Ifthecarryingvalueofareportingunit'sgoodwillexceedsitsimpliedfairvalue,thenwewouldrecordanimpairmentlossequaltothedifference.

Thefairvalueofeachreportingunitisdeterminedbyusingadiscountedcashflowanalysisusingtheincomeapproach.Wealsouseamarketapproachtocomparetheestimatedfairvaluetocomparablecompanies.Thedeterminationoffairvaluerequiresassumptionsandestimatesofmanycriticalfactors,includingamongothers,ournatureandourhistory,financialandeconomicconditionsaffectingus,ourindustryandthegeneraleconomy,pastresults,ourcurrentoperationsandfutureprospects,salesofsimilarbusinessesorcapitalstockofpubliclyheldsimilarbusinesses,aswellasprices,termsandconditionsaffectingpastsalesofsimilarbusinesses.Forecastsoffutureoperationsarebased,inpart,onoperatingresultsandmanagement'sexpectationsastofuturemarketconditions.Thesetypesofanalysescontainuncertaintiesbecausetheyrequiremanagementtomakeassumptionsandtoapplyjudgmentstoestimateindustryeconomicfactorsandtheprofitabilityoffuturebusinessstrategies.Ifactualresultsarenotconsistentwithourestimatesandassumptions,wemaybeexposedtofutureimpairmentlossesthatcouldbematerial.

Tradenames

Weannuallyevaluatewhetherthetradenamescontinuetohaveanindefinitelife.Tradenamesarereviewedforimpairmentannuallyonthefirstdayofthefourthfiscalquarterandmaybereviewedmorefrequentlyifindicatorsofimpairmentarepresent.Conditionsthatmayindicateimpairment

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include,butarenotlimitedto,asignificantadversechangeincustomerdemandorbusinessclimatethatcouldaffectthevalueofanasset,aproductrecalloranadverseactionorassessmentbyaregulator.

Theimpairmentreviewisperformedbycomparingthecarryingvaluetotheestimatedfairvalue,determinedusingadiscountedcashflowmethodology.Iftherecordedcarryingvalueofthetradenameexceedsitsestimatedfairvalue,animpairmentchargeisrecordedtowritethetradenamedowntoitsestimatedfairvalue.Factorsusedinthevaluationofintangibleassetswithindefinitelivesinclude,butarenotlimitedto,futurerevenuegrowthassumptions,estimatedmarketroyaltyratesthatcouldbederivedfromthelicensingofourtradenamestothirdparties,andarateusedtodiscounttheestimatedroyaltycashflowprojections.

Thevaluationoftradenamesrequiresassumptionsandestimatesofmanycriticalfactors,whichareconsistentwiththefactorsdiscussedunder"Goodwill"above.Forecastsoffutureoperationsarebased,inpart,onoperatingresultsandmanagement'sexpectationsastofuturemarketconditions.Thesetypesofanalysescontainuncertaintiesbecausetheyrequiremanagementtomakeassumptionsandtoapplyjudgmentstoestimateindustryeconomicfactorsandtheprofitabilityoffuturebusinessstrategies.Ifactualresultsarenotconsistentwithourestimatesandassumptions,wemaybeexposedtofutureimpairmentlossesthatcouldbematerial.

Foreigncurrencytranslation

TheCompanyoperatesforeignsubsidiariesinthefollowingcountries:Sweden,Norway,Finland,Denmark,Germany,Poland,andFrance.ThefunctionalcurrencyoftheCompany'sforeignoperationsistheapplicablecountry'scurrency.Allassetsandliabilitiesofforeignsubsidiariesandaffiliatesaretranslatedatyear-endratesofexchange.Revenuesandexpensesofforeignsubsidiariesandaffiliatesaretranslatedataverageratesofexchangefortheyear.Unrealizedgainsandlossesontranslationarereportedascumulativetranslationadjustmentsthroughothercomprehensiveincome(loss).

ThefunctionalcurrencyfortheCompany'swhollyownedsubsidiary,Elfa,istheSwedishkrona.Duringfiscal2016,therateofexchangefromU.S.dollartoSwedishkronaincreasedfrom8.6to8.9.ThecarryingamountofassetsrelatedtoElfaandsubjecttocurrencyfluctuationwas$108,707and$109,548asofApril1,2017andFebruary27,2016,respectively.Foreigncurrencyrealizedgainsof$342,realizedlossesof$241,realizedgainsof$171,andrealizedgainsof$60areincludedinselling,general,andadministrativeexpensesintheconsolidatedstatementsofoperationsinfiscal2016,fiscal2015,fiscal2014,andthefive-weeksendedApril2,2016,respectively.

Recentaccountingpronouncements

InFebruary2016,theFASBissuedASU2016-02,Leases (Topic 842) ,toreviseleaseaccountingguidance.Theupdaterequiresmostleasestoberecordedonthebalancesheetasaleaseliability,withacorrespondingright-of-useasset,whereastheseleasescurrentlyhaveanoff-balancesheetclassification.ASU2016-02mustbeappliedonamodifiedretrospectivebasisandiseffectiveforfiscalyearsbeginningafterDecember15,2018,andinterimperiodswithinthoseyears,withearlyadoption

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permitted.TheCompanycurrentlyintendstoadoptthisstandardinthefirstquarteroffiscal2019.TheCompanyisstillevaluatingtheimpactofimplementationofthisstandardonitsfinancialstatements,butexpectsthatadoptionwillhaveamaterialimpacttotheCompany'stotalassetsandliabilitiesgiventheCompanyhasasignificantnumberofoperatingleasesnotcurrentlyrecognizedonitsbalancesheet.

InMay2014,theFASBissuedASU2014-09,Revenue from Contracts with Customers ,anupdatedstandardonrevenuerecognition.ASU2014-09providesenhancementstothequalityandconsistencyofhowrevenueisreportedwhilealsoimprovingcomparabilityinthefinancialstatementsofcompaniesreportingusingIFRSandGAAP.Thecoreprincipleofthenewstandardisforcompaniestorecognizerevenuetodepictthetransferofgoodsorservicestocustomersinamountsthatreflecttheconsideration(thatis,payment)towhichtheCompanyexpectstobeentitledinexchangeforthosegoodsorservices.Thenewstandardalsowillresultinenhanceddisclosuresaboutrevenue,provideguidancefortransactionsthatwerenotpreviouslyaddressedcomprehensively(forexample,servicerevenueandcontractmodifications)andimproveguidanceformultiple-elementarrangements.InJuly2015,theFASBdeferredtheeffectivedateofASU2014-09.Accordingly,thisstandardiseffectiveforreportingperiodsbeginningafterDecember15,2017,includinginterimperiodswithinthatfiscalyear,withearlyadoptionpermittedforinterimandannualperiodsbeginningafterDecember15,2016.TheCompanycurrentlyintendstoadoptthisstandardinthefirstquarteroffiscal2018.Thisguidancecanbeappliedeitherretrospectivelytoeachperiodpresentedorasacumulative-effectadjustmentasofthedateofadoption,buttheCompanyhasnotyetselectedatransitionmethod.TheCompanyhasidentifiedcertainimpactstoouraccountingforgiftcardsgivenawayforpromotionalormarketingpurposes.UndercurrentGAAP,thevalueofpromotionalgiftcardsarerecordedasselling,general,andadministrativeexpense.Thenewstandardrequiresthesetypesofgiftcardstobeaccountedforasareductionofrevenue(i.e.adiscount).TheCompanydoesnotexpecttheadoptionofASU2014-09tohaveamaterialimpactonthefinancialstatements.

InMarch2016,theFASBissuedASU2016-09,Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based PaymentAccounting ,whichoutlinesnewprovisionsintendedtosimplifyvariousaspectsrelatedtoaccountingforshare-basedpayments,includingincometaxconsequences,forfeitures,andclassificationinthestatementofcashflows.ThisASUiseffectiveforfiscalyearsbeginningafterDecember15,2016,andinterimperiodswithinthoseyears,withearlyadoptionpermitted.TheCompanydoesnotexpectthisstandardtohaveamaterialimpactonitsfinancialstatementsandcurrentlyintendstoadoptthisstandardinthefirstquarteroffiscal2017.

InOctober2016,theFASBissuedASU2016-16,Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory ,whichrequiresentitiestorecognizetheincometaxeffectsofintercompanysalesandtransfersofassets,otherthaninventory,intheperiodinwhichthetransferoccurs.ThisisachangefromcurrentGAAP,whichrequiresentitiestodefertheincometaxeffectsofintercompanytransfersofassetsuntiltheassethasbeensoldtoanoutsidepartyorotherwiserecognized(i.e.depreciated,amortized,impaired).Theincometaxeffectsofintercompanysalesandtransfersofinventorywillcontinuetobedeferreduntiltheinventoryissoldtoanoutsideparty.ThisASUiseffectiveforfiscalyearsbeginningafterDecember15,2017,andinterimperiodswithinthoseyears,

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withearlyadoptionpermitted.TheCompanydoesnotexpectthisstandardtohaveamaterialimpactonitsfinancialstatements.

InJanuary2017,theFASBissuedASU2017-04,Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ,whichprovidesguidancetosimplifythesubsequentmeasurementofgoodwillbyeliminatingStep2fromthegoodwillimpairmenttestunderASCTopic350.Underthenewguidance,anentityshouldperformgoodwillimpairmenttestingbycomparingthefairvalueofareportingunitwithitscarryingamount.Iftheareportingunit'scarryingamountexceedsitsfairvalue,anentityshouldrecognizeanimpairmentchargebasedonthatdifference,limitedtothetotalamountofgoodwillallocatedtothatreportingunit.ThisASUwillbeappliedprospectivelyandiseffectiveforannualandinterimimpairmenttestsperformedinperiodsbeginningafterDecember15,2019.EarlyadoptionispermittedforannualandinterimgoodwillimpairmenttestingdatesafterJanuary1,2017.TheCompanydoesnotexpectthisstandardtohaveamaterialimpactonitsfinancialstatements.

InMarch2017,theFASBissuedASU2017-07,Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Costand Net Periodic Postretirement Benefit Cost ,whichprovidesguidancethatrequiresanemployertopresenttheservicecostcomponentseparatefromtheothercomponentsofnetperiodicbenefitcost.Theupdaterequiresthatemployerspresenttheservicecostcomponentofthenetperiodicbenefitcostinthesameincomestatementlineitemasotheremployeecompensationcostsarisingfromservicesrenderedbyparticipatingemployeesduringtheperiod.Theothercomponentsofthenetperiodicbenefitcostarerequiredtobepresentedseparatelyfromthelineitemthatincludesservicecostandoutsideofthesubtotalofincomefromoperations.Ifaseparatelineitemisnotused,thelineitemusedintheincomestatementmustbedisclosed.Inaddition,onlytheservicecostcomponentiseligibleforcapitalizationinassets.ThisASUwillbeappliedretrospectivelyandiseffectiveforfiscalyearsbeginningafterDecember15,2017,andinterimperiodswithinthoseyears,withearlyadoptionpermitted.TheCompanydoesnotexpectthisstandardtohaveamaterialimpactonitsfinancialstatements.

InJuly2015,theFASBissuedASU2015-11,Inventory (Topic 330): Simplifying the Measurement of Inventory ,whichchangesthemeasurementprincipleforinventoryfromthelowerofcostormarkettothelowerofcostandnetrealizablevalue.ASU2015-11definesnetrealizablevalueasestimatedsellingpricesintheordinarycourseofbusiness,lessreasonablypredictablecostsofcompletion,disposal,andtransportation.ASU2015-11waseffectiveforandadoptedbytheCompanyinthefirstquarteroffiscal2016onaprospectivebasis.TheadoptionofthisstandarddidnotresultinamaterialimpacttotheCompany'sfinancialstatements.

InMay2015,theFASBissuedASU2015-07,Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net AssetValue per Share (or its Equivalent) ,whichisintendedtoeliminatethediversityinpracticesurroundinghowinvestmentsmeasuredatnetassetvalue("NAV")withredemptiondatesinthefuturearecategorizedinthefairvaluehierarchy.Underthenewguidance,investmentsmeasuredatfairvalueusingtheNAVpersharepracticalexpedientshouldnolongerbecategorizedinthefairvaluehierarchy.ASU2015-07waseffectiveforandadoptedbythe

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Companyinthefirstquarteroffiscal2016onaretrospectivebasis.Asaresult,thenonqualifiedretirementplan,whichismeasuredatNAVpershareusingthepracticalexpedient,isnolongercategorizedinthefairvaluehierarchy.

InApril2015,theFASBissuedASU2015-05,Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350 - 40) :Customer's Accounting forFees Paid in a Cloud Computing Arrangement .TheamendmentsinASU2015-05provideguidancetocustomersaboutwhetheracloudcomputingarrangementincludesasoftwarelicense.Ifacloudcomputingarrangementincludesasoftwarelicense,thecustomershouldaccountforthesoftwarelicenseelementofthearrangementconsistentwithothersoftwarelicenses.Ifacloudcomputingarrangementdoesnotincludeasoftwarelicense,thecustomershouldaccountforthearrangementasaservicecontract.ASU2015-05waseffectiveforandadoptedbytheCompanyinthefirstquarteroffiscal2016onaprospectivebasis.TheadoptionofthisstandarddidnotresultinamaterialimpacttotheCompany'sfinancialstatements.

InApril2015,theFASBissuedASU2015-03, Interest—Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs .Theupdaterequiresdebtissuancecostsrelatedtoarecognizeddebtliabilitybepresentedinthebalancesheetasadirectdeductionfromthecarryingamountoftherelateddebtliabilityratherthanbeingpresentedasanasset.Theupdaterequiresretrospectiveapplicationandrepresentsachangeinaccountingprinciple.Inaddition,inAugust2015,ASU2015-15,Interest—Imputation of Interest ,wasreleasedwhichaddedSECparagraphspursuanttotheSECStaffAnnouncementattheJune18,2015EmergingIssuesTaskForce(EITF)meetingaboutthepresentationandsubsequentmeasurementofdebtissuancecostsassociatedwithline-of-creditarrangements.GiventheabsenceofauthoritativeguidancewithinASU2015-03fordebtissuancecostsrelatedtoline-of-creditarrangements,ASU2015-15statestheSECstaffwouldnotobjecttoanentitydeferringandpresentingdebtissuancecostsasanassetandsubsequentlyamortizingthedeferreddebtissuancecostsratablyoverthetermoftheline-of-creditarrangement,regardlessofwhetherthereareanyoutstandingborrowingsontheline-of-creditarrangement.TheamendmentsinASU2015-03andASU2015-15wereeffectiveforandadoptedbytheCompanyinthefirstquarteroffiscal2016onaretrospectivebasis.TheimpactofASU2015-03andASU2015-15onourconsolidatedfinancialstatementsincludedareclassificationofnetdeferredfinancingcostsrelatedtoourSeniorSecuredTermLoanFacilitytobepresentedinthebalancesheetasareductionoflong-termdebt,netofdeferredfinancingcosts,whilenetdeferredfinancingcostsrelatedtoourRevolvingCreditFacilityremainanassetinthedeferredfinancingcostslineitem.TheCompanyhad$3,667and$5,649ofnetdeferredfinancingcostsasofApril1,2017andFebruary27,2016,respectively,relatedtoourSeniorSecuredTermLoanFacility.

2.Goodwillandtradenames

DuringthequarterendedOctober1,2016,theCompanyvoluntarilychangedthedateofitsannualgoodwillandindefinite-livedintangibleassetsimpairmenttestingfromthelastdayoffiscalDecember(whichisalsothelastdayofthethirdfiscalquarter)tothefirstdayofthefourthfiscalquarter.ThisvoluntarychangeispreferableunderthecircumstancesasitprovidestheCompanywithsufficienttimetocompleteitsannualgoodwillandindefinite-livedintangibleassetimpairmenttestinginadvanceofits

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year-endreportingandresultsinbetteralignmentwiththeCompany'sannualplanningandforecastingprocess.Inconnectionwiththechangeinthedateoftheannualgoodwillandindefinite-livedintangibleimpairmenttests,theCompanyperformedgoodwillandindefinite-livedintangibleimpairmenttestsasofthelastdayofthe2016fiscalthirdquarterandasofthefirstdayofthe2016fiscalfourthquarter,andnoimpairmentwasidentifiedoneitherdate.Thevoluntarychangeinaccountingprinciplerelatedtotheannualtestingdatewillnotdelay,accelerateoravoidanimpairmentcharge.TheCompanyhasdeterminedthatitisimpracticabletoobjectivelydetermineprojectedcashflowsandrelatedvaluationestimatesthatwouldhavebeenusedasofthefirstdayofthefiscalfourthquarterforperiodspriortofiscal2016withouttheuseofhindsight.Assuch,theCompanywillprospectivelyapplythechangeintheannualgoodwillandindefinite-livedintangibleassetsimpairmentassessmentasofthefirstdayofthefourthfiscalquarterof2016.

Theestimatedgoodwillandtradenamefairvaluesarecomputedusingestimatesasofthemeasurementdate,whichisdefinedasthefirstdayofthefiscalfourthquarter.TheCompanymakesestimatesandassumptionsaboutsales,grossmargins,profitmargins,anddiscountratesbasedonbudgetsandforecasts,businessplans,economicprojections,anticipatedfuturecashflows,andmarketplacedata.Assumptionsarealsomadeforvaryingperpetualgrowthratesforperiodsbeyondthelong-termbusinessplanperiod.Thereareinherentuncertaintiesrelatedtothesefactorsandmanagement'sjudgmentinapplyingthesefactors.Anotherestimateusingdifferent,butstillreasonable,assumptionscouldproducedifferentresults.Astherearenumerousassumptionsandestimationsutilizedtoderivetheestimatedenterprisefairvalueofeachreportingunit,itispossiblethatactualresultsmaydifferfromestimatedresultsrequiringfutureimpairmentcharges.

TheCompanyrecordednoimpairmentsduringfiscal2016,fiscal2015,andfiscal2014asaresultofthegoodwillandtradenamesimpairmenttestsperformed.

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Thechangesinthecarryingamountofgoodwillandtradenameswereasfollowsinfiscal2016,thefiveweeksendedApril2,2016,andfiscal2015:

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Goodwill Tradenames BalanceatFebruary28,2015 Grossbalance 410,467 260,967Accumulatedimpairmentcharges (207,652) (31,534)Total,net $ 202,815 $ 229,433

Foreigncurrencytranslationadjustments — (1,065)BalanceatFebruary27,2016 Grossbalance 410,467 259,902Accumulatedimpairmentcharges (207,652) (31,534)Total,net $ 202,815 $ 228,368

Foreigncurrencytranslationadjustments — 2,423BalanceatApril2,2016 Grossbalance 410,467 262,325Accumulatedimpairmentcharges (207,652) (31,534)Total,net $ 202,815 $ 230,791

Foreigncurrencytranslationadjustments — (4,106)BalanceatApril1,2017 Grossbalance 410,467 258,219Accumulatedimpairmentcharges (207,652) (31,534)Total,net $ 202,815 $ 226,685

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April1,2017

February27,2016

Accountsreceivable,net: Tradereceivables,net $ 15,873 $ 14,748Creditcardreceivables 6,531 10,630Tenantallowances 2,353 1,721Otherreceivables 2,719 1,744

$ 27,476 $ 28,843Inventory: Finishedgoods $ 98,438 $ 81,496Rawmaterials 4,183 3,363Workinprogress 499 1,576

$ 103,120 $ 86,435Propertyandequipment,net: Landandbuildings $ 20,758 $ 20,699Furnitureandfixtures 68,837 63,375Machineryandequipment 83,523 73,218Computersoftwareandequipment 81,380 72,619Leaseholdimprovements 152,630 147,347Constructioninprogress 13,188 19,377Leasedvehiclesandother 917 776

421,233 397,411Lessaccumulateddepreciationandamortization (255,735) (221,294)

$ 165,498 $ 176,117AccruedLiabilities: Accruedpayroll,benefitsandbonuses $ 20,897 $ 22,483Unearnedrevenue 7,708 16,034Accruedtransactionandpropertytax 11,086 9,655Giftcardsandstorecreditsoutstanding 9,229 8,564Accruedleaseliabilities 4,767 4,384Accruedinterest 143 2,270Otheraccruedliabilities 6,277 6,245

$ 60,107 $ 69,635

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TheContainerStoreGroup,Inc.

Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

4.Long-termdebtandrevolvinglinesofcredit

Long-termdebtandrevolvinglinesofcreditconsistofthefollowing:

ScheduledtotalrevolvinglinesofcreditanddebtmaturitiesforthefiscalyearssubsequenttoApril1,2017,areasfollows:

SeniorSecuredTermLoanFacility

OnApril6,2012,TheContainerStoreGroup,Inc.,TheContainerStore,Inc.andcertainofitsdomesticsubsidiariesenteredintoacreditagreementwithJPMorganChaseBank,N.A.,asAdministrativeAgentandCollateralAgent,andthelenderspartythereto(asamended,the"SeniorSecuredTermLoanFacility").UndertheSeniorSecuredTermLoanFacility,wehad$316,760inoutstandingborrowingsasofApril1,2017andtheinterestrateonsuchborrowingsisLIBOR+3.25%,subjecttoaLIBORfloorof1.00%.TheSeniorSecuredTermLoanFacilityprovidesthatwearerequiredtomakequarterlyprincipalrepaymentsof$906throughDecember31,2018,withaballoonpaymentfortheremainingbalancedueonApril6,2019.

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April1,2017

February27,2016

Seniorsecuredtermloanfacility $ 316,760 $ 321,2882014Elfatermloanfacility 3,358 4,9002014Elfarevolvingcreditfacility — 721Obligationsundercapitalleases 901 745Otherloans 119 224Revolvingcreditfacility — —Totaldebt 321,138 327,878

Lesscurrentportion (5,445) (6,094)Lessdeferredfinancingcosts(1) (3,667) (5,649)Totallong-termdebt $ 312,026 $ 316,135

(1) RepresentsdeferredfinancingcostsrelatedtoourSeniorSecuredTermLoanFacility,whicharepresentednetoflong-termdebtintheconsolidatedbalancesheet.

Within1year $ 5,4452years 4,3653years 311,3284years —5years —Thereafter —

$ 321,138

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Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

4.Long-termdebtandrevolvinglinesofcredit(Continued)

TheSeniorSecuredTermLoanFacilityissecuredby(a)afirstprioritysecurityinterestinsubstantiallyallofourassets(excludingstockinforeignsubsidiariesinexcessof65%,assetsofnon-guarantorsandsubjecttocertainotherexceptions)(otherthanthecollateralthatsecurestheRevolvingCreditFacilitydescribedbelowonafirst-prioritybasis)and(b)asecondprioritysecurityinterestintheassetssecuringtheRevolvingCreditFacilitydescribedbelowonafirst-prioritybasis.ObligationsundertheSeniorSecuredTermLoanFacilityareguaranteedbyTheContainerStoreGroup,Inc.andeachofTheContainerStore,Inc.'sU.S.subsidiaries.UndertheSeniorSecuredTermLoanFacility,theCompanyisrequiredtomakequarterlyprincipalrepaymentsof$906throughDecember31,2018,withaballoonpaymentfortheremainingbalanceof$310,420dueonApril6,2019.

TheSeniorSecuredTermLoanFacilityincludesrestrictionsontheabilityoftheCompany'ssubsidiariestoincuradditionalliensandindebtedness,makeinvestmentsanddispositions,paydividendsormakeotherdistributions,makeloans,prepaycertainindebtednessandenterintosaleandleasebacktransactions,amongotherrestrictions.UndertheSeniorSecuredTermLoanFacility,providednoeventofdefaulthasoccurredandiscontinuing,TheContainerStore,Inc.ispermittedtopaydividendstoTheContainerStoreGroup,Inc.inanamountnottoexceedthesumof$10,000plusifaftergivingeffecttosuchdividendonaproformabasis,theConsolidatedLeverageRatio(asdefinedintheSeniorSecuredTermLoanFacility)doesnotexceed2.0to1.0,theAvailableAmount(asdefinedintheSeniorSecuredTermLoanFacility)duringthetermoftheSeniorSecuredTermLoanFacility,andpursuanttocertainotherlimitedexceptions.TherestrictednetassetsoftheCompany'sconsolidatedsubsidiarieswas$209,290asofApril1,2017.AsofApril1,2017,wewereincompliancewithallSeniorSecuredTermLoanFacilitycovenantsandnoEventofDefault(assuchtermisdefinedintheSeniorSecuredTermLoanFacility)hadoccurred.

RevolvingCreditFacility

OnApril6,2012,TheContainerStoreGroup,Inc.,TheContainerStore,Inc.andcertainofitsdomesticsubsidiariesenteredintoanasset-basedrevolvingcreditagreementwiththelenderspartythereto,JPMorganChaseBank,N.A.,asAdministrativeAgentandCollateralAgent,andWellsFargoBank,NationalAssociation,asSyndicationAgent(asamended,the"RevolvingCreditFacility").Theaggregateprincipalamountofthefacilityis$100,000.BorrowingsundertheRevolvingCreditFacilityaccrueinterestatLIBOR+1.25%andthematuritydateistheearlierof(x)October8,2020and(y)January6,2019,ifanyofTheContainerStore,Inc.'sobligationsunderitstermloancreditfacilityremainoutstandingonsuchdateandhavenotbeenrefinancedwithdebtthathasafinalmaturitydatethatisnoearlierthanApril6,2019orsubordinateddebt.Inaddition,theRevolvingCreditFacilityincludesanuncommittedincrementalrevolvingfacilityintheamountof$50,000,whichissubjecttoreceiptoflendercommitmentsandsatisfactionofspecifiedconditions.

TheRevolvingCreditFacilityprovidesthatproceedsaretobeusedforworkingcapitalandothergeneralcorporatepurposes,andallowsforswinglineadvancesofupto$15,000andtheissuanceoflettersofcreditofupto$40,000.

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April1,2017

4.Long-termdebtandrevolvinglinesofcredit(Continued)

TheavailabilityofcreditatanygiventimeundertheRevolvingCreditFacilityislimitedbyreferencetoaborrowingbaseformula,whichisthesumof(i)90%ofeligiblecreditcardreceivablesand(ii)90%oftheappraisedvalueofeligibleinventory;minus(iii)certainavailabilityreservesand(iv)outstandingcreditextensionsincludinglettersofcreditandexistingrevolvingloans.

TheRevolvingCreditFacilityissecuredby(a)afirst-prioritysecurityinterestinsubstantiallyallofourpersonalproperty,consistingofinventory,accountsreceivable,cash,depositaccounts,andothergeneralintangibles,and(b)asecond-prioritysecurityinterestinthecollateralthatsecurestheSeniorSecuredTermLoanFacilityonafirst-prioritybasis,asdescribedabove(excludingstockinforeignsubsidiariesinexcessof65%,andassetsofnon-guarantorsubsidiariesandsubjecttocertainotherexceptions).ObligationsundertheRevolvingCreditFacilityareguaranteedbyTheContainerStoreGroup,Inc.andeachofTheContainerStore,Inc.'sU.S.subsidiaries.

TheRevolvingCreditFacilitycontainsanumberofcovenantsthat,amongotherthings,restrictourability,subjecttospecifiedexceptions,toincuradditionaldebt;incuradditionalliensandcontingentliabilities;sellordisposeofassets;mergewithoracquireothercompanies;liquidateordissolveourselves,engageinbusinessesthatarenotinarelatedlineofbusiness;makeloans,advancesorguarantees;engageintransactionswithaffiliates;andmakeinvestments.Inaddition,thefinancingagreementscontaincertaincross-defaultprovisions.Wearerequiredtomaintainaconsolidatedfixed-chargecoverageratioof1.0to1.0ifexcessavailabilityislessthan$10,000atanytime.AsofApril1,2017,wewereincompliancewithallRevolvingCreditFacilitycovenantsandnoEventofDefault(assuchtermisdefinedintheRevolvingCreditFacility)hadoccurred.

UndertheRevolvingCreditFacility,providednoeventofdefaulthasoccurredandiscontinuing,TheContainerStore,Inc.ispermittedtopaydividendstoTheContainerStoreGroup,Inc.,inanamountnottoexceedthesumof$10,000plusifaftergivingeffecttosuchdividendonaproformabasis,theConsolidatedFixedChargeCoverageRatio(asdefinedintheRevolvingCreditFacility)isnotlessthan1.25to1.0,theAvailableAmount(asdefinedintheRevolvingCreditFacility)duringthetermoftheRevolvingCreditFacility,andpursuanttocertainotherlimitedexceptions.

Therewas$73,189availableundertheRevolvingCreditFacilityasofApril1,2017,basedonthefactorsdescribedabove.Maximumborrowings,includinglettersofcreditissuedundertheRevolvingCreditFacilityduringtheperiodendedApril1,2017,were$33,590.

ElfaSeniorSecuredCreditFacilitiesand2014ElfaSeniorSecuredCreditFacilities

OnApril27,2009,ElfaenteredintotheElfaSeniorSecuredCreditFacilitieswithTjustbygdensSparbankAB,whichwerefertoasSparbank,whichconsistedofaSEK137.5milliontermloanfacility,whichwerefertoastheElfaTermLoanFacility,andtheSEK175.0millionElfaRevolvingCreditFacilityand,togetherwiththeElfaTermLoanFacility,theElfaSeniorSecuredCreditFacilities.OnJanuary27,2012,Sparbanktransferredallofitscommitments,rightsandobligationsundertheElfaSeniorSecuredCreditFacilitiestoSwedbankAB.BorrowingsundertheElfaSeniorSecuredCreditFacilitiesaccruedinterestatarateofSTIBOR+1.775%.ElfawasrequiredtomakequarterlyprincipalrepaymentsundertheElfaTermLoanFacilityofSEK6.25millionthroughmaturity.TheElfaSenior

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otherwisestated)

April1,2017

4.Long-termdebtandrevolvinglinesofcredit(Continued)

SecuredCreditFacilitiesweresecuredbyfirstprioritysecurityinterestsinsubstantiallyallofElfa'sassets.TheElfaTermLoanFacilityandtheElfaRevolvingCreditFacilitymaturedonAugust30,2014andwerereplacedwiththe2014ElfaSeniorSecuredCreditFacilitiesasdiscussedbelow.

OnApril1,2014,ElfaenteredintoamastercreditagreementwithNordeaBankAB("Nordea"),whichconsistsofaSEK60.0million(approximately$6,715asofApril1,2017)termloanfacility(the"2014ElfaTermLoanFacility")andaSEK140.0million(approximately$15,669asofApril1,2017)revolvingcreditfacility(the"2014ElfaRevolvingCreditFacility,"andtogetherwiththe2014ElfaTermLoanFacility,the"2014ElfaSeniorSecuredCreditFacilities").The2014ElfaSeniorSecuredCreditFacilitiestermbeganonAugust29,2014andmaturesonAugust29,2019.Elfaisrequiredtomakequarterlyprincipalpaymentsunderthe2014ElfaTermLoanFacilityintheamountofSEK3.0million(approximately$336asofApril1,2017)throughmaturity.The2014ElfaTermLoanFacilitybearsinterestatSTIBOR+1.7%andthe2014ElfaRevolvingCreditFacilitybearsinterestatNordea'sbaserate+1.4%.Inthefourthquarteroffiscal2016,ElfaandNordeaagreedthatthestatedrateswouldapplythroughmaturity.AsofApril1,2017,theCompanyhad$15,669ofadditionalavailabilityunderthe2014ElfaRevolvingCreditFacility.

Underthe2014ElfaSeniorSecuredCreditFacilities,Elfa'sabilitytopaydividendstoitsparententity,TheContainerStore,Inc.,isbasedonitsfuturenetincomeandonhistoricalintercompanypracticesasbetweenElfaandTheContainerStore,Inc.The2014ElfaSeniorSecuredCreditFacilitiesaresecuredbythemajorityofassetsofElfa.The2014ElfaSeniorSecuredCreditFacilitiescontainsanumberofcovenantsthat,amongotherthings,restrictElfa'sability,subjecttospecifiedexceptions,toincuradditionalliens,sellordisposeofassets,mergewithothercompanies,engageinbusinessesthatarenotinarelatedlineofbusinessandmakeguarantees.Inaddition,Elfaisrequiredtomaintain(i)aconsolidatedequityratio(asdefinedinthe2014ElfaSeniorSecuredCreditFacilities)ofnotlessthan30%inyearoneandnotlessthan32.5%thereafterand(ii)aconsolidatedratioofnetdebttoEBITDA(asdefinedinthe2014ElfaSeniorSecuredCreditFacilities)oflessthan3.2,theconsolidatedequityratiotestedattheendofeachcalendarquarterandtheratioofnetdebttoEBITDAtestedasoftheendofeachfiscalquarter.AsofApril1,2017,ElfawasincompliancewithallcovenantsandnoEventofDefault(asdefinedinthe2014ElfaSeniorSecuredCreditFacilities)hadoccurred.

OnMay13,2014,ElfaenteredintoacreditfacilitywithNordeaforSEK15.0million(the"ShortTermCreditFacility").TheShortTermCreditFacilityaccruedinterestat2.53%andmaturedonAugust28,2014,atwhichtimeallborrowingsundertheagreementwerepaidinfulltoNordea(approximately$2,152asofAugust28,2014).ThetotalamountofborrowingsavailableundertheShortTermCreditFacilitywasusedtopayamortgageowedonthePolandmanufacturingfacilityinfullinthefirstquarteroffiscal2014.

Deferredfinancingcosts

TheCompanycapitalizescertaincostsassociatedwithissuanceofvariousdebtinstruments.Inthefirstquarteroffiscal2016,theCompanyadoptedASU2015-03andASU2015-15onaretrospective

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April1,2017

4.Long-termdebtandrevolvinglinesofcredit(Continued)

basis.Asaresult,theCompanyreclassifiednetdeferredfinancingcostsrelatedtoourSeniorSecuredTermLoanFacilitytobepresentedinthebalancesheetasareductionoflong-termdebt,netofdeferredfinancingcosts,whilenetdeferredfinancingcostsrelatedtoourRevolvingCreditFacilityremainanassetinthedeferredfinancingcostslineitem.

Thesedeferredfinancingcostsareamortizedtointerestexpenseonastraight-linemethod,whichismateriallyconsistentwiththeeffectiveinterestmethod,overthetermsoftherelateddebtagreements.Amortizationexpenseofdeferredfinancingcostswas$1,921,$1,940,$1,956,and$160infiscal2016,fiscal2015,fiscal2014,andthefiveweeksendedApril2,2016,respectively.Thefollowingisascheduleofamortizationexpenseofdeferredfinancingcosts:

91

SeniorSecuredTermLoanFacility

RevolvingCreditFacility Total

Within1year $ 1,833 $ 92 $ 1,9252years 1,834 92 1,9263years — 92 924years — 44 445years — — —Thereafter — — —

$ 3,667 $ 320 $ 3,987

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Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

5.Incometaxes

Componentsoftheprovisionforincometaxesareasfollows:

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FiscalYearEnded

FiveWeeksEndedApril2,2016

April1,2017

February27,2016

February28,2015

Incomebeforeincometaxes: U.S. $ 19,307 $ 4,830 $ 20,597 $ 1,059Foreign 5,048 3,221 9,269 (367)

$ 24,355 $ 8,051 $ 29,866 $ 692Current Federal $ 6,039 $ (385) $ 3,438 $ 235State 1,374 585 1,483 63Foreign 2,085 1,850 849 (778)Totalcurrentprovision 9,498 2,050 5,770 (480)

Deferred Federal 553 1,881 1,263 122State 22 57 646 (46)Foreign (671) (1,079) (486) 742Totaldeferredprovision(benefit) (96) 859 1,423 818

Totalprovisionforincometaxes $ 9,402 $ 2,909 $ 7,193 $ 338

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Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

5.Incometaxes(Continued)

Thedifferencesbetweentheactualprovisionforincometaxesandtheamountscomputedbyapplyingthestatutoryfederaltaxratetoincomebeforetaxesareasfollows:

Deferredincometaxesreflectthenettaxeffectsoftemporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesforfinancialreportingpurposesandtheamountsusedforincometaxpurposes.ComponentsofdeferredtaxassetsandliabilitiesasofApril1,2017andFebruary27,2016,areasfollows:

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FiscalYearEnded

FiveWeeksEndedApril2,2016

April1,2017

February27,2016

February28,2015

Provisioncomputedatfederalstatutoryrate $ 8,525 $ 2,818 $ 10,453 $ 242Permanentdifferences 536 192 163 10Changeinvaluationallowance 178 248 (815) 37Stateincometaxes,netoffederalbenefit 855 402 1,296 11Effectofforeignincometaxes (619) (384) (1,131) 53Priorperioderror — — (1,839) —Non-taxablegainonsaleofNorwegiansubsidiary — — (690) —Economiczonecredits — (292) (255) —Other,net (73) (75) 11 (15)

$ 9,402 $ 2,909 $ 7,193 $ 338

April1,2017

February27,2016

Deferredtaxassets: Inventory $ 1,763 $ 1,745Lossandcreditcarryforwards 3,445 4,334Stockcompensation 7,220 6,878Accruedliabilities 4,439 5,363Capitalassets 352 126

17,219 18,446Valuationallowance (2,015) (1,880)

Totaldeferredtaxassets 15,204 16,566

Deferredtaxliabilities: Intangibles (82,775) (83,200)Capitalassets (7,412) (8,046)Other (3,557) (3,950)

Totaldeferredtaxliabilities (93,744) (95,196)Netdeferredtaxliabilities $ (78,540) $ (78,630)

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Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

5.Incometaxes(Continued)

TheCompanyhasrecordeddeferredtaxassetsandliabilitiesbaseduponestimatesoftheirrealizablevaluewithsuchestimatesbaseduponlikelyfuturetaxconsequences.Inassessingtheneedforavaluationallowance,theCompanyconsidersbothpositiveandnegativeevidencerelatedtothelikelihoodofrealizationofthedeferredtaxassets.If,basedontheweightofavailableevidence,itismore-likely-than-notthatadeferredtaxassetwillnotberealized,theCompanyrecordsavaluationallowance.

Priortothefourthquarterof2016,theCompanymaintainedavaluationallowanceagainstFrenchdeferredtaxassets.Duringfiscal2016,significantpositiveevidenceprovidedassurancethattheFrenchdeferredtaxassetswillmore-likely-than-notberealized.Accordingly,inthefourthquarteroffiscal2016,theCompanyreleasedallvaluationallowancesithadpreviouslymaintainedagainstFrenchdeferredtaxassets.Thereleaseresultedina$100benefittotheCompany'sprovisionforincometaxes.

Foreignanddomestictaxcredits,netofvaluationallowances,totaledapproximately$1,490atApril1,2017andapproximately$1,661atFebruary27,2016.ThevariouscreditsavailableatApril1,2017expireinthe2026taxyear.

TheCompanyhaddeferredtaxassetsforforeignandstatenetoperatinglosscarryoversof$1,955atApril1,2017,andapproximately$1,888atFebruary27,2016.Valuationallowancesof$1,753and$1,687wererecordedagainstthenetoperatinglossdeferredtaxassetsatApril1,2017andFebruary27,2016,respectively.

TheCompanyissubjecttoU.S.federalincometaxexaminationsfortheyearendedMarch1,2014andforward.TheCompanyiscurrentlyunderanInternalRevenueServiceauditforthetaxyearendedMarch1,2014.

TheCompanyaccountsfortherepatriationofforeignearningsinaccordancewithASC740-30.Assuch,theCompanyispartiallyreinvestedbasedontheguidanceprovidedinASC740-30.Undistributedearningsofapproximately$33,237atApril1,2017andapproximately$33,149atFebruary27,2016,whichrepresentsalloftheCompany'sundistributedearnings,havebeenindefinitelyreinvested;therefore,noprovisionhasbeenmadefortaxesdueuponremittanceofthoseearnings.Theincreaseinundistributedearningsfromfiscal2015tofiscal2016wasprimarilyrelatedtothetranslationofforeignearningsfromSwedishkronatoU.S.dollar.Determinationoftheunrecognizeddeferredtaxliabilityrelatedtotheseundistributedearningsisnotpracticablebecauseofthecomplexitiesassociatedwithitshypotheticalcalculation.

TheCompanydoesnothaveanyuncertaintaxpositions,accordingtoASC740-10,asofApril1,2017andFebruary27,2016.

6.Employeebenefitplans

401(k)Plan

AlldomesticemployeesoftheCompanywhocomplete11monthsofserviceareeligibletoparticipateintheCompany's401(k)Plan.Participantsmaycontributeupto80%ofannual

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April1,2017

6.Employeebenefitplans(Continued)

compensation,limitedtoeighteenthousandannually(twenty-fourthousandforparticipantsaged50yearsandover)asofJanuary1,2016.Duringfiscal2015andfiscal2014,theCompanymatched100%ofemployeecontributionsupto4%ofcompensation.EffectiveApril15,2016,theCompanytemporarilyceased401(k)matchingcontributions.TheamountchargedtoexpensefortheCompany'smatchingcontributionwas$58,$3,165,$2,737,and$309forfiscal2016,fiscal2015,fiscal2014,andthefiveweeksendedApril2,2016,respectively.

Nonqualifiedretirementplan

TheCompanyhasanonqualifiedretirementplanwherebycertainemployeescanelecttodeferaportionoftheircompensationintoretirementsavingsaccounts.Undertheplan,thereisnorequirementthattheCompanymatchcontributions,althoughtheCompanymaycontributematchingpaymentsatitssolediscretion.Nomatchingcontributionsweremadetotheplanduringanyoftheperiodspresented.Thetotalfairvalueoftheplanassetrecordedinothercurrentassetswas$5,092and$3,947asofApril1,2017andFebruary27,2016,respectively.Thetotalcarryingvalueoftheplanliabilityrecordedinaccruedliabilitieswas$5,086and$3,962asofApril1,2017andFebruary27,2016,respectively.

Pensionplan

TheCompanyprovidespensionbenefitstotheemployeesofElfaundercollectivelybargainedpensionplansinSweden,whicharerecordedinotherlong-termliabilities.Thedefinedbenefitplanprovidesbenefitsforparticipatingemployeesbasedonyearsofserviceandfinalsalarylevelsatretirement.CertainemployeesalsoparticipateindefinedcontributionplansforwhichCompanycontributionsaredeterminedasapercentageofparticipantcompensation.Thedefinedbenefitplansareunfundedandapproximately3%ofElfaemployeesareparticipantsinthedefinedbenefitpensionplan.

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Notestoconsolidatedfinancialstatements(Continued)

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otherwisestated)

April1,2017

6.Employeebenefitplans(Continued)

Thefollowingisareconciliationofthechangesinthedefinedbenefitobligations,astatementoffundedstatus,andtherelatedweighted-averageassumptions:

Thefollowingtableprovidesthecomponentsofnetperiodicbenefitcostforfiscalyears2016,2015,2014andthefiveweeksendedApril2,2016:

7.Stock-basedcompensation

OnOctober16,2013,theBoardapprovedthe2013IncentiveAwardPlan("2013EquityPlan").The2013EquityPlanprovidesforgrantsofnonqualifiedstockoptions,incentivestockoptions,restrictedstock,restrictedstockunits,deferredstockawards,deferredstockunits,stockappreciationrights,dividendsequivalents,performanceawards,andstockpayments.AsofApril1,2017,thereare

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April1,2017

February27,2016

Changeinbenefitobligation: Projectedbenefitobligation,beginningofyear $ 3,691 $ 3,610Servicecost 67 86Interestcost 117 103Benefitspaid (77) (90)Actuarialloss(gain) 710 (133)Exchangerategain (370) (90)Projectedbenefitobligation,endofyear 4,138 3,486Fairvalueofplanassets,endofyear — —Underfundedstatus,endofyear $ (4,138) $ (3,486)Discountrate 3.3% 3.4%Rateofpayincreases 3.0% 3.0%

FiscalYearEnded

FiveWeeksEndedApril2,2016

April1,2017

February27,2016

February28,2015

Componentsofnetperiodicbenefitcost: Definedbenefitplans: Servicecost $ 67 $ 86 $ 62 $ 6Interestcost 117 103 131 10Amortizationofunrecognizednetloss 37 45 38 —Netperiodicbenefitcostfordefinedbenefitplan 221 234 231 16Definedcontributionplans 1,904 2,246 2,292 129Totalnetperiodicbenefitcost $ 2,125 $ 2,480 $ 2,523 $ 145

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Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

7.Stock-basedcompensation(Continued)

3,616,570sharesauthorizedand522,004sharesavailableforgrantunderthe2013EquityPlan.Awardsthataresurrenderedorterminatedwithoutissuanceofsharesareavailableforfuturegrants.

Stock Options

OnSeptember1,2014,theCompanygranted24,649nonqualifiedstockoptionsunderthe2013EquityPlantocertainemployees.Thestockoptionsgrantedvestinequalannualinstallmentsover7years.ThestockoptionsgrantedwereapprovedbytheBoardandconsistedofnonqualifiedstockoptionsasdefinedbytheIRSforcorporateandindividualtaxreportingpurposes.

OnOctober27,2014,theCompanygranted80,200nonqualifiedstockoptionsunderthe2013EquityPlantonon-employeedirectorsoftheCompany.Thestockoptionsgrantedvestinequalannualinstallmentsover3years.ThestockoptionsgrantedwereapprovedbytheBoardandconsistedofnonqualifiedstockoptionsasdefinedbytheIRSforcorporateandindividualtaxreportingpurposes.

OnAugust3,2015,theCompanygranted94,568nonqualifiedstockoptionsunderthe2013EquityPlantonon-employeedirectorsoftheCompany.Thestockoptionsgrantedvestinequalannualinstallmentsover3years.ThestockoptionsgrantedwereapprovedbytheBoardandconsistedofnonqualifiedstockoptionsasdefinedbytheIRSforcorporateandindividualtaxreportingpurposes.

OnAugust1,2016,theCompanygranted276,075nonqualifiedstockoptionsunderthe2013EquityPlantonon-employeedirectorsoftheCompany.Thestockoptionsgrantedvestinequalannualinstallmentsover3years.ThestockoptionsgrantedwereapprovedbytheBoardandconsistedofnonqualifiedstockoptionsasdefinedbytheIRSforcorporateandindividualtaxreportingpurposes.

Inconnectionwithourstock-basedcompensationplans,theBoardconsiderstheestimatedfairvalueoftheCompany'sstockwhensettingthestockoptionexercisepriceasofthedateofeachgrant.TheBoarddeterminestheexercisepriceofstockoptionsbasedontheclosingpriceoftheCompany'scommonstockasreportedonTheNewYorkStockExchangeonthegrantdate.Stock-basedcompensationcostismeasuredatthegrantdatefairvalueandisrecognizedasanexpenseintheconsolidatedstatementsofoperations,onastraight-linebasis,overtheemployee'srequisiteserviceperiod(generallythevestingperiodoftheequitygrant).TheCompanyestimatesforfeituresforoptiongrantsthatarenotexpectedtovest.TheCompanyissuesnewsharesofcommonstockuponstockoptionexercise.

Stock-basedcompensationcostrelatedtostockoptionswas$1,526,$1,556,$1,289,and$147duringthefiscalyear2016,2015,2014,andthefiveweeksendedApril2,2016,respectively.AsofApril1,2017,therewasaremainingunrecognizedcompensationcostof$4,257(netofestimatedforfeitures)thattheCompanyexpectstoberecognizedonastraight-linebasisoveraweighted-averageremainingserviceperiodofapproximately1.7years.Theintrinsicvalueofsharesexercisedwas$0,$2,and$369duringfiscal2016,2015,and2014,respectively.Thefairvalueofsharesvestedwas$1,464,$1,367,and$1,205duringfiscal2016,2015,and2014,respectively.

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April1,2017

7.Stock-basedcompensation(Continued)

ThefollowingtablesummarizestheCompany'sstockoptionactivityduringfiscal2016,2015,and2014:

ThefairvalueofstockoptionsisestimatedonthedateofthegrantusingtheBlack-Scholesoptionpricingmodelwiththefollowingweighted-averageassumptions:

• ExpectedTerm—Theexpectedtermoftheoptionsrepresentstheperiodoftimebetweenthegrantdateoftheoptionsandthedatetheoptionsareeitherexercisedorcanceled,includinganestimateofoptionsstilloutstanding.TheCompanyutilizedthesimplifiedmethodforcalculatingtheexpectedtermforstockoptionsaswedonothavesufficienthistoricaldatatocalculatebasedonactualexerciseandforfeitureactivity.

• ExpectedVolatility—Theexpectedvolatilityincorporateshistoricalandimpliedvolatilityofcomparablepubliccompaniesforaperiodapproximatingtheexpectedterm.

• ExpectedDividendYield—TheexpecteddividendyieldisbasedontheCompany'sexpectationofnotpayingdividendsonitscommonstockfortheforeseeablefuture.

• Risk-FreeInterestRate—Therisk-freeinterestrateisbasedontheU.S.Treasuryyieldcurveineffectatthetimeofgrantandwithamaturitythatapproximatestheexpectedterm.

Stockoptionsgrantedduringfiscalyear2016,2015,and2014weregrantedataweighted-averagegrantdatefairvalueof$3.26,$8.46,and$8.14,respectively.SuchamountswereestimatedusingtheBlackScholesoptionpricingmodelwiththefollowingweighted-averageassumptions:

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FiscalYear 2016(1) 2015 2014

Shares

Weighted-averageexerciseprice(pershare)

Weighted-average

contractualterm

remaining(years)

Aggregateintrinsicvalue

(thousands) Shares

Weighted-averageexerciseprice(pershare)

Weighted-average

contractualterm

remaining(years)

Aggregateintrinsicvalue

(thousands) Shares

Weighted-averageexerciseprice(pershare)

Weighted-average

contractualterm

remaining(years)

Aggregateintrinsicvalue

(thousands) Beginningbalance 2,890,476 $ 18.02 2,856,005 $ 18.04 2,827,492 $ 17.92

Granted 276,075 $ 5.35 94,568 $ 17.28 104,849 $ 21.02 Exercised — $ — (3,315) $ 17.71 (42,480) $ 17.47 Forfeited (98,815) $ 18.63 (41,791) $ 18.00 (32,202) $ 18.00 Expired (121,708) $ 17.95 (14,991) $ 17.80 (1,654) $ 17.67 Endingbalance 2,946,028 $ 16.81 6.83 $ — 2,890,476 $ 18.02 7.66 $ — 2,856,005 $ 18.04 8.60 $ 1,376

Vestedandexercisableatendofyear 2,156,537 $ 17.98 6.51 $ — 2,110,661 $ 17.95 7.55 $ — 1,975,068 $ 17.90 8.53 $ 1,036

(1) Fiscal2016includes6,690optionsforfeitedand576optionsexpiredduringthefive-weeksendedApril2,2016.Therewerenooptionsgrantedorexercisedduringthefive-weeksendedApril2,2016.

FiscalYear 2016 2015 2014Expectedterm 6.0years 6.0years 6.1yearsExpectedvolatility 67.9% 50.3% 50.4%Risk-freeinterestrate 1.2% 1.7% 1.8%Dividendyield 0% 0% 0%

TableofContents

TheContainerStoreGroup,Inc.

Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

7.Stock-basedcompensation(Continued)

Restricted Stock Awards

OnJuly1,2016,theCompanygrantedtime-basedandperformance-basedrestrictedstockawardsundertheCompany's2013IncentiveAwardPlantocertainkeyexecutivesinaccordancewithemploymentagreementsexecutedonMay6,2016.Thetotalnumberofrestrictedsharesgrantedwas372,842withagrant-datefairvalueof$5.42.Thetime-basedrestrictedsharesvestover2.75years.Theperformance-basedrestrictedsharesvestbasedonachievementoffiscal2016performancetargetsandarealsosubjecttotime-basedvestingrequirementsover3.75years.OnApril1,2017,104,320performance-basedrestrictedsharesmetthefiscal2016performanceconditionandaresubjecttosubsequenttime-basedvestingrequirements.

OnAugust2,2016,theCompanygrantedtime-basedandperformance-basedrestrictedstockawardsundertheCompany's2013IncentiveAwardPlantocertainofficersoftheCompany.Thetotalnumberofrestrictedsharesgrantedwas248,937withagrant-datefairvalueof$5.29.Thetime-basedrestrictedstockawardsvestover2.67years.Theperformance-basedrestrictedstockawardsvestbasedonachievementoffiscal2016performancetargetsandarealsosubjecttotime-basedvestingrequirementsover3.67years.OnApril1,2017,61,552performance-basedrestrictedsharesmetthefiscal2016performanceconditionandaresubjecttosubsequenttime-basedvestingrequirements.

Stock-basedcompensationcostrelatedtorestrictedstockawardswas$463forfiscalyear2016.UnrecognizedcompensationexpenserelatedtooutstandingrestrictedstockawardstoemployeesasofApril1,2017isexpectedtobe$1,009(netofestimatedforfeitures)toberecognizedonastraight-linebasisoveraweightedaverageperiodof1.9years.

ThefollowingtablesummarizestheCompany'srestrictedstockawardsactivityduringfiscal2016:

8.Shareholders'equity

Commonstock

Duringfiscal2016,theCompanyissued26,923sharesofcommonstockinexchangeforconsultationservicesreceivedfromathird-partyataweighted-averagepriceof$5.01pershare.

99

RestrictedStock

Awards WeightedAverage

GrantDateFairValue NonvestedatFebruary27,2016 — —

Granted 621,779 $ 5.37Vested (31,216) 5.37Forfeited (334,923) 5.36Withheldrelatedtonetsettlement (9,106) 5.37NonvestedatApril1,2017 246,534 $ 5.37

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TheContainerStoreGroup,Inc.

Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

8.Shareholders'equity(Continued)

AsofApril1,2017,theCompanyhad250,000,000sharesofcommonstockauthorized,withaparvalueof$0.01,ofwhich48,045,114wereissued.

Theholdersofcommonstockareentitledtoonevotepercommonshare.Theholdershavenopreemptiveorothersubscriptionrightsandtherearenoredemptionsorsinkingfundprovisionswithrespecttosuchshares.CommonstockissubordinatetoanypreferredstockoutstandingwithrespecttorightsuponliquidationanddissolutionoftheCompany.

Preferredstock

AsofApril1,2017,theCompanyhad5,000,000sharesofpreferredstockauthorized,withaparvalueof$0.01,ofwhichnoshareswereissuedoroutstanding.

9.Accumulatedothercomprehensiveincome

Accumulatedothercomprehensiveincome("AOCI")consistsofchangesinourforeigncurrencyhedgecontracts,pensionliabilityadjustment,andforeigncurrencytranslation.ThecomponentsofAOCI,netoftax,wereasfollows:

100

Foreigncurrencyhedge

instruments

Pensionliability

adjustment

Foreigncurrencytranslation Total

BalanceatFebruary28,2015 $ (882) $ (1,167) $ (16,293) $ (18,342)

Othercomprehensive(loss)incomebeforereclassifications,netoftax (47) 138 (2,521) (2,430)Amountsreclassifiedtoearnings,netoftax 900 37 — 937Netcurrentperiodothercomprehensiveincome(loss) 853 175 (2,521) (1,493)BalanceatFebruary27,2016 $ (29) $ (992) $ (18,814) $ (19,835)Othercomprehensive(loss)incomebeforereclassifications,netoftax — (66) 4,053 3,987Amountsreclassifiedtoearnings,netoftax 12 — — 12Netcurrentperiodothercomprehensiveincome(loss) 12 (66) 4,053 3,999BalanceatApril2,2016 $ (17) $ (1,058) $ (14,761) $ (15,836)Othercomprehensivelossbeforereclassifications,netoftax (543) (413) (6,283) (7,239)Amountsreclassifiedtoearnings,netoftax 405 27 — 432Netcurrentperiodothercomprehensiveloss (138) (386) (6,283) (6,807)BalanceatApril1,2017 $ (155) $ (1,444) $ (21,044) $ (22,643)

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TheContainerStoreGroup,Inc.

Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

9.Accumulatedothercomprehensiveincome(Continued)

TheunrecognizednetactuariallossincludedinaccumulatedothercomprehensiveincomeasofApril1,2017andFebruary27,2016was$1,444and$992,respectively.AmountsreclassifiedfromAOCItoearningsforthepensionliabilityadjustmentcategoryaregenerallyincludedincostofsalesandselling,generalandadministrativeexpensesintheCompany'sconsolidatedstatementsofoperations.ForadescriptionoftheCompany'semployeebenefitplans,refertoNote6.AmountsreclassifiedfromAOCItoearningsfortheforeigncurrencyhedgeinstrumentscategoryaregenerallyincludedincostofsalesintheCompany'sconsolidatedstatementsofoperations.ForadescriptionoftheCompany'suseofforeigncurrencyforwardcontracts,refertoNote10.

10.Foreigncurrencyforwardcontracts

TheCompany'sinternationaloperationsandpurchasesofitssignificantproductlinesfromforeignsuppliersaresubjecttocertainopportunitiesandrisks,includingforeigncurrencyfluctuations.IntheTCSsegment,weutilizeforeigncurrencyforwardcontractsinSwedishkronatostabilizeourretailgrossmarginsandtoprotectourdomesticoperationsfromdownwardcurrencyexposurebyhedgingpurchasesofinventoryfromourwhollyownedsubsidiary,Elfa.ForwardcontractsintheTCSsegmentaredesignatedascashflowhedges,asdefinedbyASC815.IntheElfasegment,weutilizeforeigncurrencyforwardcontractstohedgepurchases,primarilyofrawmaterials,thataretransactedincurrenciesotherthanSwedishkrona,whichisthefunctionalcurrencyofElfa.ForwardcontractsintheElfasegmentareeconomichedges,andarenotdesignatedascashflowhedgesasdefinedbyASC815.

Infiscal2016,fiscal2015,andfiscal2014,theTCSsegmentusedforwardcontractsfor78%,54%,and54%ofinventorypurchasesinSwedishkronaeachyear,respectively.Infiscal2016,fiscal2015,andfiscal2014,theElfasegmentusedforwardcontractstopurchaseU.S.dollarsintheamountof$3,905,$5,495,and$4,300,whichrepresented56%,67%,and64%oftheElfasegment'sU.S.dollarpurchaseseachyear,respectively.Inthefive-weeksendedApril2,2016,theTCSsegmentusedforwardcontractsfor0%ofinventorypurchasesinSwedishkronaandtheElfasegmentusedforwardcontractstopurchaseU.S.dollarsintheamountof$155,whichrepresented23%oftheElfasegment'sU.S.dollarpurchases.

Generally,theCompany'sforeigncurrencyforwardcontractshavetermsfrom1to12monthsandrequiretheCompanytoexchangecurrenciesatagreed-uponratesatsettlement.

Thecounterpartiestothecontractsconsistofalimitednumberofmajordomesticandinternationalfinancialinstitutions.TheCompanydoesnotholdorenterintofinancialinstrumentsfortradingorspeculativepurposes.TheCompanyrecordsitsforeigncurrencyforwardcontractsonagrossbasisandgenerallydoesnotrequirecollateralfromthesecounterpartiesbecauseitdoesnotexpectanylossesfromcreditexposure.

TheCompanyrecordsallforeigncurrencyforwardcontractsonitsconsolidatedbalancesheetatfairvalue.TheCompanyaccountsforitsforeigncurrencyhedgeinstrumentsintheTCSsegmentascashflowhedges,asdefined.Changesinthefairvalueoftheforeigncurrencyhedgeinstrumentsthatareconsideredtobeeffective,asdefined,arerecordedinothercomprehensiveincome(loss)untilthehedgeditem(inventory)issoldtothecustomer,atwhichtimethedeferredgainorlossisrecognized

101

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TheContainerStoreGroup,Inc.

Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

10.Foreigncurrencyforwardcontracts(Continued)

throughcostofsales.Anyportionofachangeintheforeigncurrencyhedgeinstrument'sfairvaluethatisconsideredtobeineffective,asdefined,orthattheCompanyhaselectedtoexcludefromitsmeasurementofeffectiveness,isimmediatelyrecordedinearningsascostofsales.TheCompanyassessedtheeffectivenessoftheforeigncurrencyhedgeinstrumentsanddeterminedtheforeigncurrencyhedgeinstrumentswerehighlyeffectiveduringthefiscalyearsendedApril1,2017,February27,2016,andFebruary28,2015.ForwardcontractsnotdesignatedashedgesintheElfasegmentareadjustedtofairvalueasselling,general,andadministrativeexpensesontheconsolidatedstatementsofoperations.Duringfiscal2016,theCompanyrecognizedanetunrealizedgainof$120associatedwiththechangeinfairvalueofforwardcontractsnotdesignatedashedgeinstruments.

TheCompanyhad$155inaccumulatedothercomprehensivelossrelatedtoforeigncurrencyhedgeinstrumentsatApril1,2017.SettledforeigncurrencyhedgeinstrumentsrelatedtoinventoryonhandasofApril1,2017represents$562oftheaccumulatedunrealizedloss.TheCompanyexpectstheunrealizedlossof$562,netoftaxes,tobereclassifiedintoearningsoverthenext12monthsastheunderlyinginventoryissoldtotheendcustomer.

ThechangeinfairvalueoftheCompany'sforeigncurrencyhedgeinstrumentsthatqualifyascashflowhedgesandareincludedinaccumulatedothercomprehensiveincome(loss),netoftaxes,arepresentedinNote9ofthesefinancialstatements.

11.Leases

TheCompanyconductsallofitsU.S.operationsfromleasedfacilitiesthatincludeacorporateheadquarters/warehousefacilityand86storelocations.Thecorporateheadquarters/warehouseandstoresareunderoperatingleasesthatwillexpireoverthenext1to20years.TheCompanyalsoleasescomputerhardwareunderoperatingleasesthatexpireoverthenextfewyears.Inmostcases,managementexpectsthatinthenormalcourseofbusiness,leaseswillberenewedorreplacedbyotherleases.

Mostoftheoperatingleasesforthestorescontainarenewaloptionatpredeterminedrentalpaymentsforperiodsof5to20years.ThisoptionenablestheCompanytoretainuseoffacilitiesindesirableoperatingareas.Therentalpaymentsundercertainstoreleasesarebasedonaminimumrentalplusapercentageofthesalesinexcessofastipulatedamount.Thesepaymentsareaccountedforascontingentrentandexpensedwhenincurred.

102

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TheContainerStoreGroup,Inc.

Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

11.Leases(Continued)

Thefollowingisascheduleoffutureminimumleasepaymentsdueundernoncancelableoperatingandcapitalleases:

Rentexpenseforfiscalyears2016,2015,2014,andthefiveweeksendedApril2,2016was$80,647,$75,834,$72,643,and$6,495,respectively.Includedinrentexpenseispercentage-of-salesrentexpenseof$416,$450,$633,and$32forfiscalyears2016,2015,2014,andthefiveweeksendedApril2,2016,respectively.

12.Commitmentsandcontingencies

Inconnectionwithinsurancepoliciesandothercontracts,theCompanyhasoutstandingstandbylettersofcredittotaling$4,143asofApril1,2017.

TheCompanyissubjecttoordinarylitigationandroutinereviewsbyregulatorybodiesthatareincidentaltoitsbusiness,noneofwhichisexpectedtohaveamaterialadverseeffectontheCompany'sconsolidatedfinancialstatementsonanindividualbasisorintheaggregate.

13.Fairvaluemeasurements

Undergenerallyacceptedaccountingprinciples,theCompanyisrequiredtoa)measurecertainassetsandliabilitiesatfairvalueorb)disclosethefairvaluesofcertainassetsandliabilitiesrecordedatcost.Accountingstandardsdefinefairvalueasthepricethatwouldbereceiveduponsaleofanassetorpaidupontransferofaliabilityinanorderlytransactionbetweenmarketparticipantsatthemeasurementdate.Fairvalueiscalculatedassumingthetransactionoccursintheprincipalormostadvantageousmarketfortheassetorliabilityandincludesconsiderationofnon-performanceriskandcreditriskofbothparties.Accountingstandardspertainingtofairvalueestablishathree-tierfairvaluehierarchythatprioritizestheinputsusedinmeasuringfairvalue.Thesetiersinclude:

• Level1—Valuationinputsarebaseduponunadjustedquotedpricesforidenticalinstrumentstradedinactivemarkets.

103

Operatingleases Capitalleases Within1year $ 81,680 $ 3932years 79,427 2933years 68,225 2374years 63,496 —5years 48,380 —Thereafter 217,116 —Totalminimumleasepayments $ 558,324 $ 923Lessamountrepresentinginterest (22)Presentvalueofminimumleasepayments $ 901

TableofContents

TheContainerStoreGroup,Inc.

Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

13.Fairvaluemeasurements(Continued)

• Level2—Valuationinputsarebaseduponquotedpricesforsimilarinstrumentsinactivemarkets,quotedpricesforidenticalorsimilarinstrumentsinmarketsthatarenotactive,andmodel-basedvaluationtechniquesforwhichallsignificantassumptionsareobservableinthemarketorcanbecorroboratedbyobservablemarketdataforsubstantiallythefulltermoftheassetsorliabilities.

• Level3—Valuationinputsareunobservableandtypicallyreflectmanagement'sestimatesofassumptionsthatmarketparticipantswoulduseinpricingtheassetorliability.Thefairvaluesaredeterminedusingmodel-basedtechniquesthatincludeoptionpricingmodels,discountedcashflowmodelsandsimilartechniques.

AsofApril1,2017andFebruary27,2016,theCompanyheldcertainitemsthatarerequiredtobemeasuredatfairvalueonarecurringbasis.Theseincludedthenonqualifiedretirementplanandforeigncurrencyforwardcontracts.Thenonqualifiedretirementplanconsistsofinvestmentspurchasedbyemployeecontributionstoretirementsavingsaccounts.TheCompany'sinternationaloperationsandpurchasesofitssignificantproductlinesfromforeignsuppliersaresubjecttocertainopportunitiesandrisks,includingforeigncurrencyfluctuations.TheCompanyutilizesforeigncurrencyforwardexchangecontractstostabilizeitsretailgrossmarginsandtoprotectitsoperationsfromdownwardcurrencyexposure.ForeigncurrencyhedgeinstrumentsarerelatedtotheCompany'sattemptstohedgeforeigncurrencyfluctuationonpurchasesofinventoryinSwedishkrona.TheCompany'sforeigncurrencyhedgeinstrumentsconsistofover-the-counter(OTC)contracts,whicharenottradedonapublicexchange.SeeNote10forfurtherinformationontheCompany'shedgingactivities.

Thefairvalueoftheforeigncurrencyforwardcontractsisdeterminedbasedonthemarketapproachwhichutilizesinputsthatarereadilyavailableinpublicmarketsorcanbederivedfrominformationavailableinpubliclyquotedmarketsforcomparableassets.Therefore,theCompanyhascategorizedthisitemasLevel2.TheCompanyalsoconsiderscounterpartycreditriskanditsowncreditriskinitsdeterminationofallestimatedfairvalues.TheCompanyhasconsistentlyappliedthesevaluationtechniquesinallperiodspresentedandbelievesithasobtainedthemostaccurateinformationavailableforthetypesofcontractsitholds.

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TheContainerStoreGroup,Inc.

Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

13.Fairvaluemeasurements(Continued)

Thefollowingitemsaremeasuredatfairvalueonarecurringbasis,subjecttothedisclosurerequirementsofASC820,Fair Value Measurements, atApril1,2017andFebruary27,2016:

Thefairvalueoflong-termdebtwasestimatedusingquotedpricesaswellasrecenttransactionsforsimilartypesofborrowingarrangements(level2valuations).AsofApril1,2017andFebruary27,2016,theestimatedfairvalueoftheCompany'slong-termdebt,includingcurrentmaturities,was$295,005and$221,534,respectively.

14.Segmentreporting

TheCompany'sreportablesegmentsweredeterminedonthesamebasisashowmanagementevaluatesperformanceinternallybytheChiefOperatingDecisionMaker("CODM").TheCompanyhasdeterminedthattheChiefExecutiveOfficeristheCODMandtheCompany'stworeportablesegmentsconsistofTCSandElfa.

TheTCSsegmentincludestheCompany'sretailstores,websiteandcallcenter,aswellastheinstallationandorganizationservicesbusiness.TheElfasegmentincludesthemanufacturingbusinessthatproducestheelfa®brandproductsthataresolddomesticallyexclusivelythroughtheTCSsegment,aswellasonawholesalebasisinapproximately30countriesaroundtheworldwithaconcentrationintheNordicregionofEurope.TheintersegmentsalesintheElfacolumnrepresentelfa®productsalestotheTCSsegment.ThesesalesandtherelatedgrossmarginonmerchandiserecordedinTCSinventorybalancesattheendoftheperiodareeliminatedforconsolidationpurposesintheEliminationscolumn.ThenetsalestothirdpartiesintheElfacolumnrepresentsalestocustomersoutsideoftheUnitedStates.

OnJuly1,2016,MelissaReiff,formerPresidentandChiefOperatingOfficer,becametheCompany'sChiefExecutiveOfficer("CEO"),succeedingWilliamA.("Kip")Tindell,III.UpontransitiontoCEO,Ms.ReiffassumedtheroleofCODMandduringthesecondquarteroffiscal2016,theCompanyre-evaluateditsmeasureusedtoevaluatesegmentperformance.Previously,theprofitorlossmeasureusedtomakeresourceallocationdecisionsandevaluatesegmentperformancewasincomeorlossbeforetaxes.TheCompanyhasdeterminedthatadjustedearningsbeforeinterest,tax,depreciation,andamortization("AdjustedEBITDA")istheprofitorlossmeasurethattheCODMuses

105

Description BalanceSheetLocation April1,2017

February27,2016

Assets Nonqualifiedretirementplan(1) N/A Othercurrentassets $ 5,092 $ 3,947Foreigncurrencyforwardcontracts Level2 Othercurrentassets 841 106

Totalassets $ 5,933 $ 4,053

(1) Thefairvalueamountofthenonqualifiedretirementplanismeasuredatfairvalueusingthenetassetvaluepersharepracticalexpedient,andtherefore,isnotclassifiedinthefairvaluehierarchy.

TableofContents

TheContainerStoreGroup,Inc.

Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

14.Segmentreporting(Continued)

tomakeresourceallocationdecisionsandevaluatesegmentperformance.TheshifttofocusonAdjustedEBITDAmorecloselyalignswithmanagement'sassessmentofsegmentperformanceunderMs.Reiff'sleadership.Assuch,allcurrentandpriorperiodsegmentinformationhasbeenpresentedcomparably.

AdjustedEBITDAassistsmanagementincomparingourperformanceonaconsistentbasisforpurposesofbusinessdecision-makingbyremovingtheimpactofcertainitemsthatmanagementbelievesdonotdirectlyreflectourcoreoperationsand,therefore,arenotincludedinmeasuringsegmentperformance.AdjustedEBITDAiscalculatedinaccordancewiththeSeniorSecuredTermLoanFacilityandtheRevolvingCreditFacilityandwedefineAdjustedEBITDAasnetincomebeforeinterest,taxes,depreciationandamortization,certainnoncashitems,andotheradjustmentsthatwedonotconsiderinourevaluationofongoingoperatingperformancefromperiodtoperiod.

106

FiscalyearendedApril1,2017 TCS Elfa Eliminations Total Netsalestothirdparties $ 752,675 $ 67,255 $ — $ 819,930Intersegmentsales — 47,898 (47,898) —AdjustedEBITDA(2) 75,268 11,186 105 86,559Depreciationandamortization 31,572 5,552 — 37,124Interestexpense,net 16,403 284 — 16,687Capitalexpenditures(1) 25,901 2,614 — 28,515Goodwill 202,815 — — 202,815Tradenames(1) 187,048 39,637 — 226,685Assets(1) 656,884 107,998 (3,048) 761,834

FiscalyearendedFebruary27,2016 TCS Elfa Eliminations Total Netsalestothirdparties $ 724,079 $ 70,551 $ — $ 794,630Intersegmentsales — 47,010 (47,010) —AdjustedEBITDA 58,827 9,157 175 68,159Depreciationandamortization 28,767 5,463 — 34,230Interestexpense,net 16,484 326 — 16,810Capitalexpenditures(1) 42,412 4,019 — 46,431Goodwill 202,815 — — 202,815Tradenames(1) 187,048 41,320 — 228,368Assets(1) 654,611 107,136 (3,628) 758,119

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TheContainerStoreGroup,Inc.

Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

14.Segmentreporting(Continued)

107

FiscalyearendedFebruary28,2015 TCS Elfa Eliminations Total Netsalestothirdparties $ 697,699 $ 84,167 $ — $ 781,866Intersegmentsales — 51,291 (51,291) —AdjustedEBITDA 72,109 16,073 48 88,230Depreciationandamortization 24,945 6,066 — 31,011Interestexpense,net 16,543 562 — 17,105Capitalexpenditures(1) 40,785 7,955 — 48,740

FiveweeksendedApril2,2016 TCS Elfa Eliminations Total Netsalestothirdparties $ 64,331 $ 4,887 $ — $ 69,218Intersegmentsales — 1,990 (1,990) —AdjustedEBITDA 5,271 (471) 639 5,439Depreciationandamortization 2,543 466 — 3,009Interestexpense,net 1,532 18 — 1,550Capitalexpenditures(1) 1,640 795 — 2,435

(1) TangibleassetsandtradenamesintheElfacolumnarelocatedoutsideoftheUnitedStates.

(2) TheTCSsegmentincludesanetbenefitof$3.9millionrelatedtoamendedandrestatedemploymentagreementsenteredintowithkeyexecutivesduringthefirstquarter,leadingtoareversalofaccrueddeferredcompensationassociatedwiththeoriginalemploymentagreements.

TableofContents

TheContainerStoreGroup,Inc.

Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

14.Segmentreporting(Continued)

AreconciliationofAdjustedEBITDAbysegmenttoincomebeforetaxesissetforthbelow:

108

FiscalYearEnded

FiveWeeksEnded

April1,2017

February27,2016

February28,2015

April2,2016

AdjustedEBITDAbysegment: TCS $ 75,268 $ 58,827 $ 72,109 $ 5,271Elfa 11,186 9,157 16,073 (471)Eliminations 105 175 48 639

TotalAdjustedEBITDA 86,559 68,159 88,230 5,439Depreciationandamortization (37,124) (34,230) (31,011) (3,009)Interestexpense,net (16,687) (16,810) (17,105) (1,550)Pre-openingcosts(a) (6,852) (9,033) (8,283) (191)Noncashrent(b) 1,365 1,844 374 200Stock-basedcompensation(c) (1,989) (1,556) (1,289) (147)Foreignexchangegains(losses)(d) 342 (241) 171 (60)Otheradjustments(e) (1,259) (82) (1,221) 10Incomebeforetaxes $ 24,355 $ 8,051 $ 29,866 $ 692

(a) Non-capitalexpendituresassociatedwithopeningnewstoresandrelocatingstores,includingrent,marketingexpenses,travelandrelocationcosts,andtrainingcosts.Weadjustforthesecoststofacilitatecomparisonsofourperformancefromperiodtoperiod.

(b) ReflectstheextenttowhichourannualGAAPrentexpensehasbeenaboveorbelowourcashrentpaymentduetoleaseaccountingadjustments.Theadjustmentvariesdependingontheaverageageofourleaseportfolio(weightedforsize),asourGAAPrentexpenseonyoungerleasestypicallyexceedsourcashcost,whileourGAAPrentexpenseonolderleasesistypicallylessthanourcashcost.

(c) Non-cashchargesrelatedtostock-basedcompensationprograms,whichvaryfromperiodtoperioddependingonvolumeandvestingtimingofawards.Weadjustforthesechargestofacilitatecomparisonsfromperiodtoperiod.

(d) Realizedforeignexchangetransactionalgains/lossesourmanagementdoesnotconsiderinourevaluationofourongoingoperations.

(e) Otheradjustmentsincludeamountsourmanagementdoesnotconsiderinourevaluationofourongoingoperations,includingcertainseveranceandothercharges.

TableofContents

TheContainerStoreGroup,Inc.

Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

14.Segmentreporting(Continued)

Thefollowingtableshowssalesbymerchandisecategoryasapercentageoftotalnetsalesforfiscalyears2016,2015,and2014:

15.Netincomepercommonshare

Basicnetincomepercommonshareiscomputedasnetincomedividedbytheweighted-averagenumberofcommonsharesoutstandingfortheperiod.Dilutednetincomepershareiscomputedasnetincomedividedbytheweighted-averagenumberofcommonsharesoutstandingfortheperiodpluscommonstockequivalentsconsistingofsharessubjecttostock-basedawardswithexercisepriceslessthanorequaltotheaveragemarketpriceoftheCompany'scommonstockfortheperiod,totheextenttheirinclusionwouldbedilutive.Potentialdilutivesecuritiesareexcludedfromthecomputationofdilutednetincomepershareiftheireffectisanti-dilutive.

109

Fiscalyearended

April1,2017

February27,2016

February28,2015

CustomClosets(1) 48% 46% 47%Storage,Box,Shelving 14% 14% 14%KitchenandTrash 13% 13% 13%Office,Collections,&Hooks 8% 9% 9%Bath,Travel,Laundry 8% 9% 9%Containers,GiftPackaging,Seasonal,Impulse 8% 8% 8%Other 1% 1% 0%Total 100% 100% 100%

(1) Includeselfa®,TCSClosets®,elfa®SlidingDoorsproductsandinstallationaswellasclosetcompletionproductssoldbytheTCSsegmentandElfasegmentsalestothirdparties.

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TheContainerStoreGroup,Inc.

Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

15.Netincomepercommonshare(Continued)

Thefollowingisareconciliationofnetincomeandthenumberofsharesusedinthebasicanddilutednetincomepersharecalculations:

16.Quarterlyresultsofoperations(unaudited)

Duetotheseasonalnatureofourbusiness,fourthquarteroperatingresultshistoricallyrepresentalargershareofannualnetsalesandoperatingincomeprimarilyduetoOurAnnualelfa®Sale.Wefollowthesameaccountingpoliciesforpreparingquarterlyandannualfinancialdata.ThetablebelowsummarizesquarterlyresultsforthefiscalyearendedApril1,2017andtherecastfiscalyearendedApril2,2016:

110

FiscalYearEnded

April2,2017

February27,2016

February28,2015

FiveWeeksEnded

April2,2016 Numerator: Netincome $ 14,953 $ 5,142 $ 22,673 $ 354

Denominator: Weighted-averagecommonshares—basic 47,996,746 47,985,717 47,971,243 47,986,975Optionsandotherdilutivesecurities 19,264 — 549,622 —Weighted-averagecommonshares—diluted 48,016,010 47,985,717 48,520,865 47,986,975

Netincomepercommonshare—basicanddiluted $ 0.31 $ 0.11 $ 0.47 $ 0.01

Antidilutivesecuritiesnotincluded: Stockoptionsoutstanding 2,954,114 2,875,900 830,740 2,886,138Nonvestedrestrictedstockawards 131,957 — — —

FiscalYearEndedApril1,2017

FourthQuarterEndedApril1,2017

ThirdQuarterEnded

December31,2016

SecondQuarterEnded

October1,2016

FirstQuarterEndedJuly2,2016

Netsales $ 221,042 $ 216,380 $ 205,060 $ 177,448Grossprofit 127,318 125,702 118,355 104,695Incomefromoperations 17,181 12,561 10,272 1,028Netincome(loss) 8,377 5,092 3,541 (2,057)Weighted-averagesharesusedincomputingbasicnetincome(loss)pershare 48,009,029 47,999,535 47,991,445 47,986,975

Weighted-averagesharesusedincomputingdilutednetincome(loss)pershare 48,073,420 48,022,499 48,001,112 47,986,975

Basicanddilutednetincome(loss)percommonshare $ 0.17 $ 0.11 $ 0.07 $ (0.04)

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TheContainerStoreGroup,Inc.

Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

16.Quarterlyresultsofoperations(unaudited)(Continued)

17.TransitionPeriodFinancialInformation

OnMarch30,2016,theBoardofDirectorsapprovedachangeintheCompany'sfiscalyearendfromtheSaturdayclosesttoFebruary28totheSaturdayclosesttoMarch31ofeachyear.Accordingly,theCompanyispresentingauditedfinancialstatementsforthefiveweektransitionperiodfromFebruary28,2016toApril2,2016.Thefollowingtableprovidescertainunauditedcomparativefinancialinformationofthesameperiodoftheprioryear.Theperiodsbelowbothrepresent35dayperiods.

111

RecastFiscalYearEndedApril2,2016

FourthQuarterEndedApril2,2016

ThirdQuarterEnded

January2,2016

SecondQuarterEnded

October3,2015

FirstQuarterEndedJuly4,2015

Netsales $ 209,881 $ 212,836 $ 204,412 $ 169,958Grossprofit 121,275 125,434 118,273 99,511Income(loss)fromoperations 9,452 10,156 9,910 (4,981)Netincome(loss) 3,380 3,924 3,342 (5,788)Weighted-averagesharesusedincomputingbasicnetincome(loss)pershare 47,986,975 47,986,975 47,986,401 47,983,785

Weighted-averagesharesusedincomputingdilutednetincome(loss)pershare 47,986,975 47,986,975 47,986,972 47,983,785

Basicanddilutednetincome(loss)percommonshare $ 0.07 $ 0.08 $ 0.07 $ (0.12)

FiveWeeksEnded

(Inthousands,exceptshareandpershareamounts) April2,2016

April4,2015

(unaudited) Consolidatedstatementofoperationsdata: Netsales $ 69,218 $ 66,761Grossprofit 40,195 39,254Selling,general,andadministrativeexpenses 34,504 33,728Incomefromoperations 2,242 2,565Incomebeforetaxes 692 978Provisionforincometaxes 338 340Netincome 354 638

Netincomepercommonshare: Basicanddiluted $ 0.01 $ 0.01Weighted-averagecommonshares—basicanddiluted 47,986,975 47,983,681

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TheContainerStoreGroup,Inc.

Notestoconsolidatedfinancialstatements(Continued)

(Inthousands,exceptshareamountsandunless

otherwisestated)

April1,2017

18.SubsequentEvent

OnMay23,2017,theCompanyannouncedafour-partplandesignedtooptimizeitsconsolidatedbusinessanddriveimprovedsalesandprofitability(the"OptimizationPlan"),whichincludedtheeliminationofcertainfull-timepositionsattheCompany'sstores,corporateofficeanddistributioncenter.TheCompanyexpectstoincurapproximately$2,000inseveranceexpenseinthefiscalquarterendingJuly1,2017,inconnectionwiththepositioneliminations.

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ScheduleI—CondensedFinancialInformationofregistrant—TheContainerStoreGroup,Inc.(parentcompanyonly)

Condensedbalancesheets

Seeaccompanyingnotes.

113

(inthousands) April1,2017 February27,2016 Assets Currentassets: Accountsreceivablefromsubsidiaries $ 985 $ 850

Totalcurrentassets 985 850Noncurrentassets: Investmentinsubsidiaries 220,805 206,218

Totalnoncurrentassets 220,805 206,218Totalassets $ 221,790 $ 207,068Liabilitiesandshareholders'equity Currentliabilities: Accountspayabletosubsidiaries $ — $ —

Totalcurrentliabilities — —Noncurrentliabilities — —Totalliabilities — —Shareholders'equity: Commonstock 480 480Additionalpaid-incapital 859,102 856,879Retaineddeficit (637,792) (650,291)

Totalshareholders'equity 221,790 207,068Totalliabilitiesandshareholders'equity $ 221,790 $ 207,068

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ScheduleI—TheContainerStoreGroup,Inc.(parentcompanyonly)

Condensedstatementsofoperations

ScheduleI—TheContainerStoreGroup,Inc.(parentcompanyonly)

Condensedstatementsofcomprehensiveincome

Seeaccompanyingnotes.

114

FiscalYearEnded FiveWeeks

Ended

(inthousands) April1,2017

February27,2016

February28,2015

April2,2016

Netsales — — — —Costofsales(excludingdepreciationandamortization) — — — —Grossprofit — — — —Selling,general,andadministrativeexpenses(excludingdepreciationandamortization) — — — —

Stock-basedcompensation — — — —Pre-openingcosts — — — —Depreciationandamortization — — — —Restructuringcharges — — — —Otherexpenses — — — —Loss(gain)ondisposalofassets — — — —Incomefromoperations — — — —Interestexpense — — — —Incomebeforetaxesandequityinnetincomeofsubsidiaries — — — —Provisionforincometaxes — — — —Incomebeforeequityinnetincomeofsubsidiaries — — — —Netincomeofsubsidiaries 14,953 5,142 22,673 354Netincome $ 14,953 $ 5,142 $ 22,673 $ 354

Fiscalyearended

FiveWeeksEndedApril2,2016

(Inthousands) April1,2017

February27,2016

February28,2015

Netincome $ 14,953 $ 5,142 $ 22,673 $ 354Unrealized(loss)gainonfinancialinstruments,netoftax(benefit)provisionof$(85),$606,$(604)and$7 (138) 853 (935) 12

Pensionliabilityadjustment,netoftaxprovision(benefit)of$142,$39,$(4)and$0 (386) 175 (14) (66)

Foreigncurrencytranslationadjustment (6,283) (2,521) (19,076) 4,053Comprehensiveincome $ 8,146 $ 3,649 $ 2,648 $ 4,353

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ScheduleI—TheContainerStoreGroup,Inc.(parentcompanyonly)

NotestoCondensedFinancialStatements

(Inthousands,exceptshareamountsandunlessotherwisestated)

April1,2017

Note1:Basisofpresentation

Intheparent-company-onlyfinancialstatements,TheContainerStoreGroup,Inc.'sinvestmentinsubsidiariesisstatedatcostplusequityinundistributedearningsofsubsidiariessincethedateofacquisition.Theparent-company-onlyfinancialstatementsshouldbereadinconjunctionwiththeCompany'sconsolidatedfinancialstatements.AcondensedstatementofcashflowswasnotpresentedbecauseTheContainerStoreGroup,Inc.hadnocashflowactivitiesduringfiscal2016,fiscal2015,fiscal2014,orthefive-weeksendedApril2,2016.

Note2:Guaranteesandrestrictions

TheContainerStoreInc.,asubsidiaryoftheCompany,has$316,760oflong-termdebtoutstandingundertheSeniorSecuredTermLoanFacility,asofApril1,2017.UnderthetermsoftheSeniorSecuredTermLoanFacility,TheContainerStoreGroup,Inc.andthedomesticsubsidiariesofTheContainerStore,Inc.haveguaranteedthepaymentofallprincipalandinterest.IntheeventofadefaultundertheSeniorSecuredTermLoanFacility,TheContainerStoreGroup,Inc.andthedomesticsubsidiariesofTheContainerStore,Inc.willbedirectlyliabletothedebtholders.TheSeniorSecuredTermLoanFacilitymaturesonApril6,2019.TheSeniorSecuredTermLoanFacilityalsoincludesrestrictionsontheabilityofTheContainerStoreGroup,Inc.anditssubsidiariestoincuradditionalliensandindebtedness,makeinvestmentsanddispositions,paydividendsormakeotherdistributions,makeloans,prepaycertainindebtednessandenterintosaleandleasebacktransactions,amongotherrestrictions.UndertheSeniorSecuredTermLoanFacility,providednoeventofdefaulthasoccurredandiscontinuing,TheContainerStore,Inc.ispermittedtopaydividendstoTheContainerStoreGroup,Inc.inanamountnottoexceedthesumof$10,000plusifaftergivingeffecttosuchdividendonaproformabasis,theConsolidatedLeverageRatio(asdefinedintheSeniorSecuredTermLoanFacility)doesnotexceed2.0to1.0,theAvailableAmount(asdefinedintheSeniorSecuredTermLoanFacility)duringthetermoftheSeniorSecuredTermLoanFacility,andpursuanttocertainotherlimitedexceptions.TherestrictednetassetsoftheCompany'sconsolidatedsubsidiarieswas$209,290asofApril1,2017.

AsofApril1,2017,TheContainerStore,Inc.alsohas$73,189ofavailablecreditontheRevolvingCreditFacilitythatprovidescommitmentsofupto$100,000forrevolvingloansandlettersofcredit.TheContainerStoreGroup,Inc.andthedomesticsubsidiariesofTheContainerStore,Inc.haveguaranteedallobligationsundertheRevolvingCreditFacility.IntheeventofdefaultundertheRevolvingCreditFacility,TheContainerStoreGroup,Inc.andthedomesticsubsidiariesofTheContainerStore,Inc.willbedirectlyliabletothedebtholders.TheRevolvingCreditFacilityincludesrestrictionsontheabilityofTheContainerStoreGroup,Inc.anditssubsidiariestoincuradditionalliensandindebtedness,makeinvestmentsanddispositions,paydividendsormakeothertransactions,amongotherrestrictions.OnOctober8,2015,TheContainerStore,Inc.executedanamendmenttotheRevolvingCreditFacility("AmendmentNo.2").UnderthetermsofAmendmentNo.2,amongotheritems,thematuritydateoftheloanwasextendedfromApril6,2017totheearlierof(x)October8,2020and(y)January6,2019,ifanyofTheContainerStore,Inc.'sobligationsunderitstermloancreditfacilityremainoutstandingonsuchdateandhavenotbeenrefinancedwithdebtthathasafinalmaturitydatethatisnoearlierthanApril6,2019orsubordinateddebt.UndertheRevolvingCreditFacility,providednoeventofdefaulthasoccurredandiscontinuing,TheContainer

115

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Store,Inc.ispermittedtopaydividendstoTheContainerStoreGroup,Inc.,inanamountnottoexceedthesumof$10,000plusifaftergivingeffecttosuchdividendonaproformabasis,theConsolidatedFixedChargeCoverageRatio(asdefinedintheRevolvingCreditFacility)isnotlessthan1.25to1.0,theAvailableAmount(asdefinedintheRevolvingCreditFacility)duringthetermoftheRevolvingCreditFacility,andpursuanttocertainotherlimitedexceptions.

ITEM9.CHANGESINANDDISAGREEMENTSWITHACCOUNTANTSONACCOUNTINGANDFINANCIALDISCLOSURE

None.

ITEM9A.CONTROLSANDPROCEDURES

Limitations on Effectiveness of Controls and Procedures

Indesigningandevaluatingourdisclosurecontrolsandprocedures,managementrecognizesthatanycontrolsandprocedures,nomatterhowwelldesignedandoperated,canprovideonlyreasonableassuranceofachievingthedesiredcontrolobjectives.Inaddition,thedesignofdisclosurecontrolsandproceduresmustreflectthefactthatthereareresourceconstraintsandthatmanagementisrequiredtoapplyjudgmentinevaluatingthebenefitsofpossiblecontrolsandproceduresrelativetotheircosts.

Evaluation of Disclosure Controls and Procedures

Ourmanagement,withtheparticipationofourChiefExecutiveOfficerandChiefFinancialOfficer,evaluated,asoftheendoftheperiodcoveredbythisAnnualReportonForm10-K,theeffectivenessofourdisclosurecontrolsandprocedures(asdefinedinRules13a-15(e)and15d-15(e)undertheSecuritiesExchangeActof1934,asamended).Basedonthatevaluation,ourChiefExecutiveOfficerandChiefFinancialOfficerconcludedthatourdisclosurecontrolsandprocedureswereeffectiveatthereasonableassurancelevelasofApril1,2017.

Changes in Internal Control

TherewerenochangesinourinternalcontroloverfinancialreportingduringthequarterendedApril1,2017identifiedinmanagement'sevaluationpursuanttoRules13a-15(d)or15d-15(d)oftheExchangeActthatmateriallyaffected,orarereasonablylikelytomateriallyaffect,ourinternalcontroloverfinancialreporting.

Management's Report on Internal Control over Financial Reporting

Managementisresponsibleforestablishingandmaintainingadequateinternalcontroloverfinancialreporting,assuchtermisdefinedinRule13a-15(f)undertheSecuritiesExchangeActof1934,asamended.

Ourmanagementconductedanassessmentoftheeffectivenessofourinternalcontroloverfinancialreportingbasedonthecriteriasetforthin"InternalControl-IntegratedFramework(2013)"issuedbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommission.Basedonthisassessment,managementconcludedthat,asofApril1,2017,ourinternalcontroloverfinancialreportingwaseffective.

ThisannualreportdoesnotincludeanattestationreportofourindependentregisteredpublicaccountingfirmoninternalcontroloverfinancialreportingduetoanexemptionestablishedbytheJOBSActfor"emerginggrowthcompanies".

ITEM9B.OTHERINFORMATION

None.

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PARTIII

ITEM10.DIRECTORS,EXECUTIVEOFFICERSANDCORPORATEGOVERNANCE

Wehaveadoptedawrittencodeofconductandethics,whichappliestoallofourdirectors,officersandemployees,includingourprincipalexecutiveofficerandourprincipalfinancialandaccountingofficer.OurCodeofConductandEthicsisavailableonourwebsitewww.containerstore.com undertheheading"CorporateGovernance."Inaddition,weintendtopostonourwebsitealldisclosuresthatarerequiredbylaworNewYorkStockExchangelistingrulesconcerninganyamendmentsto,orwaiversfrom,anyprovisionofourCodeofConductandEthics.TheinformationcontainedonourwebsiteisnotincorporatedbyreferenceintothisAnnualReportonForm10-K.

TheinformationregardingtheCompany'sexecutiveofficersislocatedattheendofPartIofthisAnnualReportonForm10-K.AllotherinformationrequiredbythisItemisincorporatedhereinbyreferencefromourdefinitiveProxyStatementforthe2017AnnualMeetingofStockholdersundertheheadings"Proposal1—ElectionofDirectors,""Section16(a)BeneficialOwnershipReportingCompliance,"and"CommitteesoftheBoard".

ITEM11.EXECUTIVECOMPENSATION

TheinformationrequiredbythisItemisincorporatedhereinbyreferencefromourdefinitiveProxyStatementforthe2017AnnualMeetingofStockholdersundertheheadings"ExecutiveandDirectorCompensation"and"CompensationCommitteeInterlocksandInsiderParticipation".

ITEM12.SECURITYOWNERSHIPOFCERTAINBENEFICIALOWNERSANDMANAGEMENTANDRELATEDSTOCKHOLDERMATTERS

TheinformationrequiredbythisItemisincorporatedhereinbyreferencefromourdefinitiveProxyStatementforthe2017AnnualMeetingofStockholdersundertheheadings"SecurityOwnershipofBeneficialOwnersandManagement"and"ExecutiveandDirectorCompensation—EquityCompensationPlanInformation".

ITEM13.CERTAINRELATIONSHIPSANDRELATEDTRANSACTIONS,ANDDIRECTORINDEPENDENCE

TheinformationrequiredbythisItemisincorporatedhereinbyreferencefromourdefinitiveProxyStatementforthe2017AnnualMeetingofStockholdersundertheheadings"CorporateGovernance,""CommitteesoftheBoard"and"CertainRelationshipsandRelatedPersonTransactions".

ITEM14.PRINCIPALACCOUNTINGFEESANDSERVICES

TheinformationrequiredbythisItemisincorporatedhereinbyreferencefromourdefinitiveProxyStatementforthe2017AnnualMeetingofStockholdersundertheheading"IndependentRegisteredPublicAccountingFirmFeesandOtherMatters".

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PARTIV

ITEM15.EXHIBITS,FINANCIALSTATEMENTSCHEDULES

1.FinancialStatements

ThefollowingconsolidatedfinancialstatementsoftheCompanyareincludedinPartII,Item8:

2.FinancialStatementsSchedules

ThefollowingfinancialstatementsscheduleisincludedinPartII,Item8:

AllotherscheduleshavenotbeenincludedeitherbecausetheyarenotapplicableorbecausetheinformationisincludedelsewhereinthisReport.

3.Exhibits

118

ReportsofIndependentRegisteredPublicAccountingFirm 66ConsolidatedBalanceSheetsasofApril1,2017andFebruary27,2016 67ConsolidatedStatementsofOperationsfortheFiscalYearsEndedApril1,2017,February27,2016,February28,2015,andtheFiveWeeksEndedApril2,2016 68

ConsolidatedStatementsofComprehensiveIncomefortheFiscalYearsEndedApril1,2017,February27,2016,February28,2015,andtheFiveWeeksEndedApril2,2016 69

ConsolidatedStatementsofShareholders'EquityfortheFiscalYearsEndedApril1,2017,February27,2016,February28,2015,andtheFiveWeeksEndedApril2,2016 70

ConsolidatedStatementsofCashFlowsfortheFiscalYearsEndedApril1,2017,February27,2016,February28,2015,andtheFiveWeeksEndedApril2,2016 71

NotestoConsolidatedFinancialStatements 72

ScheduleI—CondensedFinancialStatementInformationofRegistrant 113

IncorporatedbyReference

ExhibitNumber ExhibitDescription Form FileNo. Exhibit

FilingDate

Filed/FurnishedHerewith

3.1 AmendedandRestatedCertificateofIncorporationofTheContainerStoreGroup,Inc. 10-Q 001-36161 3.1 1/10/14

3.2 AmendedandRestatedBy-lawsofTheContainerStore

Group,Inc. 10-Q 001-36161 3.2 1/10/14 4.1 SpecimenStockCertificateevidencingthesharesof

commonstock S-1/A 333-191465 4.1 10/21/13 4.2 AmendedandRestatedStockholdersAgreement,datedas

ofNovember6,2013 10-Q 001-36161 4.1 1/10/14 10.1† ThirdAmendedandRestatedEmploymentAgreement

datedMay6,2016betweenKipTindellandTheContainerStoreGroup,Inc. 8-K 001-36161 10.1 5/9/16

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119

IncorporatedbyReference

ExhibitNumber ExhibitDescription Form FileNo. Exhibit

FilingDate

Filed/FurnishedHerewith

10.2† ThirdAmendedandRestatedEmploymentAgreementdatedMay6,2016betweenSharonTindellandTheContainerStoreGroup,Inc. 8-K 001-36161 10.3 5/9/16

10.3† ThirdAmendedandRestatedEmploymentAgreement

datedMay6,2016betweenMelissaReiffandTheContainerStoreGroup,Inc. 8-K 001-36161 10.2 5/9/16

10.4† EmploymentAgreement,datedMay6,2016,between

JodiTaylorandTheContainerStoreGroup,Inc. 8-K 001-36161 10.4 5/9/16 10.5† TheContainerStoreGroup,Inc.2012StockOptionPlan S-8 333-193255 4.3 1/10/14 10.6† FormofNon-QualifiedStockOptionAgreementunder

2012StockOptionPlan S-1 333-193255 10.2 9/30/13 10.7† TheContainerStoreGroup,Inc.2013IncentiveAward

Plan 10-Q 001-36161 10.4 1/10/14 10.8† FormofStockOptionAgreementunder2013Incentive

AwardPlan S-1/A 333-191465 10.21 10/21/13 10.9† TheContainerStoreGroup,Inc.SeniorExecutiveBonus

Plan 10-Q 001-36161 10.6 1/10/14 10.10† TheContainerStoreGroup,Inc.Non-Qualified

RetirementPlan,datedasofMarch28,2011 S-1 333-191465 10.3 9/30/13 10.11 IntercreditorAgreement,datedasofApril6,2012,byand

betweenJPMorganChaseBank,N.A.asABLAgent,andJPMorganChaseBank,N.A.asTermAgent S-1 333-191465 10.11 9/30/13

10.12 AmendmentNo.1toIntercreditorAgreement,datedasof

April8,2013,byandbetweenJPMorganChaseBank,N.A.,asABLAgentandJPMorganChaseBank,N.A.,asTermAgent 10-K 001-36161 10.13 5/28/2014

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120

IncorporatedbyReference

ExhibitNumber ExhibitDescription Form FileNo. Exhibit

FilingDate

Filed/FurnishedHerewith

10.13 CreditAgreement,datedasofApril6,2012,amongTheContainerStore,Inc.,asBorrower,theGuarantorspartythereto,JPMorganChaseBank,N.A.,asAdministrativeAgentandCollateralAgentandWellsFargoBank,N.A.asSyndicationAgent("ABLCreditAgreement") S-1 333-191465 10.12 9/30/13

10.14 AmendmentNo.1toABLCreditAgreement,datedasof

April8,2013 S-1 333-191465 10.13 9/30/13 10.15 AmendmentNo.2toABLCreditAgreement,datedasof

October8,2015 8-K 001-36161 10.1 10/09/15 10.16 AmendmentNo.3toABLCreditAgreement,datedasof

May20,2016 10-Q 001-36161 10.6 8/10/16 10.17 ABLFacilityPledgeAgreement,datedasofApril6,

2012,byandbetweenTheContainerStore,Inc.,thePledgorspartytheretoandJPMorganChaseBank,N.A.,asCollateralAgent S-1 333-191465 10.14 9/30/13

10.18 ABLFacilitySecurityAgreement,datedasofApril6,

2012,byandamongTheContainerStore,Inc.,theGuarantorspartythereto,theGrantorspartytheretoandJPMorganChaseBank,N.A.,asCollateralAgent S-1 333-191465 10.15 9/30/13

10.19 CreditAgreement,datedasofApril6,2012(asamended

throughNovember27,2013),amongTheContainerStore,Inc.,asBorrower,theGuarantorspartytheretoandJPMorganChaseBank,N.A.,asAdministrativeAgentandCollateralAgentandWellsFargoBank,N.A.asSyndicationAgent,attachedasExhibitAtoAmendmentNo.2toCreditAgreement("TermFacilityCreditAgreement") 8-K 001-36161 10.1 11/27/13

10.20 AmendmentNo.3toTermFacilityCreditAgreement,

datedasofMay20,2016 10-Q 001-36161 10.5 8/10/2016

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121

IncorporatedbyReference

ExhibitNumber ExhibitDescription Form FileNo. Exhibit

FilingDate

Filed/FurnishedHerewith

10.21 TermFacilityPledgeAgreement,datedasofApril6,2012,byandbetweenTheContainerStore,Inc.asBorrower,thePledgorspartythereto,andJPMorganChaseBank,N.A.,asCollateralAgent S-1 333-191465 10.9 9/30/13

10.22 TermFacilitySecurityAgreement,datedasofApril6,

2012,byandamongTheContainerStore,Inc.,theGuarantorspartythereto,theGrantorspartythereto,andJPMorganChaseBank,N.A.,asCollateralAgent S-1 333-191465 10.10 9/30/13

10.23 CreditAgreement,datedApril27,2009,amongElfa

InternationalAB,asBorrower,andTjustbygdensSparbankAB,asBank,astransferredtoSwedbankABonJanuary27,2012 S-1 333-191465 10.16 9/30/13

10.24† FormofIndemnificationAgreementbyandbetweenThe

ContainerStoreGroup,Inc.andcertaindirectorsandofficers S-1 333-191465 10.17 9/30/13

10.25 Office,WarehouseandDistributionCenterLease

Agreement,asofOctober8,2012,byandbetweenTexasDuganLimitedPartnership,aslandlord,andTheContainerStore,Inc.,astenant,asamendedthroughAugust24,2011 S-1 333-191465 10.18 9/30/13

10.26† IndemnificationandHoldHarmlessAgreement,datedas

ofJune13,2012,byandbetweenTheContainerStoreGroup,Inc.(formerlyknownasTCSHoldings,Inc.)andWilliamA.Tindell,III S-1 333-191465 10.20 9/30/13

10.27 AssumptionAgreement,datedasofApril2,2014,byand

betweenTheContainerStoreGroup,Inc.andWilliamA.Tindell,IIIandRufusTindellLLC 10-K 001-36161 10.23 5/28/2014

10.28 MasterCreditAgreement,datedApril1,2014,between

ElfaInternationalAB,asBorrower,andNordeaBankAB(publ),asBank 10-Q 001-36161 10.1 7/11/2014

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ITEM16.FORM10-KSUMMARY.

None.

122

IncorporatedbyReference

ExhibitNumber ExhibitDescription Form FileNo. Exhibit

FilingDate

Filed/FurnishedHerewith

10.29† Non-EmployeeDirectorCompensationPolicyofTheContainerStoreGroup,Inc. 10-Q 001-36161 10.1 1/09/2015

10.30† FormofRestrictedStockAwardAgreementandGrant

Notice(time-vesting) 10-Q 001-36161 10.7 8/10/2016 10.31† FormofRestrictedStockAwardAgreementandGrant

Notice(performance-vesting) 10-Q 001-36161 10.8 8/10/2016 21.1 SubsidiaryList * 23.1 ConsentofErnst&YoungLLP * 31.1 CertificationofChiefExecutiveOfficerpursuantto

ExchangeActRule13a-14(a) * 31.2 CertificationofChiefFinancialOfficerpursuantto

ExchangeActRule13a-14(a) * 32.1 CertificationoftheChiefExecutiveOfficerPursuantto18

U.S.C.Section1350 ** 32.2 CertificationoftheChiefFinancialOfficerPursuantto18

U.S.C.Section1350 ** 101.INS XBRLInstanceDocument * 101.SCH XBRLTaxonomyExtensionSchemaDocument * 101.CAL XBRLTaxonomyCalculationLinkbaseDocument * 101.DEF XBRLTaxonomyExtensionDefinitionLinkbase

Document * 101.LAB XBRLTaxonomyExtensionLabelLinkbaseDocument * 101.PRE XBRLTaxonomyExtensionPresentation *

* Filedherewith.

** Furnishedherewith.

† Managementcontractorcompensatoryplanorarrangement.

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SIGNATURES

PursuanttotherequirementsofSection13or15(d)oftheSecuritiesExchangeActof1934,theregistranthasdulycausedthisreporttobesignedonitsbehalfbytheundersigned,thereuntodulyauthorized.

PursuanttotherequirementsoftheSecuritiesExchangeActof1934,thisreporthasbeensignedbelowbythefollowingpersonsonbehalfoftheregistrantandinthecapacitiesandonthedatesindicated.

123

TheContainerStoreGroup,Inc.(Registrant)

Date:June1,2017 /s/JODIL.TAYLOR

JodiL.TaylorChief Financial Officer, Chief Administrative Officer andSecretary (duly authorized officer and Principal Financial

Officer)

Signature Title Date

/s/MELISSAREIFF

MelissaReiff

ChiefExecutiveOfficerandDirector(principalexecutiveofficer) June1,2017

/s/JODIL.TAYLOR

JodiL.Taylor

ChiefFinancialOfficer,ChiefAdministrativeOfficerandSecretary(principalfinancialofficer)

June1,2017

/s/JEFFREYA.MILLER

JeffreyA.Miller

VicePresidentandChiefAccountingOfficer(principalaccountingofficer)

June1,2017

/s/SHARONTINDELL

SharonTindell

President,ChiefMerchandisingOfficerandDirector June1,2017

/s/WILLIAMA.KIPTINDELL,III

WilliamA."Kip"Tindell,III

ChairmanoftheBoardofDirectors June1,2017

/s/JONATHANSOKOLOFF

JonathanSokoloff

Director June1,2017

/s/TIMOTHYFLYNN

TimothyFlynn

Director June1,2017

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124

Signature Title Date

/s/J.KRISTOFERGALASHAN

J.KristoferGalashan

Director June1,2017

/s/ROBERTE.JORDAN

RobertE.Jordan

Director June1,2017

/s/DANIELMEYER

DanielMeyer

Director June1,2017

/s/WALTERROBB

WalterRobb

Director June1,2017

/s/RAJENDRASISODIA

RajendraSisodia

Director June1,2017

/s/CARYLSTERN

CarylStern

Director June1,2017

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Exhibit21.1

TheContainerStoreGroup,Inc.

Entity JurisdictionoforganizationTheContainerStore,Inc TexasTCSGiftCardServices,LLC VirginiaElfaInternationalAB SwedenElfaKirenaOY FinlandElfaDeutschlandGmbH GermanyElfaSwedenAB SwedenElfaDoorsAB SwedenElfaLumiAB SwedenElfaLumiA/S DenmarkElfaNorgeA/S NorwayElfaFranceSA FranceElfaManufacturingPolandSp.Zo.o Poland

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Exhibit21.1

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Exhibit23.1

ConsentofIndependentRegisteredPublicAccountingFirm

WeconsenttotheincorporationbyreferenceinthefollowingRegistrationStatements:

(1) RegistrationStatement(FormS-8No.333-192067)pertainingtoTheContainerStoreGroup,Inc.2013IncentiveAwardPlanand

(2) RegistrationStatement(FormS-8No.333-193255)pertainingtoTheContainerStoreGroup,Inc.2012StockOptionPlan

ofourreportdatedJune1,2017,withrespecttotheconsolidatedbalancesheetsofTheContainerStoreGroup,Inc.(theCompany)asofApril1,2017andFebruary27,2016,andtherelatedconsolidatedstatementsofoperations,comprehensiveincome,shareholders'equityandcashflowsfortheyearendedApril1,2017,eachoftheyearsinthetwo-yearperiodendedFebruary27,2016,therelatedconsolidatedstatementsofoperations,comprehensiveincomeandcashflowsforthefiveweektransitionperiodendedApril2,2016andscheduleofTheContainerStoreGroup,Inc.includedinthisAnnualReport(Form10-K)ofTheContainerStoreGroup,Inc.fortheyearendedApril1,2017.

/s/ErnstandYoungLLPDallas,TexasJune1,2017

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Exhibit23.1

ConsentofIndependentRegisteredPublicAccountingFirm

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Exhibit31.1

CERTIFICATIONS

I,MelissaReiff,certifythat:

1. IhavereviewedthisAnnualReportonForm10-KofTheContainerStoreGroup,Inc.;

2. Basedonmyknowledge,thisreportdoesnotcontainanyuntruestatementofamaterialfactoromittostateamaterialfactnecessarytomakethestatementsmade,inlightofthecircumstancesunderwhichsuchstatementsweremade,notmisleadingwithrespecttotheperiodcoveredbythisreport;

3. Basedonmyknowledge,thefinancialstatements,andotherfinancialinformationincludedinthisreport,fairlypresentinallmaterialrespectsthefinancialcondition,resultsofoperationsandcashflowsoftheregistrantasof,andfor,theperiodspresentedinthisreport;

4. Theregistrant'sothercertifyingofficerandIareresponsibleforestablishingandmaintainingdisclosurecontrolsandprocedures(asdefinedinExchangeActRules13a-15(e)and15d-15(e))fortheregistrantandhave:

a) Designedsuchdisclosurecontrolsandprocedures,orcausedsuchdisclosurecontrolsandprocedurestobedesignedunderoursupervision,toensurethatmaterialinformationrelatingtotheregistrant,includingitsconsolidatedsubsidiaries,ismadeknowntousbyotherswithinthoseentities,particularlyduringtheperiodinwhichthisreportisbeingprepared;

b) [omitted];

c) Evaluatedtheeffectivenessoftheregistrant'sdisclosurecontrolsandproceduresandpresentedinthisreportourconclusionsabouttheeffectivenessofthedisclosurecontrolsandprocedures,asoftheendoftheperiodcoveredbythisreportbasedonsuchevaluation;and

d) Disclosedinthisreportanychangeintheregistrant'sinternalcontroloverfinancialreportingthatoccurredduringtheregistrant'smostrecentfiscalquarter(theregistrant'sfourthfiscalquarterinthecaseofanannualreport)thathasmateriallyaffected,orisreasonablylikelytomateriallyaffect,theregistrant'sinternalcontroloverfinancialreporting;and

5. Theregistrant'sothercertifyingofficerandIhavedisclosed,basedonourmostrecentevaluationofinternalcontroloverfinancialreporting,totheregistrant'sauditorsandtheauditcommitteeoftheregistrant'sboardofdirectors(orpersonsperformingtheequivalentfunctions):

a) Allsignificantdeficienciesandmaterialweaknessesinthedesignoroperationofinternalcontroloverfinancialreportingwhicharereasonablylikelytoadverselyaffecttheregistrant'sabilitytorecord,process,summarizeandreportfinancialinformation;and

b) Anyfraud,whetherornotmaterial,thatinvolvesmanagementorotheremployeeswhohaveasignificantroleintheregistrant'sinternalcontroloverfinancialreporting.

Date:June1,2017 /s/MELISSAREIFF

MelissaReiffChief Executive Officer

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Exhibit31.1

CERTIFICATIONS

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Exhibit31.2

CERTIFICATIONS

I,JodiL.Taylor,certifythat:

1. IhavereviewedthisAnnualReportonForm10-KofTheContainerStoreGroup,Inc.;

2. Basedonmyknowledge,thisreportdoesnotcontainanyuntruestatementofamaterialfactoromittostateamaterialfactnecessarytomakethestatementsmade,inlightofthecircumstancesunderwhichsuchstatementsweremade,notmisleadingwithrespecttotheperiodcoveredbythisreport;

3. Basedonmyknowledge,thefinancialstatements,andotherfinancialinformationincludedinthisreport,fairlypresentinallmaterialrespectsthefinancialcondition,resultsofoperationsandcashflowsoftheregistrantasof,andfor,theperiodspresentedinthisreport;

4. Theregistrant'sothercertifyingofficerandIareresponsibleforestablishingandmaintainingdisclosurecontrolsandprocedures(asdefinedinExchangeActRules13a-15(e)and15d-15(e))fortheregistrantandhave:

a) Designedsuchdisclosurecontrolsandprocedures,orcausedsuchdisclosurecontrolsandprocedurestobedesignedunderoursupervision,toensurethatmaterialinformationrelatingtotheregistrant,includingitsconsolidatedsubsidiaries,ismadeknowntousbyotherswithinthoseentities,particularlyduringtheperiodinwhichthisreportisbeingprepared;

b) [omitted];

c) Evaluatedtheeffectivenessoftheregistrant'sdisclosurecontrolsandproceduresandpresentedinthisreportourconclusionsabouttheeffectivenessofthedisclosurecontrolsandprocedures,asoftheendoftheperiodcoveredbythisreportbasedonsuchevaluation;and

d) Disclosedinthisreportanychangeintheregistrant'sinternalcontroloverfinancialreportingthatoccurredduringtheregistrant'smostrecentfiscalquarter(theregistrant'sfourthfiscalquarterinthecaseofanannualreport)thathasmateriallyaffected,orisreasonablylikelytomateriallyaffect,theregistrant'sinternalcontroloverfinancialreporting;and

5. Theregistrant'sothercertifyingofficerandIhavedisclosed,basedonourmostrecentevaluationofinternalcontroloverfinancialreporting,totheregistrant'sauditorsandtheauditcommitteeoftheregistrant'sboardofdirectors(orpersonsperformingtheequivalentfunctions):

a) Allsignificantdeficienciesandmaterialweaknessesinthedesignoroperationofinternalcontroloverfinancialreportingwhicharereasonablylikelytoadverselyaffecttheregistrant'sabilitytorecord,process,summarizeandreportfinancialinformation;and

b) Anyfraud,whetherornotmaterial,thatinvolvesmanagementorotheremployeeswhohaveasignificantroleintheregistrant'sinternalcontroloverfinancialreporting.

Date:June1,2017 /s/JODIL.TAYLOR

JodiL.TaylorChief Financial Officer and Chief Administrative Officer

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Exhibit31.2

CERTIFICATIONS

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Exhibit32.1

CERTIFICATIONPURSUANTTO18U.S.C.SECTION1350,

ASADOPTEDPURSUANTTOSECTION906OFTHESARBANES-OXLEYACTOF2002

I,MelissaReiff,ChiefExecutiveOfficerandChairmanoftheBoardofDirectorsofTheContainerStoreGroup,Inc.(the"Company"),herebycertify,pursuantto18U.S.C.§1350,asadoptedpursuantto§906oftheSarbanes-OxleyActof2002,that,tothebestofmyknowledge:

(1) TheAnnualReportonForm10-KoftheCompanyfortheperiodendedApril1,2017(the"Report")fullycomplieswiththerequirementsofSection13(a)or15(d)oftheSecuritiesExchangeActof1934,asamended;and

(2) TheinformationcontainedintheReportfairlypresents,inallmaterialrespects,thefinancialconditionandresultsofoperationsoftheCompany.

June1,2017 /s/MELISSAREIFF

MelissaReiffChief Executive Officer

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Exhibit32.1

CERTIFICATIONPURSUANTTO18U.S.C.SECTION1350,ASADOPTEDPURSUANTTOSECTION906OFTHESARBANES-OXLEYACTOF2002

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Exhibit32.2

CERTIFICATIONPURSUANTTO18U.S.C.SECTION1350,

ASADOPTEDPURSUANTTOSECTION906OFTHESARBANES-OXLEYACTOF2002

I,JodiL.Taylor,ChiefFinancialOfficerofTheContainerStoreGroup,Inc.(the"Company"),herebycertify,pursuantto18U.S.C.§1350,asadoptedpursuantto§906oftheSarbanes-OxleyActof2002,that,tothebestofmyknowledge:

(1) TheAnnualReportonForm10-KoftheCompanyfortheperiodendedApril1,2017(the"Report")fullycomplieswiththerequirementsofSection13(a)or15(d)oftheSecuritiesExchangeActof1934,asamended;and

(2) TheinformationcontainedintheReportfairlypresents,inallmaterialrespects,thefinancialconditionandresultsofoperationsoftheCompany.

June1,2017 /s/JODIL.TAYLOR

JodiL.TaylorChief Financial Officer and Chief Administrative Officer

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Exhibit32.2

CERTIFICATIONPURSUANTTO18U.S.C.SECTION1350,ASADOPTEDPURSUANTTOSECTION906OFTHESARBANES-OXLEYACTOF2002