Container Store: Emerging Moat Due to Focus on Custom Closets

Eric DeLamarter of Half Moon Capital presented his investment thesis on Container Store Holdings (US: TCS) at Wide-Moat Investing Summit 2022.

Thesis summary:

Container Store trades at a disconnected valuation due to a misperception as a retailer of commodity containers, temporary pandemic beneficiary, and poor execution by prior management, which led to investor fatigue.

Meanwhile, TCS has a solid new management team taking steps to significantly bolster the competitive position across the business, while the sales mix is now composed primarily of custom closets. TCS is the leader in this category with attractive tailwinds and opportunities for growth.

The company owns its brands and is vertically integrated, which enables it to generate higher margins and maintain less exposure to inventory shortages or supply chain disruptions than its peers. Performance shortfalls under weak prior CEOs led to investor aversion and a wait-and-see attitude regarding the company’s turnaround plans within general merchandise.

Eric believes TCS has 100+% upside, with multiple catalysts to value realization.

Watch this session:

slide presentation audio recording

About the instructor:

Eric DeLamarter is the PM of Half Moon Capital— a research intensive, deep value-oriented, long/ short partnership which invests across various sectors and markets with a focus on small-mid cap companies and special situations. Prior to founding Half Moon, Eric was at Stelliam Investment Management, a value-oriented hedge fund in New York, an associate at Lineage Capital, LLC, a middle-market private equity fund and an investment banking analyst at RBC Capital Markets. Eric holds an MBA from The Heilbrunn Center for Graham & Dodd Investing at Columbia Business School, with a concentration in applied value investing and a BA from the University of Michigan.

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