The Container Store Group, Inc. Announces Fourth Quarter and Full Fiscal Year 2023 Financial Results
The Container Store Group (TCS) released its financial results for Q4 and fiscal year 2023, showing significant declines in sales and earnings. Consolidated net sales for the year were $847.8 million, down 19% year-over-year, while Q4 sales dropped by 20.7% to $206.0 million. Comparable store sales fell by 19.7% for the year and 21.8% for Q4. The net loss per diluted share for the year was $2.09, improving from a higher loss of $3.21 in FY 2022. Adjusted net loss per diluted share was $0.32, compared to adjusted net income of $0.75 in the previous year. The company is suspending financial guidance as it reviews strategic alternatives, citing continued pressure on general merchandise but relative strength in its Custom Spaces segment.
- Net loss per diluted share improved to $2.09 from $3.21 in FY 2022.
- Adjusted net loss per diluted share was $0.32, compared to adjusted net income per diluted share of $0.75 in FY 2022.
- Gross margin increased by 30 basis points to 57.7% for the fiscal year.
- Free cash flow was $6.9 million, up from a negative free cash flow of $4.9 million the previous year.
- SG&A expenses decreased by 9.7% to $439.5 million.
- The company plans to open four new stores in FY 2024.
- Consolidated net sales decreased by 19% to $847.8 million for the year.
- Q4 consolidated net sales were down by 20.7%.
- Comparable store sales dropped by 19.7% for the year and 21.8% for Q4.
- Adjusted EBITDA fell to $48.1 million from $115.4 million in FY 2022.
- Online sales decreased by 23.7% for the year and 30.8% for Q4.
- Elfa third-party net sales decreased by 17.1% for the year.
- Consolidated net interest expense increased by 27.8% to $20.7 million for the year.
- The company recorded a non-cash trade names impairment charge of $73.8 million.
- SG&A as a percentage of net sales increased by 540 basis points.
Insights
Analyzing The Container Store Group’s financial performance for fiscal year 2023 reveals a challenging environment for the company. Consolidated net sales dropped by
In the short-term, the share price could experience downward pressure due to these results, as investors might react negatively to the continued losses and declining sales. However, the long-term outlook could be more positive if the company's strategic initiatives and cost management actions start to yield results.
For retail investors, it’s essential to note the company's liquidity position. The available liquidity of
The significant drop in both net sales and comparable store sales, especially during the fourth quarter, highlights a broader market trend affecting the retail sector. The general merchandise categories saw a substantial decline, down
The company is pushing its “Custom Spaces” products, which fared better than general merchandise but still declined by
Investors should watch how the company’s new marketing campaigns and in-home design services perform. If successful, these initiatives could help stabilize sales. However, the current data suggests a tough market environment and the overall effectiveness of these strategies remains to be seen.
The announcement of the strategic alternatives review is key, indicating that The Container Store is exploring options to maximize stakeholder value, which could include anything from restructuring to potential sales or partnerships. Such reviews often come when a company’s current market valuation does not reflect its perceived intrinsic value, as stated by the board.
Legal clarity will be important during this process. The engagement of J.P. Morgan Securities LLC as financial advisor and Latham & Watkins LLP as legal advisor signifies the company’s commitment to a thorough and well-advised process.
Retail investors should understand that such announcements can lead to significant volatility in stock prices. The suspension of financial guidance adds uncertainty but could also mean that significant changes are afoot, potentially unlocking value in the long term.
Full-year consolidated net sales of
Full-year net loss per diluted share of
Fourth quarter consolidated net sales down
Fourth quarter net loss per diluted share of
Announces Review of Strategic Alternatives
For the fourth quarter of fiscal 2023:
-
Consolidated net sales were
$206.0 million 20.7% , compared to the fourth quarter of fiscal 2022. Net sales in The Container Store retail business (“TCS”) were$195.3 million 20.4% . Elfa International AB (“Elfa”) third-party net sales were$10.7 million 24.6% compared to the fourth quarter of fiscal 2022. Excluding the impact of foreign currency translation, Elfa third-party net sales were down25.3% . -
Comparable store sales^ decreased
21.8% , with general merchandise categories down26.7% , contributing a decrease of 1,620 basis points to comparable store sales^. Custom Spaces+ were down14.2% , negatively impacting comparable store sales^ by 560 basis points. -
Consolidated net loss and net loss per share were
$61.4 million $1.24 $189.3 million $3.85 $0.04 $0.18
Satish Malhotra, Chief Executive Officer and President of The Container Store, commented, “We ended fiscal 2023 with continued pressure on our general merchandise assortment while experiencing relative strength in our premium Custom Space offering. I am grateful to our team members across the organization for their role in exercising strong cost discipline resulting in positive free cash flow for the fiscal year, and in delivering superior customer service reflected by our retail net promoter score of 80 for the fourth quarter.”
Mr. Malhotra continued, “Looking ahead, while we anticipate continued challenges within our general merchandise offerings, we continue to lean into Custom Spaces through enhancing our assortment, strengthening our in-home design service and building awareness through impactful marketing campaigns that highlight our complete offerings . We plan to push forward on all of our market share driving initiatives to ensure we are poised to capitalize on the significant opportunities for the business and the brand when the backdrop normalizes."
Fourth Quarter Fiscal 2023 Results
For the fourth quarter (thirteen weeks) ended March 30, 2024:
-
Consolidated net sales were
$206.0 million 20.7% , compared to the fourth quarter of fiscal 2022.-
Net sales in TCS were
$195.3 million 20.4% . -
Comparable store sales^ decreased
21.8% , with general merchandise categories down26.7% , contributing a decrease of 1,620 basis points to comparable store sales^. Custom Spaces+ were down14.2% , negatively impacting comparable store sales^ by 560 basis points. -
Online sales decreased
30.8% compared to the fourth quarter of fiscal 2022. -
Elfa third-party net sales were
$10.7 million 24.6% compared to the fourth quarter of fiscal 2022. Excluding the impact of foreign currency translation, Elfa third-party net sales were down25.3% primarily due to a decline in sales in Nordic markets.
-
Net sales in TCS were
-
Consolidated gross margin was
59.4% , an increase of 50 basis points, compared to the fourth quarter of fiscal 2022. TCS gross margin increased 60 basis points to58.1% primarily due to lower freight costs, partially offset by increased promotional activity and unfavorable product and services mix. Elfa gross margin decreased 980 basis points compared to the fourth quarter of fiscal 2022 primarily due to unfavorable mix, partially offset by price increases to customers. -
Consolidated selling, general and administrative expenses (“SG&A”) decreased by
13.9% to$107.0 million $124.3 million 51.9% , with the increase primarily due to deleverage of fixed costs associated with lower sales in the fourth quarter of fiscal 2023. -
Consolidated depreciation and amortization increased
14.5% to$11.9 million $10.4 million -
A non-cash trade names impairment charge of
$73.8 million $197.7 million $63.8 million $10.1 million $197.7 million -
Consolidated other expenses was
$4.8 million -
Consolidated net interest expense increased
11.3% to$5.3 million $4.8 million -
The effective tax rate was
25.3% in the fourth quarter of fiscal 2023, as compared to negative1.7% in the fourth quarter of fiscal 2022. The increase in the effective tax rate was primarily related to the impact of the non-cash goodwill impairment charge recorded during the fourth quarter of fiscal 2022. -
Net loss was
$61.4 million $1.24 $189.3 million $3.85 $2.0 million $0.04 $8.8 million $0.18 -
Adjusted EBITDA* was
$15.4 million $29.2 million
For the fiscal year-to-date (fifty-two weeks) ended March 30, 2024:
-
Consolidated net sales were
$847.8 million 19.0% , compared to fiscal 2022.-
Net sales for the TCS segment were
$801.4 million 19.2% . -
Comparable store sales^ decreased
19.7% , with general merchandise categories down21.9% , contributing a decrease of 1,420 basis points to comparable store sales^. Custom Spaces+ were down15.4% , negatively impacting comparable store sales^ by 550 basis points. -
Online sales decreased
23.7% compared to fiscal 2022. -
Elfa third-party net sales were
$46.3 million 17.1% compared to fiscal 2022. Excluding the impact of foreign currency translation, Elfa third-party net sales were down15.4% compared to fiscal 2022 primarily due to a decline in sales in Nordic markets.
-
Net sales for the TCS segment were
-
Consolidated gross margin was
57.7% , an increase of 30 basis points compared to fiscal 2022, primarily due to a higher mix of Custom Spaces+ sales year over year. TCS gross margin decreased 30 basis points to56.8% , primarily due to increased promotional activity and unfavorable product and services mix, partially offset by lower freight costs in fiscal 2023. Elfa gross margin decreased 270 basis points primarily due to unfavorable mix, partially offset by price increases to customers. -
Consolidated SG&A decreased by
9.7% to$439.5 million $486.4 million 51.8% , with the increase primarily due to deleverage of fixed costs associated with lower sales in fiscal 2023, and due to the benefit of the legal settlement received in the second quarter of the prior fiscal year. -
Consolidated depreciation and amortization increased
14.0% to$44.3 million $38.9 million -
Non-cash impairment charges of
$97.3 million $197.7 million $23.4 million $63.8 million $10.1 million -
Consolidated other expenses was
$7.4 million -
Consolidated net interest expense increased
27.8% to$20.7 million $16.2 million -
The effective tax rate was
17.6% for fiscal 2023 as compared to negative10.5% in fiscal 2022. The increase in the effective tax rate is primarily due to the impact of the non-cash goodwill impairment charges recorded in fiscal 2023 and fiscal 2022, combined with the tax impact of discrete items related to share-based compensation on a pre-tax loss in fiscal 2023. -
Net loss was
$103.3 million $2.09 $158.9 million $3.21 $15.9 million $0.32 $37.2 million $0.75 -
Adjusted EBITDA* was
$48.1 million $115.4 million
New and Existing Stores
As of March 30, 2024, the Company store base was 102 as compared to 97 as of April 1, 2023. The Company opened two stores during the fourth quarter of fiscal 2023. We believe we still have attractive growth opportunities in key markets and plan to open four new stores in fiscal 2024, as well as relocate one store and close one store. All new and relocated stores in fiscal 2024 are build-to-suit.
Balance sheet and liquidity highlights:
(In thousands) |
|
March 30, 2024 |
|
April 1, 2023 |
|||
|
|
(unaudited) |
|
|
|||
Cash |
|
$ |
21,000 |
|
$ |
6,958 |
|
Total debt, net of deferred financing costs |
|
$ |
176,777 |
|
$ |
167,871 |
|
Liquidity 1 |
|
$ |
112,276 |
|
$ |
106,997 |
|
Net cash provided by operating activities |
|
$ |
46,789 |
|
$ |
59,305 |
|
Free cash flow * |
|
$ |
6,895 |
|
$ |
(4,918 |
) |
_____________________________________________
|
|||||||
Share repurchase
There were no repurchases during fiscal 2023. The Company has
Fiscal 2024 To Date Commentary
Jeff Miller, Chief Financial Officer, commented, "First quarter fiscal 2024 to date, we have seen an improvement in year over year sales trends when compared to the fourth quarter of fiscal 2023. Our performance continued to be driven by relative strength in our Custom Spaces business with year over year growth in our Elfa and Preston product lines. However, our general merchandise category remains challenged resulting in double-digit year-over-year total sales declines, though not of the magnitude reported for the fourth quarter of fiscal 2023."
Review of Strategic Alternatives
Today the Company is announcing that its Board of Directors has initiated a formal review process to evaluate strategic alternatives for the Company. The Company's Board of Directors along with the management team do not believe the Company's current market value is reflective of its intrinsic value and are committed to acting in the best interests of the Company and its stakeholders.
“The Container Store’s Board and management team are committed to maximizing value for our stakeholders, and to that end, we have commenced a comprehensive process to review potential strategic alternatives for the business. We have established the Transaction Committee to help oversee the process to ensure that we are maximizing both the potential of the business and returns for stakeholders.” said Lisa Klinger, Chairperson of The Container Store.
As the Company evaluates strategic alternatives, it is suspending financial guidance. The Container Store has not set a deadline or definitive timetable for the completion of the strategic alternatives review process, and there can be no assurance that this process will result in any particular outcome. The Container Store does not intend to comment further regarding the review of strategic alternatives until it determines disclosure is necessary or advisable.
The Container Store is being advised in this review by J.P. Morgan Securities LLC, as its financial advisor, and Latham & Watkins LLP, as its legal advisor.
References
* See Reconciliation of GAAP to Non-GAAP Financial Measures table.
+ Custom Spaces includes metal-based and wood-based custom space products and in-home installation services.
^ Comparable store sales includes all net sales from our TCS segment, except for sales from stores open less than sixteen months, stores that have been closed permanently, stores that have been closed temporarily for more than seven days and C Studio sales to third parties.
Conference Call Information
A conference call to discuss fourth quarter and full fiscal 2023 financial results is scheduled for today, May 14, 2024, at 8:00 AM Eastern Time. Investors and analysts interested in participating in the call are invited to dial 877-407-3982 (international callers please dial 201-493-6780) approximately 10 minutes prior to the start of the call. A live audio webcast of the conference call will be available online at investor.containerstore.com.
A taped replay of the conference call will be available within three hours of the conclusion of the call and can be accessed both online and by dialing 844-512-2921 (international callers please dial 412-317-6671). The pin number to access the telephone replay is 13744076. The replay will be available until June 14, 2024.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including statements regarding our goals, strategies, priorities, challenges and initiatives including future focus on Custom Space; growth opportunities; expected store openings and closures, the Transaction committee review process, expected expense management; future opportunities; the impact of macroeconomic conditions and our anticipated financial performance including profitability expectations.
These forward-looking statements are based on management’s current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the following: the timeline for the completion of the strategic alternatives review process is unknown and there can be no assurance that the process will result in any particular outcome; a decline in the health of the economy and the purchase of discretionary items; results of operations and financial condition; our ability to continue to lease space on favorable terms; costs and risks relating to new store openings; quarterly and seasonal fluctuations in our operating results; cost increases that are beyond our control; our inability to protect our brand; our failure or inability to protect our intellectual property rights; our inability to source and market new products to meet consumer preferences; failure to successfully anticipate, or manage inventory commensurate with, consumer preferences and demand; competition from other stores and internet-based competition; our inability to obtain merchandise from our vendors on a timely basis and at competitive prices; vendors may sell similar or identical products to our competitors; our and our vendors’ vulnerability to natural disasters and other unexpected events; disruptions at our manufacturing facilities; product recalls and/or product liability, as well as changes in product safety and other consumer protection laws; risks relating to operating multiple distribution centers; our dependence on foreign imports for our merchandise; our reliance upon independent third party transportation providers; our inability to effectively manage our online sales; effects of a security breach or cyber-attack of our website or information technology systems, including relating to our use of third-party web service providers; damage to, or interruptions in, our information systems as a result of external factors, working from home arrangements, staffing shortages and difficulties in updating our existing software or developing or implementing new software; failure to comply with laws and regulations relating to privacy, data protection, and consumer protection; our indebtedness may restrict our current and future operations, and we may not be able to refinance our debt on favorable terms, or at all; fluctuations in currency exchange rates; our inability to maintain sufficient levels of cash flow to meet growth expectations; our fixed lease obligations; disruptions in the global financial markets leading to difficulty in borrowing sufficient amounts of capital to finance the carrying costs of inventory to pay for capital expenditures and operating costs; changes to global markets and inability to predict future interest expenses; our reliance on key executive management; our inability to find, train and retain key personnel; labor relations difficulties; increases in health care costs and labor costs; violations of the
These and other important factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, (the “SEC”) on May 26, 2023 and our other reports filed with the SEC could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. Any such forward-looking statements represent management’s estimates as of the date of this press release. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.
About The Container Store
The Container Store Group, Inc. (NYSE: TCS) is the nation’s leading specialty retailer of organizing solutions, custom spaces, and in-home services – a concept they originated in 1978. Today, with locations nationwide, the retailer offers more than 10,000 products designed to transform lives through the power of organization.
Visit www.containerstore.com for more information about products, store locations, services offered and real-life inspiration.
Follow The Container Store on Facebook, X, Instagram, TikTok, YouTube, Pinterest and LinkedIn.
The Container Store Group, Inc.
|
||||||||||||||||
|
|
Fiscal Quarter Ended |
|
Fiscal Year Ended |
||||||||||||
(In thousands, except share and per share amounts) (unaudited) |
|
March 30,
|
|
April 1,
|
|
March 30,
|
|
April 1,
|
||||||||
|
|
(unaudited) |
|
|
|
(unaudited) |
|
|
||||||||
Net sales |
|
$ |
206,037 |
|
|
$ |
259,716 |
|
|
$ |
847,779 |
|
|
$ |
1,047,258 |
|
Cost of sales (excluding depreciation and amortization) |
|
|
83,706 |
|
|
|
106,712 |
|
|
|
359,014 |
|
|
|
446,295 |
|
Gross profit |
|
|
122,331 |
|
|
|
153,004 |
|
|
|
488,765 |
|
|
|
600,963 |
|
Selling, general, and administrative expenses (excluding depreciation and amortization) |
|
|
107,014 |
|
|
|
124,327 |
|
|
|
439,485 |
|
|
|
486,431 |
|
Impairment charges |
|
|
73,832 |
|
|
|
197,712 |
|
|
|
97,279 |
|
|
|
197,712 |
|
Stock-based compensation |
|
|
265 |
|
|
|
820 |
|
|
|
1,870 |
|
|
|
3,382 |
|
Pre-opening costs |
|
|
1,278 |
|
|
|
957 |
|
|
|
2,861 |
|
|
|
2,006 |
|
Depreciation and amortization |
|
|
11,906 |
|
|
|
10,398 |
|
|
|
44,333 |
|
|
|
38,905 |
|
Other expenses |
|
|
4,834 |
|
|
|
— |
|
|
|
7,423 |
|
|
|
— |
|
Loss on disposal of assets |
|
|
27 |
|
|
|
31 |
|
|
|
248 |
|
|
|
122 |
|
(Loss) income from operations |
|
|
(76,825 |
) |
|
|
(181,241 |
) |
|
|
(104,734 |
) |
|
|
(127,595 |
) |
Interest expense, net |
|
|
5,316 |
|
|
|
4,776 |
|
|
|
20,672 |
|
|
|
16,171 |
|
(Loss) income before taxes |
|
|
(82,141 |
) |
|
|
(186,017 |
) |
|
|
(125,406 |
) |
|
|
(143,766 |
) |
(Benefit) provision for income taxes |
|
|
(20,775 |
) |
|
|
3,233 |
|
|
|
(22,119 |
) |
|
|
15,090 |
|
Net (loss) income |
|
$ |
(61,366 |
) |
|
$ |
(189,250 |
) |
|
$ |
(103,287 |
) |
|
$ |
(158,856 |
) |
|
|
|
|
|
|
|
|
|
||||||||
Net (loss) income per common share — basic |
|
$ |
(1.24 |
) |
|
$ |
(3.85 |
) |
|
$ |
(2.09 |
) |
|
$ |
(3.21 |
) |
Net (loss) income per common share — diluted |
|
$ |
(1.24 |
) |
|
$ |
(3.85 |
) |
|
$ |
(2.09 |
) |
|
$ |
(3.21 |
) |
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares — basic |
|
|
49,601,938 |
|
|
|
49,175,873 |
|
|
|
49,476,871 |
|
|
|
49,539,875 |
|
Weighted-average common shares — diluted |
|
|
49,601,938 |
|
|
|
49,175,873 |
|
|
|
49,476,871 |
|
|
|
49,539,875 |
|
|
|
|
|
|
|
|
|
|
||||||||
The Container Store Group, Inc.
|
||||||
(In thousands) |
|
March 30,
|
|
April 1,
|
||
Assets |
|
(unaudited) |
|
|
||
Current assets: |
|
|
|
|
||
Cash |
|
$ |
21,000 |
|
$ |
6,958 |
Accounts receivable, net |
|
|
22,010 |
|
|
25,870 |
Inventory |
|
|
158,434 |
|
|
170,637 |
Prepaid expenses |
|
|
12,940 |
|
|
14,989 |
Income taxes receivable |
|
|
5,118 |
|
|
858 |
Other current assets |
|
|
11,046 |
|
|
10,914 |
Total current assets |
|
|
230,548 |
|
|
230,226 |
Noncurrent assets: |
|
|
|
|
||
Property and equipment, net |
|
|
155,402 |
|
|
158,702 |
Noncurrent operating lease right-of-use assets |
|
|
400,188 |
|
|
347,959 |
Goodwill |
|
|
— |
|
|
23,447 |
Trade names |
|
|
146,449 |
|
|
221,278 |
Deferred financing costs, net |
|
|
97 |
|
|
150 |
Noncurrent deferred tax assets, net |
|
|
393 |
|
|
568 |
Other assets |
|
|
3,288 |
|
|
2,844 |
Total noncurrent assets |
|
|
705,817 |
|
|
754,948 |
Total assets |
|
$ |
936,365 |
|
$ |
985,174 |
The Container Store Group, Inc.
|
||||||||
(In thousands, except share and per share amounts) |
|
March 30,
|
|
April 1,
|
||||
Liabilities and shareholders’ equity |
|
(unaudited) |
|
|
||||
Current liabilities: |
|
|
|
|
||||
Accounts payable |
|
$ |
59,873 |
|
|
$ |
52,637 |
|
Accrued liabilities |
|
|
70,076 |
|
|
|
74,673 |
|
Current borrowings on revolving lines of credit |
|
|
— |
|
|
|
2,423 |
|
Current portion of long-term debt |
|
|
2,166 |
|
|
|
2,063 |
|
Current operating lease liabilities |
|
|
60,692 |
|
|
|
57,201 |
|
Income taxes payable |
|
|
280 |
|
|
|
1,318 |
|
Total current liabilities |
|
|
193,087 |
|
|
|
190,315 |
|
Noncurrent liabilities: |
|
|
|
|
||||
Long-term debt |
|
|
174,611 |
|
|
|
163,385 |
|
Noncurrent operating lease liabilities |
|
|
378,524 |
|
|
|
314,100 |
|
Noncurrent deferred tax liabilities, net |
|
|
24,185 |
|
|
|
49,338 |
|
Other long-term liabilities |
|
|
6,267 |
|
|
|
5,851 |
|
Total noncurrent liabilities |
|
|
583,587 |
|
|
|
532,674 |
|
Total liabilities |
|
|
776,674 |
|
|
|
722,989 |
|
Commitments and contingencies (Note 12) |
|
|
|
|
||||
Shareholders’ equity: |
|
|
|
|
||||
Common stock, |
|
|
496 |
|
|
|
492 |
|
Additional paid-in capital |
|
|
873,927 |
|
|
|
872,204 |
|
Accumulated other comprehensive loss |
|
|
(33,443 |
) |
|
|
(32,509 |
) |
Retained deficit |
|
|
(681,289 |
) |
|
|
(578,002 |
) |
Total shareholders’ equity |
|
|
159,691 |
|
|
|
262,185 |
|
Total liabilities and shareholders’ equity |
|
$ |
936,365 |
|
|
$ |
985,174 |
|
The Container Store Group, Inc.
|
||||||||
|
|
Fiscal Year Ended |
||||||
(In thousands) |
|
March 30,
|
|
April 1,
|
||||
Operating activities |
|
(unaudited) |
|
|
||||
Net (loss) income |
|
$ |
(103,287 |
) |
|
$ |
(158,856 |
) |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
|
|
|
|
||||
Depreciation and amortization |
|
|
44,333 |
|
|
|
38,905 |
|
Stock-based compensation |
|
|
1,870 |
|
|
|
3,382 |
|
Impairment charges |
|
|
97,279 |
|
|
|
197,712 |
|
Loss (gain) on disposal of assets |
|
|
248 |
|
|
|
122 |
|
Deferred tax (benefit) expense |
|
|
(24,751 |
) |
|
|
(351 |
) |
Non-cash interest |
|
|
1,884 |
|
|
|
1,884 |
|
Other |
|
|
(339 |
) |
|
|
1,059 |
|
Changes in operating assets and liabilities (exclusive of effects of acquisition): |
|
|
|
|
||||
Accounts receivable |
|
|
3,565 |
|
|
|
1,836 |
|
Inventory |
|
|
12,145 |
|
|
|
20,450 |
|
Prepaid expenses and other assets |
|
|
564 |
|
|
|
(4,584 |
) |
Accounts payable and accrued liabilities |
|
|
3,396 |
|
|
|
(37,684 |
) |
Net change in lease assets and liabilities |
|
|
15,714 |
|
|
|
1,013 |
|
Income taxes |
|
|
(5,177 |
) |
|
|
(5,213 |
) |
Other noncurrent liabilities |
|
|
(655 |
) |
|
|
(370 |
) |
Net cash provided by operating activities |
|
|
46,789 |
|
|
|
59,305 |
|
|
|
|
|
|
||||
Investing activities |
|
|
|
|
||||
Additions to property and equipment |
|
|
(39,894 |
) |
|
|
(64,223 |
) |
Investments in non-qualified plan trust |
|
|
(252 |
) |
|
|
(1,147 |
) |
Proceeds from non-qualified plan trust redemptions |
|
|
719 |
|
|
|
916 |
|
Proceeds from sale of property and equipment |
|
|
206 |
|
|
|
43 |
|
Net cash used in investing activities |
|
|
(39,221 |
) |
|
|
(64,411 |
) |
|
|
|
|
|
||||
Financing activities |
|
|
|
|
||||
Borrowings on revolving lines of credit |
|
|
65,568 |
|
|
|
80,292 |
|
Payments on revolving lines of credit |
|
|
(67,935 |
) |
|
|
(79,497 |
) |
Borrowings on long-term debt |
|
|
31,000 |
|
|
|
40,000 |
|
Payments on long-term debt |
|
|
(22,089 |
) |
|
|
(37,092 |
) |
Repurchases of common stock |
|
|
— |
|
|
|
(5,000 |
) |
Payment of taxes with shares withheld upon restricted stock vesting |
|
|
(144 |
) |
|
|
(712 |
) |
Proceeds from the exercise of stock options |
|
|
— |
|
|
|
340 |
|
Net cash provided by (used in) financing activities |
|
|
6,400 |
|
|
|
(1,669 |
) |
|
|
|
|
|
||||
Effect of exchange rate changes on cash |
|
|
74 |
|
|
|
(519 |
) |
|
|
|
|
|
||||
Net increase (decrease) in cash |
|
|
14,042 |
|
|
|
(7,294 |
) |
Cash at beginning of fiscal period |
|
|
6,958 |
|
|
|
14,252 |
|
Cash at end of fiscal period |
|
$ |
21,000 |
|
|
$ |
6,958 |
|
Note Regarding Non-GAAP Information
This press release includes financial measures that are not calculated in accordance with GAAP, including adjusted net income (loss), adjusted net income (loss) per common share - diluted, Adjusted EBITDA, and free cash flow. The Company has reconciled these non-GAAP financial measures with the most directly comparable GAAP financial measures in a table accompanying this release. These non-GAAP measures should not be considered as alternatives to net income (loss) as a measure of financial performance or cash flows from operations as a measure of liquidity, or any other performance measure derived in accordance with GAAP and they should not be construed as an inference that the Company’s future results will be unaffected by unusual or non-recurring items. These non-GAAP measures are key metrics used by management, the Company’s board of directors, and Leonard Green and Partners, L.P., to assess its financial performance.
The Company presents adjusted net income (loss), adjusted net income (loss) per common share - diluted, and Adjusted EBITDA because it believes they assist investors in comparing the Company’s performance across reporting periods on a consistent basis by excluding items that the Company does not believe are indicative of its core operating performance and because the Company believes it is useful for investors to see the measures that management uses to evaluate the Company. These non-GAAP measures are also frequently used by analysts, investors and other interested parties to evaluate companies in the Company’s industry. In evaluating these non-GAAP measures, you should be aware that in the future the Company will incur expenses that are the same as or similar to some of the adjustments in this presentation. The Company’s presentation of these non-GAAP measures should not be construed to imply that its future results will be unaffected by any such adjustments. Management compensates for these limitations by relying on our GAAP results in addition to using non-GAAP measures supplementally. These non-GAAP measures are not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.
The Company defines adjusted net income (loss) as net income (loss) before restructuring charges, severance charges, acquisition-related costs, impairment charges related to intangible assets, loss on extinguishment of debt, certain losses (gains) on disposal of assets, legal settlements and the tax impact of these adjustments and other unusual or infrequent tax items. We define adjusted net income (loss) per common share - diluted as adjusted net income (loss) divided by the diluted weighted average common shares outstanding. We use adjusted net income (loss) and adjusted net income (loss) per common share - diluted to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions and to compare our performance against that of other peer companies using similar measures. We present adjusted net income (loss) and adjusted net income (loss) per common share - diluted because we believe they assist investors in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance and because we believe it is useful for investors to see the measures that management uses to evaluate the Company.
The Company defines EBITDA as net income (loss) before interest, taxes, depreciation, and amortization. Adjusted EBITDA is calculated in accordance with the Company’s credit facilities and is one of the components for performance evaluation under its executive compensation programs. Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the impact of certain items, including certain non-cash and other items that the Company does not consider in its evaluation of ongoing operating performance from period to period. The Company uses Adjusted EBITDA in connection with covenant compliance and executive performance evaluations, and to supplement GAAP measures of performance to evaluate the effectiveness of its business strategies, to make budgeting decisions and to compare its performance against that of other peer companies using similar measures. The Company believes it is useful for investors to see the measures that management uses to evaluate the Company, its executives and its covenant compliance. EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in the Company’s industry.
The Company presents free cash flow, which the Company defines as net cash provided by operating activities in a period minus payments for property and equipment made in that period, because it believes it is a useful indicator of the Company’s overall liquidity, as the amount of free cash flow generated in any period is representative of cash that is available for debt repayment, investment, and other discretionary and non-discretionary cash uses. Accordingly, we believe that free cash flow provides useful information to investors in understanding and evaluating our liquidity in the same manner as management. Our definition of free cash flow is limited in that it does not solely represent residual cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt service and other contractual obligations. Therefore, we believe it is important to view free cash flow as a measure that provides supplemental information to our Consolidated Statements of Cash Flows. Although other companies report their free cash flow, numerous methods may exist for calculating a company’s free cash flow. As a result, the method used by our management to calculate our free cash flow may differ from the methods used by other companies to calculate their free cash flow.
Additionally, this press release refers to the change in Elfa third-party net sales after the conversion of Elfa’s net sales from Swedish krona to
The Container Store Group, Inc. Supplemental Information - Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except share and per share amounts)
(unaudited)
The table below reconciles the non-GAAP financial measures of adjusted net income (loss) and adjusted net income (loss) per common share - diluted with the most directly comparable GAAP financial measures of GAAP net income (loss) and GAAP net income (loss) per common share - diluted.
|
Fiscal Quarter Ended |
|
Fiscal Year Ended |
||||||||||||
|
March 30,
|
|
April 1,
|
|
March 30,
|
|
April 1,
|
||||||||
Numerator: |
|
|
|
|
|
|
|
||||||||
Net (loss) income |
$ |
(61,366 |
) |
|
$ |
(189,250 |
) |
|
$ |
(103,287 |
) |
|
$ |
(158,856 |
) |
Impairment charges (a) |
|
73,832 |
|
|
|
197,712 |
|
|
|
97,279 |
|
|
|
197,712 |
|
Severance charges (b) |
|
1,663 |
|
|
|
383 |
|
|
|
4,125 |
|
|
|
383 |
|
Elfa restructuring (c) |
|
51 |
|
|
|
— |
|
|
|
181 |
|
|
|
— |
|
Acquisition-related costs (d) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
63 |
|
Legal settlement (e) |
|
3,117 |
|
|
|
— |
|
|
|
3,117 |
|
|
|
(2,600 |
) |
Taxes (f) |
|
(19,334 |
) |
|
|
(12 |
) |
|
|
(17,283 |
) |
|
|
533 |
|
Adjusted net (loss) income |
$ |
(2,037 |
) |
|
$ |
8,833 |
|
|
$ |
(15,868 |
) |
|
$ |
37,235 |
|
|
|
|
|
|
|
|
|
||||||||
Denominator: |
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding — basic |
|
49,601,938 |
|
|
|
49,175,873 |
|
|
|
49,476,871 |
|
|
|
49,539,875 |
|
Weighted-average common shares outstanding — diluted |
|
49,601,938 |
|
|
|
49,175,873 |
|
|
|
49,476,871 |
|
|
|
49,539,875 |
|
|
|
|
|
|
|
|
|
||||||||
Net (loss) income per common share — basic |
$ |
(1.24 |
) |
|
$ |
(3.85 |
) |
|
$ |
(2.09 |
) |
|
$ |
(3.21 |
) |
Net (loss) income per common share — diluted |
$ |
(1.24 |
) |
|
$ |
(3.85 |
) |
|
$ |
(2.09 |
) |
|
$ |
(3.21 |
) |
|
|
|
|
|
|
|
|
||||||||
Adjusted net (loss) income per common share — basic |
$ |
(0.04 |
) |
|
$ |
0.18 |
|
|
$ |
(0.32 |
) |
|
$ |
0.75 |
|
Adjusted net (loss) income per common share — diluted |
$ |
(0.04 |
) |
|
$ |
0.18 |
|
|
$ |
(0.32 |
) |
|
$ |
0.75 |
|
| ________________________________________ | ||
(a) |
Non-cash trade name impairment charge incurred in the fourth quarter of fiscal 2023, as well as non-cash goodwill impairment charge incurred in the second quarter of fiscal 2023 and in the fourth quarter of fiscal 2022, which we do not consider in our evaluation of ongoing performance. |
|
(b) |
Severance charges associated with the elimination of certain positions recorded in other expenses in fiscal 2023 and fiscal 2022, which we do not consider in our evaluation of ongoing performance. |
|
(c) |
Charges associated with the close-down of Elfa segment sales operations in |
|
(d) |
Includes acquisition and legal costs incurred in fiscal 2022 associated with the acquisition of C Studio on December 30, 2021, all of which are recorded as selling, general and administrative expenses, which we do not consider in our evaluation of ongoing performance. |
|
(e) |
The Company incurred costs associated with a legal settlement inclusive of legal fees in fiscal 2023 recorded in other expenses and received a legal settlement, net of legal fees, in fiscal 2022 recorded as selling, general and administrative expenses, all of which we do not consider in our evaluation of ongoing performance. |
|
(f) |
Tax impact of adjustments to net income (loss) that are considered to be unusual or infrequent tax items. For fiscal 2023, includes |
|
The table below reconciles the non-GAAP financial measure Adjusted EBITDA with the most directly comparable GAAP financial measure of GAAP net income (loss).
|
Fiscal Quarter Ended |
|
Fiscal Year Ended |
||||||||||||
|
March 30,
|
|
April 1,
|
|
March 30,
|
|
April 1,
|
||||||||
Net (loss) income |
$ |
(61,366 |
) |
|
$ |
(189,250 |
) |
|
$ |
(103,287 |
) |
|
$ |
(158,856 |
) |
Depreciation and amortization |
|
11,906 |
|
|
|
10,398 |
|
|
|
44,333 |
|
|
|
38,905 |
|
Interest expense, net |
|
5,316 |
|
|
|
4,776 |
|
|
|
20,672 |
|
|
|
16,171 |
|
(Benefit) provision for income taxes |
|
(20,775 |
) |
|
|
3,233 |
|
|
|
(22,119 |
) |
|
|
15,090 |
|
EBITDA |
$ |
(64,919 |
) |
|
$ |
(170,843 |
) |
|
$ |
(60,401 |
) |
|
$ |
(88,690 |
) |
Pre-opening costs (a) |
|
1,278 |
|
|
|
957 |
|
|
|
2,861 |
|
|
|
2,006 |
|
Non-cash lease expense (b) |
|
82 |
|
|
|
144 |
|
|
|
(820 |
) |
|
|
547 |
|
Impairment charges (c) |
|
73,832 |
|
|
|
197,712 |
|
|
|
97,279 |
|
|
|
197,712 |
|
Stock-based compensation (d) |
|
265 |
|
|
|
820 |
|
|
|
1,870 |
|
|
|
3,382 |
|
Foreign exchange (gains) losses (e) |
|
(16 |
) |
|
|
(9 |
) |
|
|
(118 |
) |
|
|
23 |
|
Severance charges (f) |
|
1,663 |
|
|
|
383 |
|
|
|
4,125 |
|
|
|
383 |
|
Elfa restructuring (g) |
|
51 |
|
|
|
— |
|
|
|
181 |
|
|
|
— |
|
Legal settlement (h) |
|
3,117 |
|
|
|
— |
|
|
|
3,117 |
|
|
|
— |
|
Acquisition-related costs (i) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
63 |
|
Adjusted EBITDA |
$ |
15,353 |
|
|
$ |
29,164 |
|
|
$ |
48,094 |
|
|
$ |
115,426 |
|
____________________________________________ |
||
| (a) | Non-capital expenditures associated with opening new stores and relocating stores, including marketing expenses, travel and relocation costs, and training costs. We adjust for these costs to facilitate comparisons of our performance from period to period. |
|
| (b) | Reflects the extent to which our annual GAAP operating lease expense has been above or below our cash operating lease payments. The amount varies depending on the average age of our lease portfolio (weighted for size), as our GAAP operating lease expense on younger leases typically exceeds our cash operating lease payments, while our GAAP operating lease expense on older leases is typically less than our cash operating lease payments. |
|
| (c) | Non-cash trade name impairment charge incurred in the fourth quarter of fiscal 2023, as well as non-cash goodwill impairment charge incurred in the second quarter of fiscal 2023 and in the fourth quarter of fiscal 2022, which we do not consider in our evaluation of ongoing performance. |
|
| (d) | Non-cash charges related to stock-based compensation programs, which vary from period to period depending on volume and vesting timing of awards. We adjust for these charges to facilitate comparisons from period to period. |
|
| (e) | Realized foreign exchange transactional gains/losses our management does not consider in our evaluation of our ongoing operations. |
|
| (f) | Severance charges associated with the elimination of certain positions recorded in other expenses in fiscal 2023 and fiscal 2022, which we do not consider in our evaluation of ongoing performance. |
|
| (g) |
Charges associated with the close-down of Elfa segment sales operations in |
|
| (h) | The Company incurred costs associated with a legal settlement inclusive of legal fees in fiscal 2023 recorded in other expenses, which we do not consider in our evaluation of ongoing performance. |
|
| (i) | Includes acquisition and legal costs incurred in fiscal 2022 associated with the acquisition of C Studio on December 30, 2021, all of which are recorded as selling, general and administrative expenses, which we do not consider in our evaluation of ongoing performance. |
|
The table below reconciles the non-GAAP financial measure of free cash flow with the most directly comparable GAAP financial measure of net cash provided by operating activities.
|
Fiscal Year Ended |
||||||
|
March 30,
|
|
April 1,
|
||||
Net cash provided by operating activities |
$ |
46,789 |
|
|
$ |
59,305 |
|
Less: Additions to property and equipment |
|
(39,894 |
) |
|
|
(64,223 |
) |
Free cash flow |
$ |
6,895 |
|
|
$ |
(4,918 |
) |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240514531918/en/
Investors:
ICR, Inc.
Farah Soi/Caitlin Churchill
203-682-8200
Farah.Soi@icrinc.com
Caitlin.Churchill@icrinc.com
or
Media:
The Container Store Group, Inc.
Carson Netherton, 972-538-6402
publicrelations@containerstore.com
Source: The Container Store Group, Inc.
FAQ
What were The Container Store's (TCS) net sales for fiscal year 2023?
How did TCS's comparable store sales perform in Q4 2023?
What was the net loss per diluted share for TCS in fiscal year 2023?
How much did TCS's online sales decline in Q4 2023?
What is the status of The Container Store's review of strategic alternatives?
