The Container Store Group, Inc. Announces Third Quarter 2023 Financial Results
- Consolidated net sales of $214.9 million, down 14.8% compared to the third quarter of fiscal 2022
- Net loss per share of $0.13 compared to earnings per diluted share of $0.08 in the third quarter of fiscal 2022
- Comparable store sales^ down 16.8% compared to the third quarter of fiscal 2022
- Outlook for the fiscal fourth quarter ending March 30, 2024, includes a projected net loss per diluted share of $0.12 - $0.09 and a decline in comparable store sales by mid-twenties
- Consolidated net sales decreased by 14.8%
- Net loss per share of $0.13 compared to earnings per diluted share of $0.08 in the third quarter of fiscal 2022
- Comparable store sales^ decreased by 16.8%
- Outlook for the fiscal fourth quarter ending March 30, 2024, indicates a projected net loss per diluted share of $0.12 - $0.09 and a decline in comparable store sales by mid-twenties
Insights
The reported decline of 14.8% in consolidated net sales for The Container Store Group in the third quarter of fiscal 2023 is a clear indicator of a contraction in consumer demand within the organization and retail sector. This is further substantiated by the significant 16.8% drop in comparable store sales, which is a critical measure of a retailer's health, as it accounts for sales growth in stores that have been open for more than a year. The decrease in general merchandise categories by 20.4% is particularly noteworthy, as it suggests a shift in consumer spending patterns or increased competition affecting these product lines.
The reported net loss per share of $0.13, a stark contrast to the earnings per diluted share of $0.08 in the previous year, reflects the company's struggle to maintain profitability amidst declining sales. Furthermore, the adjusted net loss per share of $0.08, compared to an adjusted net income per diluted share of $0.08 in the third quarter of fiscal 2022, highlights the challenges faced in achieving financial targets despite cost management efforts. The updated fiscal outlook, with lowered expectations for net sales and a projected increase in net loss per diluted share, will likely influence investor sentiment and could impact the company's stock performance in the short term.
An increase in The Container Store's consolidated gross margin to 58.3% is a positive aspect amidst the sales decline, suggesting an improvement in profitability per unit sold. This could be attributed to a higher mix of Custom Spaces sales, which typically have higher margins. However, the overall financial health of the company is concerning, with the gross margin increase overshadowed by the significant sales decline and net losses.
Another important financial metric to consider is the increase in SG&A as a percentage of net sales to 52.0%, indicating that the company has not been able to scale back its operating expenses in line with the decrease in sales. This deleverage of fixed costs can strain financial resources and may necessitate more aggressive cost-cutting measures if sales continue to decline. Additionally, the reported increase in net interest expense due to higher interest rates and average borrowings could further strain the company's profitability.
The reported non-cash goodwill impairment charge of $23.4 million indicates that the company has reassessed the value of its assets and found them to be overvalued, which is a sign of potential over-optimism in past financial projections. This adjustment is a significant factor for analysts and investors, as it reflects a more realistic valuation of the company's assets and future earning potential.
The Container Store's financial results may be symptomatic of broader economic trends, such as decreased consumer confidence, increased market saturation, or shifts in discretionary spending. The reported decline in sales and the net loss may also reflect macroeconomic factors such as inflation, which can erode consumer purchasing power, or supply chain disruptions that affect product availability and costs. The decline in online sales by 26.3% year-over-year could also be influenced by changes in consumer behavior as the economy evolves post-pandemic, with potential shifts back to in-person shopping or a saturation of the e-commerce market.
Furthermore, the increase in the effective tax rate from negative to 21% for the fiscal year ending March 30, 2024, may have implications for the company's future cash flows and investment capacity. This change in tax rate, along with the current economic climate, could affect the company's strategic decisions regarding store openings, capital expenditures and other investments in growth.
Third quarter consolidated net sales of
Comparable store sales^ down
Third quarter net loss per share of
Updates Fiscal 2023 Earnings Outlook
For the third quarter of fiscal 2023:
-
Consolidated net sales were
$214.9 million 14.8% , compared to the third quarter of fiscal 2022. Net sales in The Container Store retail business (“TCS”) were$202.5 million 15.4% compared to the third quarter of fiscal 2022. Elfa International AB (“Elfa”) third-party net sales were$12.4 million 4.2% compared to the third quarter of fiscal 2022. Excluding the impact of foreign currency translation, Elfa third-party net sales were down4.9% . -
Comparable store sales^ decreased
16.8% , with general merchandise categories down20.4% , contributing a decrease of 1,380 basis points to comparable store sales^. Custom Spaces+ were down9.2% , negatively impacting comparable store sales^ by 300 basis points. -
Consolidated net loss and net loss per share were
$6.4 million $0.13 $4.2 million $0.08 $0.08 $0.08
Satish Malhotra, Chief Executive Officer and President of The Container Store, commented, “As we discussed in our commentary ahead of the ICR Conference last month, our third quarter sales reflected similar trends to what we experienced in the second quarter as our general merchandise categories weighed on results while our Custom Spaces assortment relatively outperformed. In fact, Custom Spaces saw sequential improvement in comparable store sales declines from the second quarter driven by improved performance in our elfa® product line and strength in our premium, wood-based line, Preston®. Despite the sales shortfall from our original guidance, promotional discipline and tight cost management enabled us to deliver bottom line results within our original outlook range.”
Mr. Malhotra continued, “Given the landscape we are navigating, we plan to continue to manage expenses and capital allocation with great discipline. We continue to lean into our competitive strengths and differentiation in Custom Spaces and complementary premium general merchandise, where we see significant growth opportunity.
Third Quarter Fiscal 2023 Results
For the third quarter (thirteen weeks) ended December 30, 2023:
-
Consolidated net sales were
$214.9 million 14.8% , compared to the third quarter of fiscal 2022.-
Net sales in TCS were
$202.5 million 15.4% . -
Comparable store sales^ decreased
16.8% , with general merchandise categories down20.4% , contributing a decrease of 1,380 basis points to comparable store sales^. Custom Spaces+ were down9.2% , negatively impacting comparable store sales^ by 300 basis points. -
Online sales decreased
26.3% compared to the third quarter of fiscal 2022. -
Elfa third-party net sales were
$12.4 million 4.2% compared to the third quarter of fiscal 2022. Excluding the impact of foreign currency translation, Elfa third-party net sales were down4.9% primarily due to a decline in sales in Nordic markets.
-
Net sales in TCS were
-
Consolidated gross margin was
58.3% , an increase of 140 basis points, compared to the third quarter of fiscal 2022 primarily due to a higher mix of Custom Spaces+ sales year over year. TCS gross margin increased 40 basis points to57.6% primarily due to lower freight costs, partially offset by increased promotional activity and unfavorable product and services mix. Elfa gross margin decreased 170 basis points compared to the third 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
8.0% to$111.8 million $121.5 million 52.0% , with the increase primarily due to deleverage of fixed costs associated with lower sales in the third quarter of fiscal 2023. -
Consolidated depreciation and amortization increased
15.9% to$11.5 million $10.0 million -
Consolidated net interest expense increased
17.4% to$5.2 million $4.4 million -
The effective tax rate was (34.5)% in the third quarter of fiscal 2023, as compared to
33.8% in the third quarter of fiscal 2022. The negative effective tax rate was primarily related to the impact of discrete items related to share-based compensation on a pre-tax loss in the third quarter of fiscal 2023, as compared to pre-tax income in the third quarter of fiscal 2022. -
Net loss was
$6.4 million $0.13 $4.2 million $0.08 $4.1 million $0.08 $4.1 million $0.08 -
Adjusted EBITDA* was
$12.8 million $22.2 million
For the fiscal year-to-date (thirty-nine weeks) ended December 30, 2023:
-
Consolidated net sales were
$641.7 million 18.5% , including a 10 basis point negative impact of foreign currency translation as compared to the thirty-nine weeks ended December 31, 2022.-
Net sales for the TCS segment were
$606.1 million 18.7% -
Comparable store sales^ decreased
18.9% , with general merchandise categories down20.5% , contributing a decrease of 1,350 basis points to comparable store sales^. Custom Spaces+ were down15.9% , negatively impacting comparable store sales^ by 540 basis points. -
Online sales decreased
21.2% compared to the thirty-nine weeks ended December 31, 2022. -
Elfa third-party net sales were
$35.6 million 14.5% compared to the thirty-nine weeks ended December 31, 2022. Excluding the impact of foreign currency translation, Elfa third-party net sales were down12.1% compared to the thirty-nine weeks ended December 31, 2022 primarily due to a decline in sales in Nordic markets.
-
Net sales for the TCS segment were
-
Consolidated gross margin was
57.1% , an increase of 20 basis points compared to the thirty-nine weeks ended December 31, 2022. TCS gross margin decreased 50 basis points to56.4% , primarily due to increased promotional activity and unfavorable product and services mix, partially offset by lower freight costs in the thirty-nine weeks ended December 30, 2023. Elfa gross margin decreased 10 basis points primarily due to unfavorable mix, partially offset by price increases to customers. -
Consolidated SG&A decreased by
8.2% to$332.5 million $362.1 million 51.8% , with the increase primarily due to deleverage of fixed costs associated with lower sales in the thirty-nine weeks ended December 30, 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
13.7% to$32.4 million $28.5 million -
A non-cash goodwill impairment charge of
$23.4 million $23.4 million -
Consolidated net interest expense increased
34.8% to$15.4 million $11.4 million -
The effective tax rate was
3.1% for the thirty-nine weeks ended December 30, 2023 as compared to28.1% in the thirty-nine weeks ended December 31, 2022. The decrease in the effective tax rate is primarily due to the tax impact of discrete items related to share-based compensation on a pre-tax loss in the thirty-nine weeks ended December 30, 2023. -
Net loss was
$41.9 million $0.85 $30.4 million $0.61 $13.8 million $0.28 $28.4 million $0.57 -
Adjusted EBITDA* was
$32.7 million $86.3 million
New and Existing Stores
As of December 30, 2023, the Company store base was 100 as compared to 95 as of December 31, 2022. The Company opened two stores during the third quarter of fiscal 2023.
Balance sheet and liquidity highlights:
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(In thousands) |
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December 30, 2023 |
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December 31, 2022 |
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Cash |
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$ |
16,007 |
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$ |
5,760 |
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Total debt, net of deferred financing costs |
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$ |
184,656 |
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$ |
188,608 |
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Liquidity 1 |
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$ |
99,632 |
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$ |
96,059 |
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Net cash provided by operating activities |
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$ |
26,673 |
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$ |
18,856 |
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Free cash flow * |
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$ |
(6,703 |
) |
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$ |
(27,702 |
) |
| _________________________ | ||
| (1) | Cash plus availability on revolving credit facilities. |
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Share repurchase
There were no repurchases during the third quarter of fiscal 2023. The Company has
Outlook
The Company today provided the following financial outlook for the fiscal fourth quarter ending on March 30, 2024:
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Current Outlook |
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Current Outlook |
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Prior Outlook |
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Fourth Quarter Ending
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Fiscal Year Ending
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Fiscal Year Ending
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Consolidated net sales |
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Comparable store sales^ decline |
Mid twenties |
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Low twenties |
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High teens |
Net loss per diluted share |
( |
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( |
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( |
Adjusted net loss per diluted share* |
( |
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( |
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( |
Assumed dilutive shares |
49.5 million |
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49.5 million |
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49 million |
Capital expenditures |
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Effective tax rate (1) |
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(1) Effective tax rate for fiscal year ending March 30, 2024 includes |
The Company plans to open two new small format stores in the remainder of fiscal 2023. Looking forward to fiscal 2024, we are planning to open four new stores and close one location. We also plan to relocate our
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Estimated Opening |
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Spring calendar 2024 |
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Spring calendar 2024 |
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 Closet Works sales to third parties.
Conference Call Information
A conference call to discuss third quarter fiscal 2023 financial results is scheduled for today, February 6, 2024, at 4:30 PM 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 13742837. The replay will be available until March 6, 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 and initiatives including future store openings and closures; expected expense management; future opportunities; the impact of macroeconomic conditions and our anticipated financial performance and long-term targets.
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: 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. Consolidated statements of operations |
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Thirteen Weeks Ended |
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Thirty-Nine Weeks Ended |
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December 30, |
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December 31, |
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December 30, |
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December 31, |
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(In thousands, except share and per share amounts) (unaudited) |
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2023 |
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2022 |
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2023 |
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2022 |
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Net sales |
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$ |
214,899 |
|
|
$ |
252,236 |
|
$ |
641,742 |
|
|
$ |
787,542 |
Cost of sales (excluding depreciation and amortization) |
|
|
89,682 |
|
|
|
108,795 |
|
|
275,308 |
|
|
|
339,583 |
Gross profit |
|
|
125,217 |
|
|
|
143,441 |
|
|
366,434 |
|
|
|
447,959 |
Selling, general, and administrative expenses (excluding depreciation and amortization) |
|
|
111,820 |
|
|
|
121,540 |
|
|
332,471 |
|
|
|
362,104 |
Impairment charges |
|
|
— |
|
|
|
— |
|
|
23,447 |
|
|
|
— |
Stock-based compensation |
|
|
515 |
|
|
|
825 |
|
|
1,605 |
|
|
|
2,562 |
Pre-opening costs |
|
|
849 |
|
|
|
430 |
|
|
1,583 |
|
|
|
1,049 |
Depreciation and amortization |
|
|
11,532 |
|
|
|
9,952 |
|
|
32,427 |
|
|
|
28,507 |
Other expenses |
|
|
130 |
|
|
|
— |
|
|
2,589 |
|
|
|
— |
Loss on disposal of assets |
|
|
— |
|
|
|
10 |
|
|
221 |
|
|
|
91 |
Income (loss) from operations |
|
|
371 |
|
|
|
10,684 |
|
|
(27,909 |
) |
|
|
53,646 |
Interest expense, net |
|
|
5,151 |
|
|
|
4,389 |
|
|
15,356 |
|
|
|
11,395 |
(Loss) income before taxes |
|
|
(4,780 |
) |
|
|
6,295 |
|
|
(43,265 |
) |
|
|
42,251 |
Provision (benefit) for income taxes |
|
|
1,651 |
|
|
|
2,127 |
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|
(1,344 |
) |
|
|
11,857 |
Net (loss) income |
|
$ |
(6,431 |
) |
|
$ |
4,168 |
|
$ |
(41,921 |
) |
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$ |
30,394 |
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Net (loss) income per common share — basic |
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$ |
(0.13 |
) |
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$ |
0.08 |
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$ |
(0.85 |
) |
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$ |
0.61 |
Net (loss) income per common share — diluted |
|
$ |
(0.13 |
) |
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$ |
0.08 |
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$ |
(0.85 |
) |
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$ |
0.61 |
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Weighted-average common shares — basic |
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49,591,111 |
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49,263,122 |
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49,435,182 |
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49,661,209 |
Weighted-average common shares — diluted |
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|
49,591,111 |
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|
49,452,980 |
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49,435,182 |
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|
50,024,589 |
The Container Store Group, Inc. Consolidated balance sheets |
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December 30, |
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April 1, |
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December 31, |
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(In thousands) |
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2023 |
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2023 |
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2022 |
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Assets |
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(unaudited) |
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(unaudited) |
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Current assets: |
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Cash |
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$ |
16,007 |
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$ |
6,958 |
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$ |
5,760 |
Accounts receivable, net |
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27,489 |
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|
25,870 |
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|
30,790 |
Inventory |
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|
163,090 |
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|
170,637 |
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|
190,307 |
Prepaid expenses |
|
|
15,515 |
|
|
14,989 |
|
|
15,596 |
Income taxes receivable |
|
|
1,235 |
|
|
858 |
|
|
1,357 |
Other current assets |
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|
10,343 |
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|
10,914 |
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|
9,941 |
Total current assets |
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233,679 |
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230,226 |
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|
253,751 |
Noncurrent assets: |
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Property and equipment, net |
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|
159,879 |
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158,702 |
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|
152,282 |
Noncurrent operating lease right-of-use assets |
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|
340,883 |
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347,959 |
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357,607 |
Goodwill |
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|
— |
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23,447 |
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|
221,159 |
Trade names |
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|
222,285 |
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|
221,278 |
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|
221,046 |
Deferred financing costs, net |
|
|
110 |
|
|
150 |
|
|
163 |
Noncurrent deferred tax assets, net |
|
|
352 |
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|
568 |
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|
690 |
Other assets |
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|
3,589 |
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|
2,844 |
|
|
2,323 |
Total noncurrent assets |
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727,098 |
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|
754,948 |
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|
955,270 |
Total assets |
|
$ |
960,777 |
|
$ |
985,174 |
|
$ |
1,209,021 |
The Container Store Group, Inc. Consolidated balance sheets (continued) |
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December 30, |
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April 1, |
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December 31, |
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(In thousands, except share and per share amounts) |
|
2023 |
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2023 |
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2022 |
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Liabilities and shareholders’ equity |
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(unaudited) |
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(unaudited) |
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Current liabilities: |
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Accounts payable |
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$ |
49,325 |
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$ |
52,637 |
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$ |
57,704 |
|
Accrued liabilities |
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|
72,587 |
|
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|
74,673 |
|
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|
75,338 |
|
Current borrowings on revolving lines of credit |
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|
3,300 |
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|
2,423 |
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|
8,131 |
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Current portion of long-term debt |
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|
2,068 |
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|
2,063 |
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|
2,061 |
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Current operating lease liabilities |
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|
62,525 |
|
|
|
57,201 |
|
|
|
58,309 |
|
Income taxes payable |
|
|
2,994 |
|
|
|
1,318 |
|
|
|
276 |
|
Total current liabilities |
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|
192,799 |
|
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|
190,315 |
|
|
|
201,819 |
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Noncurrent liabilities: |
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Long-term debt |
|
|
179,288 |
|
|
|
163,385 |
|
|
|
178,416 |
|
Noncurrent operating lease liabilities |
|
|
315,327 |
|
|
|
314,100 |
|
|
|
322,243 |
|
Noncurrent deferred tax liabilities, net |
|
|
42,746 |
|
|
|
49,338 |
|
|
|
50,050 |
|
Other long-term liabilities |
|
|
5,731 |
|
|
|
5,851 |
|
|
|
6,983 |
|
Total noncurrent liabilities |
|
|
543,092 |
|
|
|
532,674 |
|
|
|
557,692 |
|
Total liabilities |
|
|
735,891 |
|
|
|
722,989 |
|
|
|
759,511 |
|
Commitments and contingencies |
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|
|||
Shareholders’ equity: |
|
|
|
|
|
|
|
|
|
|||
Common stock, |
|
|
496 |
|
|
|
492 |
|
|
|
492 |
|
Additional paid-in capital |
|
|
873,664 |
|
|
|
872,204 |
|
|
|
871,384 |
|
Accumulated other comprehensive loss |
|
|
(29,351 |
) |
|
|
(32,509 |
) |
|
|
(33,614 |
) |
Retained deficit |
|
|
(619,923 |
) |
|
|
(578,002 |
) |
|
|
(388,752 |
) |
Total shareholders’ equity |
|
|
224,886 |
|
|
|
262,185 |
|
|
|
449,510 |
|
Total liabilities and shareholders’ equity |
|
$ |
960,777 |
|
|
$ |
985,174 |
|
|
$ |
1,209,021 |
|
The Container Store Group, Inc. Consolidated statements of cash flows |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
Thirty-Nine Weeks Ended |
||||||
|
|
December 30, |
|
December 31, |
||||
(In thousands) (unaudited) |
|
2023 |
|
2022 |
||||
Operating activities |
|
|
|
|
|
|
||
Net (loss) income |
|
$ |
(41,921 |
) |
|
$ |
30,394 |
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
32,427 |
|
|
|
28,507 |
|
Stock-based compensation |
|
|
1,605 |
|
|
|
2,562 |
|
Impairment charges |
|
|
23,447 |
|
|
|
— |
|
Loss on disposal of assets |
|
|
221 |
|
|
|
91 |
|
Deferred tax (benefit) expense |
|
|
(6,619 |
) |
|
|
(1,018 |
) |
Non-cash interest |
|
|
1,413 |
|
|
|
1,413 |
|
Other |
|
|
5 |
|
|
|
855 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
(904 |
) |
|
|
(2,955 |
) |
Inventory |
|
|
8,585 |
|
|
|
511 |
|
Prepaid expenses and other assets |
|
|
(1,111 |
) |
|
|
(3,303 |
) |
Accounts payable and accrued liabilities |
|
|
(4,622 |
) |
|
|
(33,126 |
) |
Net change in lease assets and liabilities |
|
|
13,641 |
|
|
|
607 |
|
Income taxes |
|
|
1,329 |
|
|
|
(5,539 |
) |
Other noncurrent liabilities |
|
|
(823 |
) |
|
|
(143 |
) |
Net cash provided by operating activities |
|
|
26,673 |
|
|
|
18,856 |
|
|
|
|
|
|
|
|
||
Investing activities |
|
|
|
|
|
|
||
Additions to property and equipment |
|
|
(33,376 |
) |
|
|
(46,558 |
) |
Investments in non-qualified plan trust |
|
|
(220 |
) |
|
|
(1,049 |
) |
Proceeds from non-qualified plan trust redemptions |
|
|
642 |
|
|
|
811 |
|
Proceeds from sale of property and equipment |
|
|
1 |
|
|
|
36 |
|
Net cash used in investing activities |
|
|
(32,953 |
) |
|
|
(46,760 |
) |
|
|
|
|
|
|
|
||
Financing activities |
|
|
|
|
|
|
||
Borrowings on revolving lines of credit |
|
|
54,492 |
|
|
|
64,790 |
|
Payments on revolving lines of credit |
|
|
(53,733 |
) |
|
|
(58,243 |
) |
Borrowings on long-term debt |
|
|
31,000 |
|
|
|
35,000 |
|
Payments on long-term debt |
|
|
(16,550 |
) |
|
|
(16,572 |
) |
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 financing activities |
|
|
15,065 |
|
|
|
19,603 |
|
|
|
|
|
|
|
|
||
Effect of exchange rate changes on cash |
|
|
264 |
|
|
|
(191 |
) |
|
|
|
|
|
|
|
||
Net increase (decrease) in cash |
|
|
9,049 |
|
|
|
(8,492 |
) |
Cash at beginning of fiscal period |
|
|
6,958 |
|
|
|
14,252 |
|
Cash at end of fiscal period |
|
$ |
16,007 |
|
|
$ |
5,760 |
|
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|||||||||||||||||||||||||||||
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
Q4 2023 Outlook |
|
FY 2023 Outlook |
|||||||||||||||||||||||||
|
December 30, |
|
December 31, |
|
December 30, |
|
December 31, |
|
|
|
|
|
|
|
|
||||||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
Low |
|
High |
|
Low |
|
High |
||||||||||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net (loss) income |
$ |
(6,431 |
) |
|
$ |
4,168 |
|
|
$ |
(41,921 |
) |
|
$ |
30,394 |
|
|
$ |
(6,000 |
) |
|
$ |
(4,400 |
) |
|
$ |
(47,921 |
) |
|
$ |
(46,321 |
) |
Impairment charges (a) |
|
— |
|
|
|
— |
|
|
|
23,447 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
23,447 |
|
|
|
23,447 |
|
Severance charges (b) |
|
— |
|
|
|
— |
|
|
|
2,462 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,462 |
|
|
|
2,462 |
|
Elfa restructuring (c) |
|
130 |
|
|
|
— |
|
|
|
130 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
130 |
|
|
|
130 |
|
Acquisition-related costs (d) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
63 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Legal settlement (e) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,600 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Taxes (f) |
|
2,238 |
|
|
|
(59 |
) |
|
|
2,051 |
|
|
|
545 |
|
|
|
— |
|
|
|
— |
|
|
|
2,051 |
|
|
|
2,051 |
|
Adjusted net (loss) income |
$ |
(4,063 |
) |
|
$ |
4,109 |
|
|
$ |
(13,831 |
) |
|
$ |
28,402 |
|
|
$ |
(6,000 |
) |
|
$ |
(4,400 |
) |
|
$ |
(19,831 |
) |
|
$ |
(18,231 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding — basic |
|
49,591,111 |
|
|
|
49,263,122 |
|
|
|
49,435,182 |
|
|
|
49,661,209 |
|
|
|
49,500,000 |
|
|
|
49,500,000 |
|
|
|
49,500,000 |
|
|
|
49,500,000 |
|
Weighted-average common shares outstanding — diluted |
|
49,591,111 |
|
|
|
49,452,980 |
|
|
|
49,435,182 |
|
|
|
50,024,589 |
|
|
|
49,500,000 |
|
|
|
49,500,000 |
|
|
|
49,500,000 |
|
|
|
49,500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net (loss) income per common share — basic |
$ |
(0.13 |
) |
|
$ |
0.08 |
|
|
$ |
(0.85 |
) |
|
$ |
0.61 |
|
|
$ |
(0.12 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.97 |
) |
|
$ |
(0.94 |
) |
Net (loss) income per common share — diluted |
$ |
(0.13 |
) |
|
$ |
0.08 |
|
|
$ |
(0.85 |
) |
|
$ |
0.61 |
|
|
$ |
(0.12 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.97 |
) |
|
$ |
(0.94 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Adjusted net (loss) income per common share — basic |
$ |
(0.08 |
) |
|
$ |
0.08 |
|
|
$ |
(0.28 |
) |
|
$ |
0.57 |
|
|
$ |
(0.12 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.40 |
) |
|
$ |
(0.37 |
) |
Adjusted net (loss) income per common share — diluted |
$ |
(0.08 |
) |
|
$ |
0.08 |
|
|
$ |
(0.28 |
) |
|
$ |
0.57 |
|
|
$ |
(0.12 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.40 |
) |
|
$ |
(0.37 |
) |
| _________________________________ | ||
| (a) | Non-cash goodwill impairment charge incurred in the second quarter of fiscal 2023, 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 the first and second quarters of fiscal 2023, 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 legal costs incurred in the second quarter of fiscal 2022 associated with the acquisition of Closet Works, 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 received a legal settlement, net of legal fees, in the second quarter of fiscal 2022, which we do not consider in our evaluation of ongoing performance. The amount is recorded as selling, general and administrative expenses. |
|
| (f) |
Tax impact of adjustments to net income (loss) that are considered to be unusual or infrequent tax items. For fiscal 2023, also 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).
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
||||||||||
|
December 30, |
|
December 31, |
|
December 30, |
|
December 31, |
||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||
Net (loss) income |
$ |
(6,431 |
) |
|
$ |
4,168 |
|
$ |
(41,921 |
) |
|
$ |
30,394 |
Depreciation and amortization |
|
11,532 |
|
|
|
9,952 |
|
|
32,427 |
|
|
|
28,507 |
Interest expense, net |
|
5,151 |
|
|
|
4,389 |
|
|
15,356 |
|
|
|
11,395 |
Provision (benefit) for income taxes |
|
1,651 |
|
|
|
2,127 |
|
|
(1,344 |
) |
|
|
11,857 |
EBITDA |
$ |
11,903 |
|
|
$ |
20,636 |
|
$ |
4,518 |
|
|
$ |
82,153 |
Pre-opening costs (a) |
|
849 |
|
|
|
430 |
|
|
1,583 |
|
|
|
1,049 |
Non-cash lease expense (b) |
|
(573 |
) |
|
|
232 |
|
|
(902 |
) |
|
|
403 |
Impairment charges (c) |
|
— |
|
|
|
— |
|
|
23,447 |
|
|
|
— |
Stock-based compensation (d) |
|
515 |
|
|
|
825 |
|
|
1,605 |
|
|
|
2,562 |
Foreign exchange losses (gains) (e) |
|
(29 |
) |
|
|
38 |
|
|
(102 |
) |
|
|
30 |
Severance charges (f) |
|
— |
|
|
|
— |
|
|
2,462 |
|
|
|
— |
Elfa restructuring (g) |
|
130 |
|
|
|
— |
|
|
130 |
|
|
|
— |
Acquisition-related costs (h) |
|
— |
|
|
|
— |
|
|
— |
|
|
|
63 |
Adjusted EBITDA |
$ |
12,795 |
|
|
$ |
22,161 |
|
$ |
32,741 |
|
|
$ |
86,260 |
| __________________________________ | ||
| (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 goodwill impairment charge incurred in the second quarter of fiscal 2023, 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 performance. |
|
| (f) | Severance charges associated with the elimination of certain positions recorded in other expenses in the first and second quarters of fiscal 2023, 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) | Includes legal costs incurred in the second quarter of fiscal 2022 associated with the acquisition of Closet Works, 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.
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
Thirty-Nine Weeks Ended |
||||||
|
|
December 30, |
|
December 31, |
||||
|
|
2023 |
|
2022 |
||||
Net cash provided by operating activities |
|
$ |
26,673 |
|
|
$ |
18,856 |
|
Less: Additions to property and equipment |
|
|
(33,376 |
) |
|
|
(46,558 |
) |
Free cash flow |
|
$ |
(6,703 |
) |
|
$ |
(27,702 |
) |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240206216439/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.
Katelyn Clinton, 972-538-6491
publicrelations@containerstore.com
Source: The Container Store Group, Inc.
FAQ
What were The Container Store Group, Inc.'s (TCS) consolidated net sales in the third quarter of fiscal 2023?
How did The Container Store Group, Inc. (TCS) perform in terms of net loss per share in the third quarter of fiscal 2023?
What was the change in comparable store sales for The Container Store Group, Inc. (TCS) in the third quarter of fiscal 2023?
What is the projected net loss per diluted share for The Container Store Group, Inc. (TCS) in the fiscal fourth quarter ending March 30, 2024?
What is the outlook for comparable store sales for The Container Store Group, Inc. (TCS) in the fiscal fourth quarter ending March 30, 2024?
