TCS - Earnings call transcript Q1 2024 | Container Store Group, Inc.

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Operator

Conference is being recorded. It is now my pleasure to introduce your host, Caitlin Churchill. Thank you.

You may begin.

Caitlin Churchill

Good afternoon, everyone, and thanks for joining us today for The Container Store's first quarter fiscal year 2023 earnings results conference call.

Malhotra, Officer; Satish Chief Jeff are Officer. Financial today Chief and Executive Miller, Speaking Jeff their have will and Satish After made call questions. open formal to the we remarks,

to certain like Before I The relating financial as release filed the quarterly in could to plans reports statements updated call on the to today today issued business that undertake other call factors matters management's statements statements. discussed our The in events, U.S. performance on objectives Form Container remind Form are to results press made Store XX-Q we from subject forward-looking affect of are in would with everyone and as annual company begin, obligation future and filings on their may conference XX-K today's The future SEC and that Commission. The are for risk and uncertainties. Actual with report not XXXX, are this by to Store's differ Exchange the of these the date public those and results update anticipated the our Securities and does and forward-looking XX, risks statements. forward-looking of materially in forward-looking that May referred Container the any

to turn press today's page over the Investor may Store's The this website most to Relations directly in GAAP will at call Finally, Satish. call. A the comparable non-GAAP the available deck speakers non-GAAP measures on release or release visiting Container the to refer is reconciliation the issued by certain A obtained the may today. financial measures adjusted financial schedule of copy measure of also now be investor press of and www.containerstore.com. I

Satish Malhotra

the joining our After first by you performance. will Jeff up discuss then Thank call all financial we'll today. our by of discussion will results, first which our Caitlin, our I you, the quarter outlook. reviewing to highlights quarter from questions. followed thank call and open today's details begin for

the would discussed XXXX our challenging. has environment we the while and macro customers spending, And May, call entered and strategic relationship expanding their our it expectation year-end on control and we this in control deepening relentless focus we focus $X to priorities advance remain our goals impact fiscal our with and of our on enable cannot cost sales. As that with of annual customers, the can our capabilities. We billion our strengthening management our us on steadfast focus reach discipline long-term in our remains in will believe we

on year-end actions of While NPS we experience. an implemented shared our record a us plan cost have XX. call, not we our from the delivering In store kept cost high action cutting customer QX, delivered exceptional

we us and with the focus of sense customers we shop objective tested line promotional we to These unlock approach test line and key tests delivered learnings by deepening top on For quarter, learn our from sales first continue our will in go-forward expectations, plans although promotional better increased activity inform relationship our we as us, our fueled performance customers. they that urgency for various durations when promotions created believe types. a and with to on saw for year. We the Therefore, deliver the reason better results this with to provide will. when position customer. a quarter with in We first our offer we with

XX-day a XX% we one, a performed off offer. ran offer one get on six-day than per day buy basis example, For that a better

are [ of with products we In CalPak, aesthetic we with gave are this Tubi These to giving to infusing new we like summer, reason functional XX% products customers. accounted exceeding to In category into both carry-on example which we another The duffel and and customers with potential our growth our our luggage, put of continue are travel area brands our fresh that products all will bringing to see life pleased and bags, a customers new on-the-go with for growth. College include backpacks expectations. To Rains ]. sales. laptop new new we and innovation assortment. effort Container new potential. bags, note, the QX, of light across and a are shop categories traveling customers to And identified Another for was ongoing Store of newness like focus travel belt is have on

off online re-imagined campaign with assortment and annual online kicked Our stores QX with destination a alongside our Dormify. expanded dorm and college product in décor in partnership

we While year. strong back-to-school in to as college season, made of are the early a have enhancements shelves off still result the this start a

dropship online other our core several QX, innovation In crafted how who coming introduce part plan of our lives. XXXX. We that launched enhance embark evergreen showcase product to fiscal assortment. Like the new anticipated The products companies, help will expect which to X,XXX also and is campaign can drive home of conscious and SKUs Dormify with to brands innovative partners, Citizenry, and our sought The artisans' vendor and program goods socially We newness, transform a Store are products solution-oriented we throughout awareness exceeding expectations. our to Container fall this on curated, bold after

than with greater spaces. reach, be are respect expected shoe box current space softness jewelry. declines within environment. With continue in pleased the in the response our Home Edit than our we're our re-condo category, macro sales and expected [ we declines symptomatic ] storage to custom a results closet While seeing have our spaces, incremental with more premium categories drop-front the expanding of driven delivering, and in seen to We are more declines offset non-premium in extent are than we to by while and to by in results traditional lesser are believe the pleased we newness collection, these greater the we

Preston enhancements looking the new colors. with introducing further. to we lighting strength line compatible offering elevate continue well smart door the by Given superior the these believe diamond in Preston home, even in assortment We as innovation innovative pair the we with weave are line, mesh see more that Preston forward to as inserts European beautifully will

space skills majority for represents These knowledge. specialists and quarter. the specialists services, Avera in-home a spaces, by XXX in-home design design technical of $X primarily the Preston to completed design reminder all year, Avera previous XX% market. specialists successfully as XX% we same are accounted sold QX, a product custom selling custom in-person Preston billion the have multi-day, compared and spaces and who have In space in focused enhance quarter which of premium premium on design training last significant Regarding to XX% in a and sales their

identified of previously shared, we garage we As to opportunity offering is an area expand. our custom

closed to stores by Elfa, Garage+ enhancements and drawers, our rolling current we all garage options, on Elfa soft-close deep excited developed our and our this cabinet, enhancements new We overall new and Preston plan full-extension a lighting, garage elevate announce we premium classic truly freestanding out the by solutions are workbench. garage and launch Informed offering. later which features feedback including will to customer These to we're year.

a New portal and online their intuitive tools space review give the payment, and launched differentiate Spaces portal inspiration installation. customers experience. their Custom of This continue will agreement, custom design, the lifecycle their We a My from to and to with sign our space smooth experience. manage the track centralized custom status our purchase customers elevate to provide soft spot to

in-store, a we they're when on in-home on our or easily recently online design an scheduler design. website get In virtual addition, for enhanced launched space started appointments ready to customers make to

on relates that from and customer increased our it service custom innovation our us As points XX. our focus to satisfaction score category, net of XXXX continued by spaces confidence to of promoter making X impact. gives is an QX This

where Hills, Jersey, over in Mateo, to track to coming whitespace. expect stores we stores winter; This This small-format XXXX. fall, market by our remain year's count followed key York Huntington, in a open this six spring Maryland to next New significantly we Turning new our and New plan. years. new on California; increase Miami, existing will Gettysburg, XXXX still and open pathway store Woodland and and of We fiscal store to see an California; see the Florida San in new open Princeton,

to I'm to the against proud of of the to Finally, in have outlines as our make which publication second we our QX, progress we One sustainability recognized annual wind continued continue States green strengthen for the want report power. throughout our by United of use XXXX. and capabilities, company's is governance Agency our I social strategy being environmental, fiscal Protection Environmental highlight note

at with new include indirect hard work will measure partner our of a also chain. are us emissions, teams X that our emissions supply help greenhouse Our which Scope gas

and our difficult carbon year. learning assessment, one start the footprint. To can further was first forward to in it to anticipated, which reduce summarize, the embark retailers we this as to are we look a challenging We we on a of ways

annual notwithstanding, that for the hard of unrelenting hand environment. capitalize profitable on and us focused occurs. I'll Jeff. we our this to to position it billion current confident reflect I'm job, trends revised in that strategic demand in for are have as to We our outlook and taking The revenue. I QX. against their Jeff? steps thank long-term backdrop in we're well path customer over business it our the dynamic work seeing our all Store on Container today X our The when in position on the to executing now team experience want we initiatives growth in navigate optimism to the to we remain recovery

Jeffrey Miller

everyone. and Satish, afternoon, good you, Thank

with first was our our line reviewed, Satish As performance quarter line top in expectations.

test discipline including tax we the however, of our experiment learn and our last lesser line customers effective results activity, the lower to and to on extent, continue than environment, planned pressure, different current as commitment a bottom this a management, call. impacted rate. in promotional to by some with expense negatively expected actions was ongoing our we events engage discussed with However, an were to Offsetting

basis last sales store XXX The remaining decreased which sales merchandise year-over-year, $XXX.X business primarily sales offset up XXX points, XX.X% last inclusive net basis sales points. Custom spaces is in comp store for partially by year. XX.X% the the points. decrease comp XX.X% of driven the TCS decrease first of year by compared the in sales negatively negatively a to basis and party $XXX.X by stores our of comp sales made comp XX.X% sales store consolidated million Store The C-Studio store general discontinuation impacted were from $XXX.X quarter, year-over-year. declined net to impacted third to segment, new X,XXX decline Container sales decrease retail decline The For By categories, XX.X%, sales year-over-year million, XX.X% total net compared by million. a

our are compared in we first million our to of includes year. sales represented experiencing. Elfa third XX.X% generated curbside decreased and year year, the $XX.X which QX sales XX.X% compared XX.X% $XX XX.X% compared the in fiscal in the a total XX.X% last channel generated spending revenue sales, to decreased net by sales this of decreased XXXX. last quarter QX last decreased versus driven million online QX year. to to that TCS Website For net XXXX, year-over-year fiscal in pullback XX website party first of Unearned of customer million quarter pickup

the to due previously in were shipping more online basis Excluding profitability margin XX.X% regions or SG&A points a year. points by our to XXX translation, an the in the decreased Nordic net due last the to freight points learn $XXX.X and million segment, shift rates. From associated Nordic compared XXX sales By other all XX.X% due currency offset high compared costs. services $XX.X test to the XX.X% to QX sales material and X.X% to primarily reflects in Consolidated macroeconomic basis year, partially product TCS impact QX decreased party decline for a Elfa decreased third gross mix, decline costs higher primarily compared to promotional in million continued third due gross primarily basis of markets. to to sales environment decreased discussed, consolidated compared unfavorable sales and of Elfa discounting, inflation last The margin driven of which by higher mix and year, in margin year-over-year, last activity increasing million party costs. Elfa $XXX.X interest XXX in foreign decreased last direct gross decreased challenging and standpoint, to dollars year. and

reduction lower As SG&A year-over-year occupancy, on basis The XX.X%. partially to previously with store costs. We $X.X distribution offset and of marketing increase points percentage of primarily sales, XXX a to our associated deleverage center and announced center, severance at operations. costs is net decreased and force QX year compensation benefits in due million recorded other by the increased support this of sales, in fixed expense

for tax rate rate interest of the or on net in fiscal last term $X.X per first $XX.X $X.XX loss quarter million effective diluted our in last pre-tax XXXX per expense to compared basis fiscal tax income was interest million Our $X.XX to Adjusted year. compared year-over-year GAAP quarter on net as items in primarily was fiscal due to a loan. The $X a compared loss XXXX. Net $XX.X $X.XX compared the XXXX as the primarily year. $XX.X first of of adjusted quarter discrete effective net diluted year. the to impact increased on increase to last pre-tax in share. was income year's compared for million share of or the million a per the first as $XX.X million quarter net share loss higher The quarter XX.X% The per million is income to was quarter a or the or $X.XX GAAP in to share rate to quarter first of related last decrease first in XX.X% of the the

Our to $XX.X year the in last at decreased in $X.X quarter compared QX EBITDA adjusted million million year. this first

We to $XX.X $XX.X balance sheet. total in debt million with on liquidity, million. availability in $XXX.X Turning quarter ended our facilities million of credit and the revolving total including cash,

$XX.X leverage the year. XX.X% to down a decline quarter actions costs pullback year-over-year experiencing customer planned reflects the to given in fiscal macro the XXXX inventory result compared are expenditures reduce current given in XXXX, of expect a first pullback our lower we quarter as million continue of which spending quarter QX prudent The inventory purchases $X.X and to last ratio were freight with was of in capital fiscal inventory of see fiscal spending the is environment. Capital We versus and first challenging Our well ended as consolidated and X.Xx. the the XXXX. to million

year. a invest was our flow this in primarily first technology. versus use continuing $XX.X million Free are QX use $XX.X year and million of a of cash in the last quarter to stores We in of

outlook. Now for our

third are $XXX point the primarily traffic comparable we of consolidated to expected the in of comparable of revenue C-Studio party million to expected than decline terms quarter is million, third sales The decline sales for quarter second second sales reflective XXXX, a in the the declines also expected average strategic continued consolidated approximately For $XXX XX% basis mid fiscal net of to party of start our ticket. The and driven sales sales a slower discontinuation impact in expect inclusive store headwinds. low to be customer XXX Elfa and by range. store

New headwinds. store are sales partially to offset impact the expected of these

be the in tailwinds product deleverage quarter. to higher favorable rates. to on lower sales. From expected quarter margin are to million, fixed expense approximately year-over-year We $X.X a loss $X.XX mix expect and be perspective, adjusted interest net per moderate of quarter be gross share more in freight driven range for in by expected to gross the margin second The driven implied by be quarter due expected to cost entirely operating decline than second for to second SG&A is to is $X.XX. the margin the Interest the second

range in to million tax quarter. items driven tax of income primarily by second expect $X in expense $XXX,XXX, discrete the the We

store in is to a our to comparable range second discrete As $XXX of XXXX, we to for XX%. With these performance XX% consolidated quarter, million, driven range fiscal the high of of effective result primarily net range. rate the items, in given expectation sales now to expected sales our tax and the percent quarter in $XXX by teen million the positive first negative expect respect declines be

tailwinds and inclusive of in campaign offset be party of of prior mix new the margin gross the driven to promotional by partially benefit year. This of comparisons moderate perspective, offset the outlook to expect to our C-Studio cadence year, sales cadence XX margin introductions, to basis sales stores, new planned from easing our declines by continued a product third strategic a in assumes a comp the the expected increased and favorable in related fiscal Elfa of point significant discontinuation less the freight gross and partial due comparable sales also second impact half activity. are third continue the fiscal to headwinds. From XXXX, We party store planned product

million profit Our of assumes $XXX outlook million. a $XXX to therefore gross range

payroll-related quarter expense total took reduce first in our to sales As at to expected the a the marketing approximately the quarter proactive approximately last the SG&A costs, along is fourth and result are as to being dollar million workforce expense for XX% savings a other full effort SG&A quarter of with goal year. These with fiscal our actions to compared we reduce keep slightly actions per higher. a overall by $XX percent of reduction year,

reductions full are year. compared fiscal almost SG&A to million $XX the year, last when expected to total For be

assumes outlook by or rates. XX Interest operating for million be $XX to higher expected million is profit. driven approximately margins in approximately million Our interest X.X% X.X%, XXXX to operating $XX of fiscal to expense

Our be to expense third XXX%, million certain stock fiscal tax income expiration tax of of approximate granted XXX% of in in public XXXX. be connection the expense effective discrete is tax in quarter This rate the in to recorded expected given is expected to options XXXX. offering $X.X of to an with the range initial our related discrete

related to fiscal be aim in to in open Almost outlook, million. planned new aforementioned to cash of share XX free We previously of positive XXXX. expect per fiscal $X.XX approximately fiscal range mentioned in XXXX to million After still to expense, million XX expect are fiscal estimated $X.X expense be planned adjusted the well of to $X.X be to net be or $X.XX. income to as flow half diluted XXXX. share net $X.XX. Capital in adjusting of loss still $X.XX capital tax this are severance income range the the for to we expenditures XXXX million we as be expected with expenditures per our stores in And in discrete the

half XXXX. is are to our now remaining stores to maintenance. This begin concludes lesser extent, to six e-commerce, turn fiscal over session. to infrastructure the capital fiscal the We a and new I'll planning open The technology in primarily remarks. related in operator stores three of second Q&A software to in prepared and projects and XXXX investment it the

Operator

you. Thank

question-and-answer will Instructions]. We [Operator a conducting be session. now

from first Steven Securities. Please Guggenheim question proceed. is Our with Forbes

Steven Forbes

with activity the I wanted promotional to mentioned learnings quarter. during around the that start you

understanding whether response? during the of you if a back half. curious in year, seem what the terms you're sort unsatisfied and expand get Just experience severe to trying on with pressure of Just depth customer or breadth better like and business the on the what in it can did planning were maybe as doesn't you quarter half to gross for satisfied profile back the of you're of because margin a planning the you

Satish Malhotra

were Yes. Hi, question. Thanks line our our expectations, prepared Satish. Steve. definitely why there This in in as the sales Look, QX some I said for key we in remarks is delivered takeaways. with

quarter, drive that that's around the For right pointing promotion found promotions. One profitable is We worth the out. results. can

we levers our engage while we results. both percentage and off it duration economic interest rates, driving promotional profitable As essentially the higher different to to take customers, current in learn given what stated, would still with experimented of environment

urgency a much BOGOs more better straight off. success campaigns, and had that than a sense of shorter we campaigns profitable than So with drove better much did percentage sales longer and

to our and worth mind also learned go-forward promotions to to that top given that it what we actually promotional of current that resistance great they're customers, pricing engage a everything in with. offset of dealing help any to customers. inform deal storage take noting plans for So will It's especially terms serve organization bring and will our the

out really of worthy to is newness us. is that working I for think outside also point promotions

and cleaners, collectively results reimagined and dropship positive mentioned actually our prior fragrances I also home are to from customers. assortment travel new and and quarter seeing of plant-based quarter, grew introduction which XX% As bringing sales this in the from the doing new all over college refreshed before, we're very back and well, our program assortment

win to they big was QX promotions? mix is look as newness? an well So to customers cadence learning our with really we with are in really that another the found right for pointing of engaging what's I What as us learning for important is worthy think relates it extent, our really But with environment. in out again, we that and [indiscernible] facing And the with to and the that additional challenges that's the a than current and closet definitely of declines some category. Home organization declines think, we're more storage the storage macro a traditional seeing the all function Edit, I expected of we're categories. lesser as

coming And in last of kind what inserts. ability, with in pleased line lining excited with operation to learned of custom premium of so to exceptional is performance really why particular, compatible we're really about year, QX of tee door the new with this Avera and doing conclude, mesh with our and homes of European off, kind see smart even our Preston it quite to out our during both the QX, look, And positive spaces, deliver of our which service. Preston, then, pleased just innovation we sales well our with to customer new environment,

So hard customers work convert them spaces. able deliver XX strong XX also come in, custom them, for really do to to store, scores NPS when for and with we're

kind our in best are So of to on think deliver when foot well of customers bodes come able forward. where in I that we all terms of

Steven Forbes

or follow second for guidance around you inflection frame trying with the better right because to of just a guiding promotional these full easier. second on the got you're seems get sort an But know up can, sort learnings I of compares I'm half if I And contextualize activity. and calling that, then just almost for it year, because guidance, like quarter in

have right? You the time You period. holiday newness, have

is the is more it's outlook, the And of related, but second also visible, becoming priority-driven? so that all macro inflection strategic whether is around right that the sort half message key

Satish Malhotra

probably peak season. definitely I'll we I travel Jeff saw categorize believe Yes, bit in say correct. more. July, some due add so softness little What is, as And a it let to you QX, of on we primarily would think I particularly

relative Having thought that, of said exciting was ton that. of kind to new that like is around customers our with goods we fruition, celebrate of products an launching will XXth to customers. we guidance Elfa. really we revise Plus, [indiscernible] special that's world have from it for a our we've to think got ethically well bode about Citizenry anniversary we talked the our the coming So to something really sourced planned with home prudent

So that's we back of happened a guide. some one and respect all categorize think then we we as easier the have reasons the in have about year, that well, QX were as with And relates our the to it bit what and it to do quite half, prudent you compares as newness excitement we last planned.

Operator

Our is proceed. from next Capital. Meyers question Ryan Lake Street with Please

Ryan Meyers

me of you and one performing? curious if some how for on kind of the stores First are comment highlight newer could just

Satish Malhotra

relative we to would the three new opened. attract us continue I is, we've new. of stores, new say We are stores shopping Look, see what new our to that XX% customers, over customers

all them relates at custom almost our And penetration rather, are a of higher spaces of XX. our to also it as score see XX, around mid-XXs XX%. actually across degree NPS We the in

So new opening. that to we consumer response the we're seeing are doors great

they seeing contending Now are across three to current having are dealing that. with and what that, But pleased said we climate. generally are immune They're macro the or not with still stores. those we

up stores some of new Half actually for suit planned we've know, locations. you coming fiscal locations. really built got and great As still them to 'XX six are

front. we the tremendous expansion store CapEx a still climate. believe to the very on much we economic current us have still are of and helps growth it amount means whitespace, And really committed given that new So

may the based on cash we accordingly many we've our we goal as before, doors that. and times we we However, will positive keep flow, to be of that ensuring generating smart open stated plans that free around and moderate particularly

Operator

next is proceed. question Sachs. Goldman Please Our Kate with McShane from

Katharine McShane

both travel if of view seems spaces on Satish, how consumer wondered, and versus what We non-premium, premium custom you're they you in on is by dollars prioritization the and the services. than better had macro as holding like a also focus maybe up the of It is seeing a store. in much potentially

well. wondered talk that more we a little you if So as could bit to

Satish Malhotra

some we're Definitely, win relates seeing resistance stated I premium it our to spaces. on as ability to as

committed contend We with those and able Non-premium are do well there. purchases, to seeing in They with a are Elfa. are them. to particular the and spaces excite we softness customer

would seen say elements last starting it few we've early I still Although tell. of to too to the but days, actually improve,

our travel all interest newness I the a look with what We a things -- now excited distracted, they of with right are going and on that's those geared start getting either level consumers, very rates, do to half. much that's think back. largely up are And uncertainty at we are or about, we obviously And and back for expect introducing return the as right now. normalize. given we with the that are continuing for

Katharine McShane

the if what the the just And follow-up range. then should by our the down basis out parse in inventory it year? where was down question know wondered was where or by you're a could store on be We XX% you inventory. on guiding quarter and I in unit Jeff of noted what was basis it end

Jeffrey Miller

by call it's I is And for in relatively been little question unit the XX%. Kate, this is as a From perspective, Inventory driven basis really on over Jeff. that's freight. the inventory. stated Thanks flat. down a

the as the we freight a So on current to freight year, projections year-over-year now, to of result cost are But we continue just that to our move seeing. through average we're down down. as basis be to expect savings costs a inventory right continue

Katharine McShane

you all think mentioned too quarter in the about help loyalty I line comments. with sneak if for QX? more Satish. of prepared data that just could question at program some in to the with or your expectations much we don't And in, this else just I one maybe If wondered anything your you with sales linked into

Satish Malhotra

level We our our baskets, be we than entry Xx baskets historically. higher well experts about talked And they're Yes, not do it that our have we our tell will to program mention continues But see incredibly we than in you our spending XX%. see enthusiasts. still prepared still almost remarks. loyalty relative to more loyalty I our non-loyalty do still anything how up

data loyalty So calls, a again, our get we're as able great of we've out stated level of to it's program. prior on that

to one able then mine category for to into to them that understand data which spaces. be from really custom then be category, bring along and to are the We customers storage, example, could get in and another the best third which could category into journey how kitchen

So of is our all performing. is The at still Store and great of that commencing Container proud program here very loyalty work how

Operator

further your As no questions, concludes you for teleconference. there Thank are this today's participation.

your You now lines. disconnect may

Container Store (TCSGQ) 1 Aug 232024 Q1 Earnings call transcript