Third quarter consolidated net sales of
$214.9 million, down 14.8% compared to the third quarter of fiscal
2022
Comparable store sales^ down 16.8% compared
to the third quarter of fiscal 2022
Third quarter net loss per share of $0.13,
compared to earnings per diluted share of $0.08 in the third
quarter of fiscal 2022; Adjusted net loss per share* of $0.08
compared to adjusted net income per diluted share of $0.08
in the third quarter of fiscal 2022
Updates Fiscal 2023 Earnings Outlook
The Container Store Group, Inc. (NYSE: TCS) (the “Company”),
today announced its financial results for the third quarter of
fiscal 2023 ended December 30, 2023.
For the third quarter of fiscal 2023:
- Consolidated net sales were $214.9 million, down 14.8%,
compared to the third quarter of fiscal 2022. Net sales in The
Container Store retail business (“TCS”) were $202.5 million, down
15.4% compared to the third quarter of fiscal 2022. Elfa
International AB (“Elfa”) third-party net sales were $12.4 million,
down 4.2% compared to the third quarter of fiscal 2022. Excluding
the impact of foreign currency translation, Elfa third-party net
sales were down 4.9%.
- Comparable store sales^ decreased 16.8%, with general
merchandise categories down 20.4%, contributing a decrease of 1,380
basis points to comparable store sales^. Custom Spaces+ were down
9.2%, negatively impacting comparable store sales^ by 300 basis
points.
- Consolidated net loss and net loss per share were $6.4 million
and $0.13 per share, compared to net income of $4.2 million and
$0.08 per diluted share, respectively, in the third quarter of
fiscal 2022. Adjusted net loss per share* was $0.08 compared to
adjusted net income per diluted share of $0.08 in the third quarter
of fiscal 2022.
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, down 14.8%,
compared to the third quarter of fiscal 2022.
- Net sales in TCS were $202.5 million, down 15.4%.
- Comparable store sales^ decreased 16.8%, with general
merchandise categories down 20.4%, contributing a decrease of 1,380
basis points to comparable store sales^. Custom Spaces+ were down
9.2%, 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, down 4.2%
compared to the third quarter of fiscal 2022. Excluding the impact
of foreign currency translation, Elfa third-party net sales were
down 4.9% primarily due to a decline in sales in Nordic
markets.
- 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 to 57.6% 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 in the third
quarter of fiscal 2023 from $121.5 million in the third quarter of
fiscal 2022. SG&A as a percentage of net sales increased 380
basis points to 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 in the third quarter of fiscal 2023 from $10.0
million in the third quarter of fiscal 2022. The increase was
primarily due to capital investments in stores and technology in
fiscal 2022.
- Consolidated net interest expense increased 17.4% to $5.2
million in the third quarter of fiscal 2023 from $4.4 million in
the third quarter of fiscal 2022. The increase was primarily due to
a higher interest rate on the Senior Secured Term Loan Facility and
higher average borrowings on the Revolving Credit Facility during
the third quarter of fiscal 2023 compared to the third quarter of
fiscal 2022.
- 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, or $0.13 per share, in the third
quarter of fiscal 2023 compared to net income of $4.2 million, or
$0.08 per diluted share, in the third quarter of fiscal 2022.
Adjusted net loss* was $4.1 million, or $0.08 per share, in the
third quarter of fiscal 2023 compared to adjusted net income* of
$4.1 million, or $0.08 per diluted share, in the third quarter of
fiscal 2022.
- Adjusted EBITDA* was $12.8 million in the third quarter of
fiscal 2023 compared to $22.2 million in the third quarter of
fiscal 2022.
For the fiscal year-to-date (thirty-nine weeks) ended
December 30, 2023:
- Consolidated net sales were $641.7 million, down 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, down
18.7%
- Comparable store sales^ decreased 18.9%, with general
merchandise categories down 20.5%, contributing a decrease of 1,350
basis points to comparable store sales^. Custom Spaces+ were down
15.9%, 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, down 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 down 12.1% compared to the thirty-nine
weeks ended December 31, 2022 primarily due to a decline in sales
in Nordic markets.
- 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 to 56.4%, 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 from
$362.1 million in the thirty-nine weeks ended December 31, 2022.
SG&A as a percentage of net sales increased 580 basis points to
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 in the thirty-nine weeks ended December 30, 2023 from
$28.5 million in the thirty-nine weeks ended December 31, 2022. The
increase was primarily due to capital investments in stores and
technology in fiscal 2022.
- A non-cash goodwill impairment charge of $23.4 million was
recorded in the thirty-nine weeks ended December 30, 2023 as
compared to zero in the thirty-nine weeks ended December 31, 2022.
We conducted an interim assessment of our remaining goodwill
balance on September 30, 2023 in accordance with ASC 350 due to
indicators identified during the second quarter of fiscal 2023. The
interim assessment resulted in the Company recording a $23.4
million charge which represented an impairment of the remaining
goodwill balance in the TCS reporting unit as of September 30,
2023.
- Consolidated net interest expense increased 34.8% to $15.4
million in the thirty-nine weeks ended December 30, 2023 from $11.4
million in the thirty-nine weeks ended December 31, 2022. The
increase is primarily due to a higher interest rate on the Senior
Secured Term Loan Facility.
- The effective tax rate was 3.1% for the thirty-nine weeks ended
December 30, 2023 as compared to 28.1% 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, or $0.85 per share, in the
thirty-nine weeks ended December 30, 2023 compared to net income of
$30.4 million, or $0.61 per diluted share in the thirty-nine weeks
ended December 31, 2022. Adjusted net loss* was $13.8 million, or
$0.28 per share in the thirty-nine weeks ended December 30, 2023
compared to adjusted net income* of $28.4 million, or $0.57 per
diluted share in the thirty-nine weeks ended December 31,
2022.
- Adjusted EBITDA* was $32.7 million in the thirty-nine weeks
ended December 30, 2023 compared to $86.3 million in the
thirty-nine weeks ended December 31, 2022.
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:
(In thousands)
December 30, 2023
December 31, 2022
Cash
$
16,007
$
5,760
Total debt, net of deferred financing
costs
$
184,656
$
188,608
Liquidity 1
$
99,632
$
96,059
Net cash provided by operating
activities
$
26,673
$
18,856
Free cash flow *
$
(6,703
)
$
(27,702
)
_________________________ (1)
Cash plus availability on revolving credit
facilities.
Share repurchase
There were no repurchases during the third quarter of fiscal
2023. The Company has $25 million remaining of the original $30
million authorization for share repurchases.
Outlook
The Company today provided the following financial outlook for
the fiscal fourth quarter ending on March 30, 2024:
Current
Outlook
Current
Outlook
Prior
Outlook
Fourth
Quarter Ending March 30, 2024
Fiscal
Year Ending March 30, 2024
Fiscal
Year Ending March 30, 2024
Consolidated net sales
$200 - $205 million
$842 - $847 million
$870 - $885 million
Comparable store sales^ decline
Mid twenties
Low twenties
High teens
Net loss per diluted share
($0.12) - ($0.09)
($0.97) - ($0.94)
($0.82) - ($0.70)
Adjusted net loss per diluted share*
($0.12) - ($0.09)
($0.40) - ($0.37)
($0.24) - ($0.13)
Assumed dilutive shares
49.5 million
49.5 million
49 million
Capital expenditures
$40 to $45 million
$45 to $50 million
Effective tax rate (1)
21%
6% to 5%
0% to (4%)
(1) Effective tax rate for fiscal year
ending March 30, 2024 includes $2.6 million of discrete income tax
expense recorded in the third quarter of fiscal 2023 related to the
expiration of certain stock options granted in connection with our
initial public offering in 2013.
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 San Francisco store to a nearby location in
June 2024. The two new store openings planned before the end of
fiscal 2023 are as follows:
Estimated Opening
Gaithersburg, MD
Spring calendar 2024
Huntington, NY
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 U.S. Foreign Corrupt Practices Act and
similar worldwide anti-bribery and anti-kickback laws; impairment
charges and effects of changes in estimates or projections used to
assess the fair value of our assets; effects of tax reform and
other tax fluctuations; significant fluctuations in the price of
our common stock; substantial future sales of our common stock, or
the perception that such sales may occur, which could depress the
price of our common stock; risks related to being a public company;
our performance meeting guidance provided to the public;
anti-takeover provisions in our governing documents, which could
delay or prevent a change in control; acquisition-related risks and
our failure to establish and maintain effective internal
controls.
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
Thirteen Weeks Ended
Thirty-Nine Weeks
Ended
December 30,
December 31,
December 30,
December 31,
(In thousands, except share and per
share amounts) (unaudited)
2023
2022
2023
2022
Net sales
$
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
(1,344
)
11,857
Net (loss) income
$
(6,431
)
$
4,168
$
(41,921
)
$
30,394
Net (loss) income per common share —
basic
$
(0.13
)
$
0.08
$
(0.85
)
$
0.61
Net (loss) income per common share —
diluted
$
(0.13
)
$
0.08
$
(0.85
)
$
0.61
Weighted-average common shares — basic
49,591,111
49,263,122
49,435,182
49,661,209
Weighted-average common shares —
diluted
49,591,111
49,452,980
49,435,182
50,024,589
The Container Store Group, Inc.
Consolidated balance sheets
December 30,
April 1,
December 31,
(In thousands)
2023
2023
2022
Assets
(unaudited)
(unaudited)
Current assets:
Cash
$
16,007
$
6,958
$
5,760
Accounts receivable, net
27,489
25,870
30,790
Inventory
163,090
170,637
190,307
Prepaid expenses
15,515
14,989
15,596
Income taxes receivable
1,235
858
1,357
Other current assets
10,343
10,914
9,941
Total current assets
233,679
230,226
253,751
Noncurrent assets:
Property and equipment, net
159,879
158,702
152,282
Noncurrent operating lease right-of-use
assets
340,883
347,959
357,607
Goodwill
—
23,447
221,159
Trade names
222,285
221,278
221,046
Deferred financing costs, net
110
150
163
Noncurrent deferred tax assets, net
352
568
690
Other assets
3,589
2,844
2,323
Total noncurrent assets
727,098
754,948
955,270
Total assets
$
960,777
$
985,174
$
1,209,021
The Container Store Group, Inc.
Consolidated balance sheets
(continued)
December 30,
April 1,
December 31,
(In thousands, except share and per
share amounts)
2023
2023
2022
Liabilities and shareholders’
equity
(unaudited)
(unaudited)
Current liabilities:
Accounts payable
$
49,325
$
52,637
$
57,704
Accrued liabilities
72,587
74,673
75,338
Current borrowings on revolving lines of
credit
3,300
2,423
8,131
Current portion of long-term debt
2,068
2,063
2,061
Current operating lease liabilities
62,525
57,201
58,309
Income taxes payable
2,994
1,318
276
Total current liabilities
192,799
190,315
201,819
Noncurrent liabilities:
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
Shareholders’ equity:
Common stock, $0.01 par value, 250,000,000
shares authorized; 49,591,111 shares issued at December 30, 2023;
49,181,562 shares issued at April 1, 2023; 49,164,862 shares issued
at December 31, 2022
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 U.S. dollars using the prior year’s conversion
rate, which is a financial measure not calculated in accordance
with GAAP. The Company believes the disclosure of the change in
Elfa third-party net sales without the effects of currency exchange
rate fluctuations helps investors understand the Company’s
underlying performance.
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 Poland in the third quarter of
fiscal 2023, which we do not consider in our evaluation of ongoing
performance.
(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 $2.6 million of discrete income tax
expense recorded in the third quarter of fiscal 2023 related to the
expiration of certain stock options granted in connection with our
initial public offering in 2013, all of which we do not consider in
our evaluation of ongoing performance.
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 Poland in the third quarter of
fiscal 2023, which we do not consider in our evaluation of ongoing
performance.
(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
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