Full-year consolidated net sales of $847.8
million, down 19.0% compared to fiscal 2022; Comparable store
sales^ down 19.7% compared to fiscal 2022
Full-year net loss per diluted share of
$2.09, compared to full-year net loss per diluted share of $3.21 in
fiscal 2022; Adjusted net loss per diluted share* of $0.32 compared
to adjusted net income per diluted share* of $0.75 in fiscal
2022
Fourth quarter consolidated net sales
down 20.7% compared to the fourth quarter of fiscal 2022;
Comparable store sales^ down 21.8% compared to the fourth
quarter of fiscal 2022
Fourth quarter net loss per diluted share of
$1.24, compared to net loss per diluted share of $3.85 in the
fourth quarter of fiscal 2022; Adjusted net loss per diluted share*
of $0.04 compared to adjusted net income per diluted share* of
$0.18 in fiscal 2022
Announces Review of Strategic
Alternatives
The Container Store Group, Inc. (NYSE: TCS) (the “Company”),
today announced its financial results for the fourth quarter and
fiscal year 2023 ended March 30, 2024.
For the fourth quarter of fiscal 2023:
- Consolidated net sales were $206.0 million, down 20.7%,
compared to the fourth quarter of fiscal 2022. Net sales in The
Container Store retail business (“TCS”) were $195.3 million, down
20.4%. Elfa International AB (“Elfa”) third-party net sales were
$10.7 million, down 24.6% compared to the fourth quarter of fiscal
2022. Excluding the impact of foreign currency translation, Elfa
third-party net sales were down 25.3%.
- Comparable store sales^ decreased 21.8%, with general
merchandise categories down 26.7%, contributing a decrease of 1,620
basis points to comparable store sales^. Custom Spaces+ were down
14.2%, negatively impacting comparable store sales^ by 560 basis
points.
- Consolidated net loss and net loss per share were $61.4 million
and $1.24 per diluted share, compared to net loss of $189.3 million
and $3.85 per diluted share, respectively, in the fourth quarter of
fiscal 2022. Adjusted net loss per diluted share* was $0.04
compared to adjusted net income per diluted share* of $0.18 in
fiscal 2022.
Satish Malhotra, Chief Executive Officer and President of The
Container Store, commented, “We ended fiscal 2023 with continued
pressure on our general merchandise assortment while experiencing
relative strength in our premium Custom Space offering. I am
grateful to our team members across the organization for their role
in exercising strong cost discipline resulting in positive free
cash flow for the fiscal year, and in delivering superior customer
service reflected by our retail net promoter score of 80 for the
fourth quarter.”
Mr. Malhotra continued, “Looking ahead, while we anticipate
continued challenges within our general merchandise offerings, we
continue to lean into Custom Spaces through enhancing our
assortment, strengthening our in-home design service and building
awareness through impactful marketing campaigns that highlight our
complete offerings . We plan to push forward on all of our market
share driving initiatives to ensure we are poised to capitalize on
the significant opportunities for the business and the brand when
the backdrop normalizes."
Fourth Quarter Fiscal 2023
Results
For the fourth quarter (thirteen weeks) ended March 30,
2024:
- Consolidated net sales were $206.0 million, down 20.7%,
compared to the fourth quarter of fiscal 2022.
- Net sales in TCS were $195.3 million, down 20.4%.
- Comparable store sales^ decreased 21.8%, with general
merchandise categories down 26.7%, contributing a decrease of 1,620
basis points to comparable store sales^. Custom Spaces+ were down
14.2%, negatively impacting comparable store sales^ by 560 basis
points.
- Online sales decreased 30.8% compared to the fourth quarter of
fiscal 2022.
- Elfa third-party net sales were $10.7 million, down 24.6%
compared to the fourth quarter of fiscal 2022. Excluding the impact
of foreign currency translation, Elfa third-party net sales were
down 25.3% primarily due to a decline in sales in Nordic
markets.
- Consolidated gross margin was 59.4%, an increase of 50 basis
points, compared to the fourth quarter of fiscal 2022. TCS gross
margin increased 60 basis points to 58.1% primarily due to lower
freight costs, partially offset by increased promotional activity
and unfavorable product and services mix. Elfa gross margin
decreased 980 basis points compared to the fourth quarter of fiscal
2022 primarily due to unfavorable mix, partially offset by price
increases to customers.
- Consolidated selling, general and administrative expenses
(“SG&A”) decreased by 13.9% to $107.0 million in the fourth
quarter of fiscal 2023 from $124.3 million in the fourth quarter of
fiscal 2022 which reflects the impact of cost management actions
taken in the first quarter, and again in the fourth quarter.
SG&A as a percentage of net sales increased 400 basis points to
51.9%, with the increase primarily due to deleverage of fixed costs
associated with lower sales in the fourth quarter of fiscal
2023.
- Consolidated depreciation and amortization increased 14.5% to
$11.9 million in the fourth quarter of fiscal 2023 from $10.4
million in the fourth quarter of fiscal 2022. The increase was
primarily due to capital investments in stores and technology in
fiscal 2022.
- A non-cash trade names impairment charge of $73.8 million was
recorded in the fourth quarter of fiscal 2023 compared to a
non-cash goodwill impairment charge of $197.7 million in the fourth
quarter of fiscal 2022. In the fourth quarter of fiscal 2023, we
conducted an annual impairment test of our trade names balance on
January 1, 2024 in accordance with ASC 350, and an interim
assessment as of March 30, 2024 due to indicators identified during
the fourth quarter of fiscal 2023, which resulted in a $63.8
million impairment of the TCS trade name and a $10.1 million
impairment of the Elfa trade name. In the fourth quarter of fiscal
2022, we conducted an annual impairment test of our goodwill
balances on January 1, 2023 in accordance with ASC 350, and an
interim assessment as of April 1, 2023 due to indicators identified
during the fourth quarter of fiscal 2022, which resulted in the
$197.7 million goodwill impairment.
- Consolidated other expenses was $4.8 million in the fourth
quarter of fiscal 2023, due to a legal settlement and associated
legal fees incurred, as well as severance charges associated with
the elimination of certain positions in the fourth quarter of
fiscal 2023.
- Consolidated net interest expense increased 11.3% to $5.3
million in the fourth quarter of fiscal 2023 from $4.8 million in
the fourth quarter of fiscal 2022. The increase was primarily due
to a higher interest rate on the Senior Secured Term Loan Facility,
as well as higher borrowings under the Revolving Credit Facility,
during the fourth quarter of fiscal 2023 compared to the fourth
quarter of fiscal 2022.
- The effective tax rate was 25.3% in the fourth quarter of
fiscal 2023, as compared to negative 1.7% in the fourth quarter of
fiscal 2022. The increase in the effective tax rate was primarily
related to the impact of the non-cash goodwill impairment charge
recorded during the fourth quarter of fiscal 2022.
- Net loss was $61.4 million, or $1.24 per diluted share, in the
fourth quarter of fiscal 2023 compared to net loss of $189.3
million, or $3.85 per diluted share, in the fourth quarter of
fiscal 2022. Adjusted net loss* was $2.0 million, or $0.04 per
diluted share, in the fourth quarter of fiscal 2023 compared to
adjusted net income* of $8.8 million, or $0.18 per diluted share,
in the fourth quarter of fiscal 2022.
- Adjusted EBITDA* was $15.4 million in the fourth quarter of
fiscal 2023 compared to $29.2 million in the fourth quarter of
fiscal 2022.
For the fiscal year-to-date (fifty-two weeks) ended March 30,
2024:
- Consolidated net sales were $847.8 million, down 19.0%,
compared to fiscal 2022.
- Net sales for the TCS segment were $801.4 million, down
19.2%.
- Comparable store sales^ decreased 19.7%, with general
merchandise categories down 21.9%, contributing a decrease of 1,420
basis points to comparable store sales^. Custom Spaces+ were down
15.4%, negatively impacting comparable store sales^ by 550 basis
points.
- Online sales decreased 23.7% compared to fiscal 2022.
- Elfa third-party net sales were $46.3 million, down 17.1%
compared to fiscal 2022. Excluding the impact of foreign currency
translation, Elfa third-party net sales were down 15.4% compared to
fiscal 2022 primarily due to a decline in sales in Nordic
markets.
- Consolidated gross margin was 57.7%, an increase of 30 basis
points compared to fiscal 2022, primarily due to a higher mix of
Custom Spaces+ sales year over year. TCS gross margin decreased 30
basis points to 56.8%, primarily due to increased promotional
activity and unfavorable product and services mix, partially offset
by lower freight costs in fiscal 2023. Elfa gross margin decreased
270 basis points primarily due to unfavorable mix, partially offset
by price increases to customers.
- Consolidated SG&A decreased by 9.7% to $439.5 million from
$486.4 million in fiscal 2022 which reflects the impact of cost
management actions taken in the first quarter, and again in the
fourth quarter. SG&A as a percentage of net sales increased 540
basis points to 51.8%, with the increase primarily due to
deleverage of fixed costs associated with lower sales in fiscal
2023, and due to the benefit of the legal settlement received in
the second quarter of the prior fiscal year.
- Consolidated depreciation and amortization increased 14.0% to
$44.3 million in fiscal 2023 from $38.9 million in fiscal 2022. The
increase was primarily due to capital investments in stores and
technology in fiscal 2022.
- Non-cash impairment charges of $97.3 million were recorded in
fiscal 2023 compared to $197.7 million in fiscal 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. In the fourth
quarter of fiscal 2023, we conducted an annual impairment test of
our trade names balance on January 1, 2024 in accordance with ASC
350, and an interim assessment as of March 30, 2024 due to
indicators identified during the fourth quarter of fiscal 2023,
which resulted in a $63.8 million impairment of the TCS trade name
and a $10.1 million impairment of the Elfa trade name.
- Consolidated other expenses was $7.4 million in fiscal 2023,
due to severance charges associated with the elimination of certain
positions in fiscal 2023, as well as a legal settlement and
associated legal fees incurred in fiscal 2023.
- Consolidated net interest expense increased 27.8% to $20.7
million in fiscal 2023 from $16.2 million in fiscal 2022. The
increase is primarily due to a higher interest rate on the Senior
Secured Term Loan Facility.
- The effective tax rate was 17.6% for fiscal 2023 as compared to
negative 10.5% in fiscal 2022. The increase in the effective tax
rate is primarily due to the impact of the non-cash goodwill
impairment charges recorded in fiscal 2023 and fiscal 2022,
combined with the tax impact of discrete items related to
share-based compensation on a pre-tax loss in fiscal 2023.
- Net loss was $103.3 million, or $2.09 per share, in fiscal 2023
compared to net loss of $158.9 million, or $3.21 per diluted share
in fiscal 2022. Adjusted net loss* was $15.9 million, or $0.32 per
share in fiscal 2023 compared to adjusted net income* of $37.2
million, or $0.75 per diluted share in fiscal 2022.
- Adjusted EBITDA* was $48.1 million in fiscal 2023 compared to
$115.4 million in fiscal 2022.
New and Existing Stores
As of March 30, 2024, the Company store base was 102 as compared
to 97 as of April 1, 2023. The Company opened two stores during the
fourth quarter of fiscal 2023. We believe we still have attractive
growth opportunities in key markets and plan to open four new
stores in fiscal 2024, as well as relocate one store and close one
store. All new and relocated stores in fiscal 2024 are
build-to-suit.
Balance sheet and liquidity highlights:
(In thousands)
March 30, 2024
April 1, 2023
(unaudited)
Cash
$
21,000
$
6,958
Total debt, net of deferred financing
costs
$
176,777
$
167,871
Liquidity 1
$
112,276
$
106,997
Net cash provided by operating
activities
$
46,789
$
59,305
Free cash flow *
$
6,895
$
(4,918
)
_____________________________________________ (1) Cash plus
availability on revolving credit facilities.
Share repurchase
There were no repurchases during fiscal 2023. The Company has
$25 million remaining of the original $30 million authorization for
share repurchases.
Fiscal 2024 To Date Commentary
Jeff Miller, Chief Financial Officer, commented, "First quarter
fiscal 2024 to date, we have seen an improvement in year over year
sales trends when compared to the fourth quarter of fiscal 2023.
Our performance continued to be driven by relative strength in our
Custom Spaces business with year over year growth in our Elfa and
Preston product lines. However, our general merchandise category
remains challenged resulting in double-digit year-over-year total
sales declines, though not of the magnitude reported for the fourth
quarter of fiscal 2023."
Review of Strategic Alternatives
Today the Company is announcing that its Board of Directors has
initiated a formal review process to evaluate strategic
alternatives for the Company. The Company's Board of Directors
along with the management team do not believe the Company's current
market value is reflective of its intrinsic value and are committed
to acting in the best interests of the Company and its
stakeholders.
“The Container Store’s Board and management team are committed
to maximizing value for our stakeholders, and to that end, we have
commenced a comprehensive process to review potential strategic
alternatives for the business. We have established the Transaction
Committee to help oversee the process to ensure that we are
maximizing both the potential of the business and returns for
stakeholders.” said Lisa Klinger, Chairperson of The Container
Store.
As the Company evaluates strategic alternatives, it is
suspending financial guidance. The Container Store has not set a
deadline or definitive timetable for the completion of the
strategic alternatives review process, and there can be no
assurance that this process will result in any particular outcome.
The Container Store does not intend to comment further regarding
the review of strategic alternatives until it determines disclosure
is necessary or advisable.
The Container Store is being advised in this review by J.P.
Morgan Securities LLC, as its financial advisor, and Latham &
Watkins LLP, as its legal advisor.
References
* See Reconciliation of GAAP to Non-GAAP Financial Measures
table. + Custom Spaces includes metal-based and wood-based custom
space products and in-home installation services. ^ Comparable
store sales includes all net sales from our TCS segment, except for
sales from stores open less than sixteen months, stores that have
been closed permanently, stores that have been closed temporarily
for more than seven days and C Studio sales to third parties.
Conference Call Information
A conference call to discuss fourth quarter and full fiscal 2023
financial results is scheduled for today, May 14, 2024, at 8:00 AM
Eastern Time. Investors and analysts interested in participating in
the call are invited to dial 877-407-3982 (international callers
please dial 201-493-6780) approximately 10 minutes prior to the
start of the call. A live audio webcast of the conference call will
be available online at investor.containerstore.com.
A taped replay of the conference call will be available within
three hours of the conclusion of the call and can be accessed both
online and by dialing 844-512-2921 (international callers please
dial 412-317-6671). The pin number to access the telephone replay
is 13744076. The replay will be available until June 14, 2024.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. All statements contained in this press release that do not
relate to matters of historical fact should be considered
forward-looking statements, including statements regarding our
goals, strategies, priorities, challenges and initiatives including
future focus on Custom Space; growth opportunities; expected store
openings and closures, the Transaction committee review process,
expected expense management; future opportunities; the impact of
macroeconomic conditions and our anticipated financial performance
including profitability expectations.
These forward-looking statements are based on management’s
current expectations. These statements are neither promises nor
guarantees, but involve known and unknown risks, uncertainties and
other important factors that may cause our actual results,
performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by
the forward-looking statements, including, but not limited to, the
following: the timeline for the completion of the strategic
alternatives review process is unknown and there can be no
assurance that the process will result in any particular outcome; a
decline in the health of the economy and the purchase of
discretionary items; results of operations and financial condition;
our ability to continue to lease space on favorable terms; costs
and risks relating to new store openings; quarterly and seasonal
fluctuations in our operating results; cost increases that are
beyond our control; our inability to protect our brand; our failure
or inability to protect our intellectual property rights; our
inability to source and market new products to meet consumer
preferences; failure to successfully anticipate, or manage
inventory commensurate with, consumer preferences and demand;
competition from other stores and internet-based competition; our
inability to obtain merchandise from our vendors on a timely basis
and at competitive prices; vendors may sell similar or identical
products to our competitors; our and our vendors’ vulnerability to
natural disasters and other unexpected events; disruptions at our
manufacturing facilities; product recalls and/or product liability,
as well as changes in product safety and other consumer protection
laws; risks relating to operating multiple distribution centers;
our dependence on foreign imports for our merchandise; our reliance
upon independent third party transportation providers; our
inability to effectively manage our online sales; effects of a
security breach or cyber-attack of our website or information
technology systems, including relating to our use of third-party
web service providers; damage to, or interruptions in, our
information systems as a result of external factors, working from
home arrangements, staffing shortages and difficulties in updating
our existing software or developing or implementing new software;
failure to comply with laws and regulations relating to privacy,
data protection, and consumer protection; our indebtedness may
restrict our current and future operations, and we may not be able
to refinance our debt on favorable terms, or at all; fluctuations
in currency exchange rates; our inability to maintain sufficient
levels of cash flow to meet growth expectations; our fixed lease
obligations; disruptions in the global financial markets leading to
difficulty in borrowing sufficient amounts of capital to finance
the carrying costs of inventory to pay for capital expenditures and
operating costs; changes to global markets and inability to predict
future interest expenses; our reliance on key executive management;
our inability to find, train and retain key personnel; labor
relations difficulties; increases in health care costs and labor
costs; violations of the 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; any failure to meet the NYSE's continued
listing standards could result in the delisting 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
Fiscal Quarter Ended
Fiscal Year Ended
(In thousands, except share and per
share amounts) (unaudited)
March 30, 2024
April 1, 2023
March 30, 2024
April 1, 2023
(unaudited)
(unaudited)
Net sales
$
206,037
$
259,716
$
847,779
$
1,047,258
Cost of sales (excluding depreciation and
amortization)
83,706
106,712
359,014
446,295
Gross profit
122,331
153,004
488,765
600,963
Selling, general, and administrative
expenses (excluding depreciation and amortization)
107,014
124,327
439,485
486,431
Impairment charges
73,832
197,712
97,279
197,712
Stock-based compensation
265
820
1,870
3,382
Pre-opening costs
1,278
957
2,861
2,006
Depreciation and amortization
11,906
10,398
44,333
38,905
Other expenses
4,834
—
7,423
—
Loss on disposal of assets
27
31
248
122
(Loss) income from operations
(76,825
)
(181,241
)
(104,734
)
(127,595
)
Interest expense, net
5,316
4,776
20,672
16,171
(Loss) income before taxes
(82,141
)
(186,017
)
(125,406
)
(143,766
)
(Benefit) provision for income taxes
(20,775
)
3,233
(22,119
)
15,090
Net (loss) income
$
(61,366
)
$
(189,250
)
$
(103,287
)
$
(158,856
)
Net (loss) income per common share —
basic
$
(1.24
)
$
(3.85
)
$
(2.09
)
$
(3.21
)
Net (loss) income per common share —
diluted
$
(1.24
)
$
(3.85
)
$
(2.09
)
$
(3.21
)
Weighted-average common shares — basic
49,601,938
49,175,873
49,476,871
49,539,875
Weighted-average common shares —
diluted
49,601,938
49,175,873
49,476,871
49,539,875
The Container Store Group, Inc.
Consolidated balance sheets
(In thousands)
March 30, 2024
April 1, 2023
Assets
(unaudited)
Current assets:
Cash
$
21,000
$
6,958
Accounts receivable, net
22,010
25,870
Inventory
158,434
170,637
Prepaid expenses
12,940
14,989
Income taxes receivable
5,118
858
Other current assets
11,046
10,914
Total current assets
230,548
230,226
Noncurrent assets:
Property and equipment, net
155,402
158,702
Noncurrent operating lease right-of-use
assets
400,188
347,959
Goodwill
—
23,447
Trade names
146,449
221,278
Deferred financing costs, net
97
150
Noncurrent deferred tax assets, net
393
568
Other assets
3,288
2,844
Total noncurrent assets
705,817
754,948
Total assets
$
936,365
$
985,174
The Container Store Group, Inc.
Consolidated balance sheets (continued)
(In thousands, except share and per
share amounts)
March 30, 2024
April 1, 2023
Liabilities and shareholders’
equity
(unaudited)
Current liabilities:
Accounts payable
$
59,873
$
52,637
Accrued liabilities
70,076
74,673
Current borrowings on revolving lines of
credit
—
2,423
Current portion of long-term debt
2,166
2,063
Current operating lease liabilities
60,692
57,201
Income taxes payable
280
1,318
Total current liabilities
193,087
190,315
Noncurrent liabilities:
Long-term debt
174,611
163,385
Noncurrent operating lease liabilities
378,524
314,100
Noncurrent deferred tax liabilities,
net
24,185
49,338
Other long-term liabilities
6,267
5,851
Total noncurrent liabilities
583,587
532,674
Total liabilities
776,674
722,989
Commitments and contingencies (Note
12)
Shareholders’ equity:
Common stock, $0.01 par value, 250,000,000
shares authorized; 49,607,811 shares issued at March 30, 2024;
49,181,562 shares issued at April 1, 2023
496
492
Additional paid-in capital
873,927
872,204
Accumulated other comprehensive loss
(33,443
)
(32,509
)
Retained deficit
(681,289
)
(578,002
)
Total shareholders’ equity
159,691
262,185
Total liabilities and shareholders’
equity
$
936,365
$
985,174
The Container Store Group, Inc.
Consolidated statements of cash flows
Fiscal Year Ended
(In thousands)
March 30, 2024
April 1, 2023
Operating activities
(unaudited)
Net (loss) income
$
(103,287
)
$
(158,856
)
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Depreciation and amortization
44,333
38,905
Stock-based compensation
1,870
3,382
Impairment charges
97,279
197,712
Loss (gain) on disposal of assets
248
122
Deferred tax (benefit) expense
(24,751
)
(351
)
Non-cash interest
1,884
1,884
Other
(339
)
1,059
Changes in operating assets and
liabilities (exclusive of effects of acquisition):
Accounts receivable
3,565
1,836
Inventory
12,145
20,450
Prepaid expenses and other assets
564
(4,584
)
Accounts payable and accrued
liabilities
3,396
(37,684
)
Net change in lease assets and
liabilities
15,714
1,013
Income taxes
(5,177
)
(5,213
)
Other noncurrent liabilities
(655
)
(370
)
Net cash provided by operating
activities
46,789
59,305
Investing activities
Additions to property and equipment
(39,894
)
(64,223
)
Investments in non-qualified plan
trust
(252
)
(1,147
)
Proceeds from non-qualified plan trust
redemptions
719
916
Proceeds from sale of property and
equipment
206
43
Net cash used in investing activities
(39,221
)
(64,411
)
Financing activities
Borrowings on revolving lines of
credit
65,568
80,292
Payments on revolving lines of credit
(67,935
)
(79,497
)
Borrowings on long-term debt
31,000
40,000
Payments on long-term debt
(22,089
)
(37,092
)
Repurchases of common stock
—
(5,000
)
Payment of taxes with shares withheld upon
restricted stock vesting
(144
)
(712
)
Proceeds from the exercise of stock
options
—
340
Net cash provided by (used in) financing
activities
6,400
(1,669
)
Effect of exchange rate changes on
cash
74
(519
)
Net increase (decrease) in cash
14,042
(7,294
)
Cash at beginning of fiscal period
6,958
14,252
Cash at end of fiscal period
$
21,000
$
6,958
Note Regarding Non-GAAP Information
This press release includes financial measures that are not
calculated in accordance with GAAP, including adjusted net income
(loss), adjusted net income (loss) per common share - diluted,
Adjusted EBITDA, and free cash flow. The Company has reconciled
these non-GAAP financial measures with the most directly comparable
GAAP financial measures in a table accompanying this release. These
non-GAAP measures should not be considered as alternatives to net
income (loss) as a measure of financial performance or cash flows
from operations as a measure of liquidity, or any other performance
measure derived in accordance with GAAP and they should not be
construed as an inference that the Company’s future results will be
unaffected by unusual or non-recurring items. These non-GAAP
measures are key metrics used by management, the Company’s board of
directors, and Leonard Green and Partners, L.P., to assess its
financial performance.
The Company presents adjusted net income (loss), adjusted net
income (loss) per common share - diluted, and Adjusted EBITDA
because it believes they assist investors in comparing the
Company’s performance across reporting periods on a consistent
basis by excluding items that the Company does not believe are
indicative of its core operating performance and because the
Company believes it is useful for investors to see the measures
that management uses to evaluate the Company. These non-GAAP
measures are also frequently used by analysts, investors and other
interested parties to evaluate companies in the Company’s industry.
In evaluating these non-GAAP measures, you should be aware that in
the future the Company will incur expenses that are the same as or
similar to some of the adjustments in this presentation. The
Company’s presentation of these non-GAAP measures should not be
construed to imply that its future results will be unaffected by
any such adjustments. Management compensates for these limitations
by relying on our GAAP results in addition to using non-GAAP
measures supplementally. These non-GAAP measures are not
necessarily comparable to other similarly titled captions of other
companies due to different methods of calculation.
The Company defines adjusted net income (loss) as net income
(loss) before restructuring charges, severance charges,
acquisition-related costs, impairment charges related to intangible
assets, loss on extinguishment of debt, certain losses (gains) on
disposal of assets, legal settlements and the tax impact of these
adjustments and other unusual or infrequent tax items. We define
adjusted net income (loss) per common share - diluted as adjusted
net income (loss) divided by the diluted weighted average common
shares outstanding. We use adjusted net income (loss) and adjusted
net income (loss) per common share - diluted to supplement GAAP
measures of performance to evaluate the effectiveness of our
business strategies, to make budgeting decisions and to compare our
performance against that of other peer companies using similar
measures. We present adjusted net income (loss) and adjusted net
income (loss) per common share - diluted because we believe they
assist investors in comparing our performance across reporting
periods on a consistent basis by excluding items that we do not
believe are indicative of our core operating performance and
because we believe it is useful for investors to see the measures
that management uses to evaluate the Company.
The Company defines EBITDA as net income (loss) before interest,
taxes, depreciation, and amortization. Adjusted EBITDA is
calculated in accordance with the Company’s credit facilities and
is one of the components for performance evaluation under its
executive compensation programs. Adjusted EBITDA reflects further
adjustments to EBITDA to eliminate the impact of certain items,
including certain non-cash and other items that the Company does
not consider in its evaluation of ongoing operating performance
from period to period. The Company uses Adjusted EBITDA in
connection with covenant compliance and executive performance
evaluations, and to supplement GAAP measures of performance to
evaluate the effectiveness of its business strategies, to make
budgeting decisions and to compare its performance against that of
other peer companies using similar measures. The Company believes
it is useful for investors to see the measures that management uses
to evaluate the Company, its executives and its covenant
compliance. EBITDA and Adjusted EBITDA are also frequently used by
analysts, investors and other interested parties to evaluate
companies in the Company’s industry.
The Company presents free cash flow, which the Company defines
as net cash provided by operating activities in a period minus
payments for property and equipment made in that period, because it
believes it is a useful indicator of the Company’s overall
liquidity, as the amount of free cash flow generated in any period
is representative of cash that is available for debt repayment,
investment, and other discretionary and non-discretionary cash
uses. Accordingly, we believe that free cash flow provides useful
information to investors in understanding and evaluating our
liquidity in the same manner as management. Our definition of free
cash flow is limited in that it does not solely represent residual
cash flows available for discretionary expenditures due to the fact
that the measure does not deduct the payments required for debt
service and other contractual obligations. Therefore, we believe it
is important to view free cash flow as a measure that provides
supplemental information to our Consolidated Statements of Cash
Flows. Although other companies report their free cash flow,
numerous methods may exist for calculating a company’s free cash
flow. As a result, the method used by our management to calculate
our free cash flow may differ from the methods used by other
companies to calculate their free cash flow.
Additionally, this press release refers to the change in Elfa
third-party net sales after the conversion of Elfa’s net sales from
Swedish krona to 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.
Fiscal Quarter Ended
Fiscal Year Ended
March 30, 2024
April 1, 2023
March 30, 2024
April 1, 2023
Numerator:
Net (loss) income
$
(61,366
)
$
(189,250
)
$
(103,287
)
$
(158,856
)
Impairment charges (a)
73,832
197,712
97,279
197,712
Severance charges (b)
1,663
383
4,125
383
Elfa restructuring (c)
51
—
181
—
Acquisition-related costs (d)
—
—
—
63
Legal settlement (e)
3,117
—
3,117
(2,600
)
Taxes (f)
(19,334
)
(12
)
(17,283
)
533
Adjusted net (loss) income
$
(2,037
)
$
8,833
$
(15,868
)
$
37,235
Denominator:
Weighted-average common shares outstanding
— basic
49,601,938
49,175,873
49,476,871
49,539,875
Weighted-average common shares outstanding
— diluted
49,601,938
49,175,873
49,476,871
49,539,875
Net (loss) income per common share —
basic
$
(1.24
)
$
(3.85
)
$
(2.09
)
$
(3.21
)
Net (loss) income per common share —
diluted
$
(1.24
)
$
(3.85
)
$
(2.09
)
$
(3.21
)
Adjusted net (loss) income per common
share — basic
$
(0.04
)
$
0.18
$
(0.32
)
$
0.75
Adjusted net (loss) income per common
share — diluted
$
(0.04
)
$
0.18
$
(0.32
)
$
0.75
________________________________________
(a)
Non-cash trade name impairment charge
incurred in the fourth quarter of fiscal 2023, as well as non-cash
goodwill impairment charge incurred in the second quarter of fiscal
2023 and in the fourth quarter of fiscal 2022, which we do not
consider in our evaluation of ongoing performance.
(b)
Severance charges associated with the
elimination of certain positions recorded in other expenses in
fiscal 2023 and fiscal 2022, which we do not consider in our
evaluation of ongoing performance.
(c)
Charges associated with the close-down of
Elfa segment sales operations in Poland in fiscal 2023, which we do
not consider in our evaluation of ongoing performance.
(d)
Includes acquisition and legal costs
incurred in fiscal 2022 associated with the acquisition of C Studio
on December 30, 2021, all of which are recorded as selling, general
and administrative expenses, which we do not consider in our
evaluation of ongoing performance.
(e)
The Company incurred costs associated with
a legal settlement inclusive of legal fees in fiscal 2023 recorded
in other expenses and received a legal settlement, net of legal
fees, in fiscal 2022 recorded as selling, general and
administrative expenses, all of which we do not consider in our
evaluation of ongoing performance.
(f)
Tax impact of adjustments to net income
(loss) that are considered to be unusual or infrequent tax items.
For fiscal 2023, includes $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).
Fiscal Quarter Ended
Fiscal Year Ended
March 30, 2024
April 1, 2023
March 30, 2024
April 1, 2023
Net (loss) income
$
(61,366
)
$
(189,250
)
$
(103,287
)
$
(158,856
)
Depreciation and amortization
11,906
10,398
44,333
38,905
Interest expense, net
5,316
4,776
20,672
16,171
(Benefit) provision for income taxes
(20,775
)
3,233
(22,119
)
15,090
EBITDA
$
(64,919
)
$
(170,843
)
$
(60,401
)
$
(88,690
)
Pre-opening costs (a)
1,278
957
2,861
2,006
Non-cash lease expense (b)
82
144
(820
)
547
Impairment charges (c)
73,832
197,712
97,279
197,712
Stock-based compensation (d)
265
820
1,870
3,382
Foreign exchange (gains) losses (e)
(16
)
(9
)
(118
)
23
Severance charges (f)
1,663
383
4,125
383
Elfa restructuring (g)
51
—
181
—
Legal settlement (h)
3,117
—
3,117
—
Acquisition-related costs (i)
—
—
—
63
Adjusted EBITDA
$
15,353
$
29,164
$
48,094
$
115,426
____________________________________________
(a)
Non-capital expenditures associated with
opening new stores and relocating stores, including marketing
expenses, travel and relocation costs, and training costs. We
adjust for these costs to facilitate comparisons of our performance
from period to period.
(b)
Reflects the extent to which our annual
GAAP operating lease expense has been above or below our cash
operating lease payments. The amount varies depending on the
average age of our lease portfolio (weighted for size), as our GAAP
operating lease expense on younger leases typically exceeds our
cash operating lease payments, while our GAAP operating lease
expense on older leases is typically less than our cash operating
lease payments.
(c)
Non-cash trade name impairment charge
incurred in the fourth quarter of fiscal 2023, as well as non-cash
goodwill impairment charge incurred in the second quarter of fiscal
2023 and in the fourth quarter of fiscal 2022, which we do not
consider in our evaluation of ongoing performance.
(d)
Non-cash charges related to stock-based
compensation programs, which vary from period to period depending
on volume and vesting timing of awards. We adjust for these charges
to facilitate comparisons from period to period.
(e)
Realized foreign exchange transactional
gains/losses our management does not consider in our evaluation of
our ongoing operations.
(f)
Severance charges associated with the
elimination of certain positions recorded in other expenses in
fiscal 2023 and fiscal 2022, which we do not consider in our
evaluation of ongoing performance.
(g)
Charges associated with the close-down of
Elfa segment sales operations in Poland in fiscal 2023, which we do
not consider in our evaluation of ongoing performance.
(h)
The Company incurred costs associated with
a legal settlement inclusive of legal fees in fiscal 2023 recorded
in other expenses, which we do not consider in our evaluation of
ongoing performance.
(i)
Includes acquisition and legal costs
incurred in fiscal 2022 associated with the acquisition of C Studio
on December 30, 2021, all of which are recorded as selling, general
and administrative expenses, which we do not consider in our
evaluation of ongoing performance.
The table below reconciles the non-GAAP financial measure of
free cash flow with the most directly comparable GAAP financial
measure of net cash provided by operating activities.
Fiscal Year Ended
March 30, 2024
April 1, 2023
Net cash provided by operating
activities
$
46,789
$
59,305
Less: Additions to property and
equipment
(39,894
)
(64,223
)
Free cash flow
$
6,895
$
(4,918
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240514531918/en/
Investors: ICR, Inc. Farah Soi/Caitlin Churchill
203-682-8200 Farah.Soi@icrinc.com Caitlin.Churchill@icrinc.com or
Media: The Container Store Group, Inc. Carson Netherton,
972-538-6402 publicrelations@containerstore.com
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