Second quarter consolidated net sales of
$196.6 million, down 10.5% compared to the second quarter of fiscal
2023, including 20 basis points of positive foreign exchange
impact
Comparable store sales^ down 12.5% compared
to the second quarter of fiscal 2023
Second quarter loss per share of $4.85
compared to loss per share of $7.17 in the second quarter of fiscal
2023; Adjusted loss per share* of $3.23 compared to adjusted income
per share* of $0.11 in the second quarter of fiscal 2023
The Container Store Group, Inc. (NYSE: TCS) (the “Company”),
today announced its financial results for the second quarter of
fiscal 2024 ended September 28, 2024. All share and per share
information reported in this press release have been retroactively
adjusted to reflect the reverse stock split that became effective
on September 3, 2024.
For the second quarter of fiscal 2024:
- Consolidated net sales were $196.6 million, down 10.5%,
compared to the second quarter of fiscal 2023. Net sales in The
Container Store retail business (“TCS”) were $186.8 million, down
10.4%. Elfa International AB (“Elfa”) third-party net sales were
$9.8 million, down 12.9% compared to the second quarter 2023.
Excluding the impact of foreign currency translation, Elfa
third-party net sales were down 16.2%.
- Comparable store sales^ decreased 12.5%, with general
merchandise categories down 18.7%, contributing a decrease of 1,200
basis points to comparable store sales^. Custom Spaces+ were down
1.5%, negatively impacting comparable store sales^ by 50 basis
points.
- Consolidated net loss and net loss per share were $16.1 million
and $4.85 per share, compared to net loss of $23.7 million and
$7.17 per share, respectively, in the second quarter of fiscal
2023. Adjusted net loss per share* was $3.23 compared to adjusted
net income per share* of $0.11 in fiscal 2023.
Satish Malhotra, Chief Executive Officer and President of The
Container Store, commented, "Our second quarter sales results
reflect continued sequential improvement compared to the prior
quarter results. Custom Spaces continued to relatively outperform
and, from a customer demand perspective, orders placed, but not yet
delivered to customers experienced year over year growth during the
second quarter of fiscal 2024. In addition, general merchandise has
continued to sequentially improve as we remain focused on ensuring
we are in-stock in core product categories, while also enhancing
key areas of the assortment with newness and innovation. While the
environment has remained challenging and promotions have
intensified, we are pleased to see traffic trends improve from
earlier in the year and look forward to continuing on the
trajectory we are building. Additionally, we are excited to realize
the longer-term opportunities that we believe will come from our
recently announced partnership with Beyond, Inc."
Second Quarter Fiscal 2024
Results
For the second quarter (thirteen weeks) ended September 28,
2024:
- Consolidated net sales were $196.6 million, down 10.5%,
compared to the second quarter of fiscal 2023.
- Net sales in TCS were $186.8 million, down 10.4%.
- Comparable store sales^ decreased 12.5%, with general
merchandise categories down 18.7%, contributing a decrease of 1,200
basis points to comparable store sales^. Custom Spaces+ were down
1.5%, negatively impacting comparable store sales^ by 50 basis
points.
- Online sales decreased 13.7% compared to the second quarter of
fiscal 2023.
- Elfa third-party net sales were $9.8 million, down 12.9%
compared to the second quarter of fiscal 2023. Excluding the impact
of foreign currency translation, Elfa third-party net sales were
down 16.2% primarily due to a decline in sales in Nordic
markets.
- Consolidated gross margin was 55.5%, a decrease of 210 basis
points, compared to the second quarter of fiscal 2023. TCS gross
margin decreased 260 basis points to 54.3% primarily due to
increased promotional activity and unfavorable product and services
mix, partially offset by lower freight costs. Elfa gross margin
increased 250 basis points compared to the second quarter of fiscal
2023 primarily due to price increases to customers.
- Consolidated selling, general and administrative expenses
(“SG&A”) decreased $4.1 million, or 3.7% to $105.2 million in
the second quarter of fiscal 2024 from $109.3 million in the second
quarter of fiscal 2023. SG&A as a percentage of net sales
increased 380 basis points to 53.5%, with the increase primarily
due to deleverage of fixed costs associated with lower sales and
increased marketing spend in the second quarter of fiscal
2024.
- A non-cash long-lived asset impairment charge of $3.4 million
was recorded in the second quarter of fiscal 2024 related to one
underperforming store and a planned store closure in fiscal
2024.
- Consolidated other expenses was $3.5 million in the second
quarter of fiscal 2024, primarily due to legal and professional
fees related to the strategic alternatives review, as well as
employee retention costs incurred.
- Consolidated net interest expense increased 15.4% to $6.0
million in the second quarter of fiscal 2024 from $5.2 million in
the second quarter of fiscal 2023. The increase was primarily due
to higher borrowings under the Revolving Credit Facility and a
higher interest rate on the Senior Secured Term Loan Facility
during the second quarter of fiscal 2024 compared to the second
quarter of fiscal 2023.
- The effective tax rate was 21.5% in the second quarter of
fiscal 2024, as compared to negative 2.6% in the second quarter of
fiscal 2023. The increase in the effective tax rate was primarily
related to the impact of discrete items on a pre-tax loss in the
second quarter of fiscal 2023.
- Net loss was $16.1 million, or $4.85 per diluted share, in the
second quarter of fiscal 2024 compared to net loss of $23.7
million, or $7.17 per diluted share, in the second quarter of
fiscal 2023. Adjusted net loss* was $10.7 million, or $3.23 per
diluted share, in the second quarter of fiscal 2024 compared to
adjusted net income* of $0.4 million, or $0.11 per diluted share,
in the second quarter of fiscal 2023.
- Adjusted EBITDA* was $3.9 million in the second quarter of
fiscal 2024 compared to $17.0 million in the second quarter of
fiscal 2023.
For the fiscal year-to-date (twenty-six weeks) ended
September 28, 2024:
- Consolidated net sales were $378.4 million, down 11.3%,
compared to the twenty-six weeks ended September 30, 2023.
- Net sales in TCS were $358.3 million, down 11.2%.
- Comparable store sales^ decreased 13.1%, with general
merchandise categories down 20.2%, contributing a decrease of 1,310
basis points to comparable store sales^. Custom Spaces+ were flat
year over year on a comparable store sales basis^.
- Online sales decreased 19.8% compared to the twenty-six weeks
ended September 30, 2023.
- Elfa third-party net sales were $20.1 million, down 13.3%
compared to the twenty-six weeks ended September 30, 2023.
Excluding the impact of foreign currency translation, Elfa
third-party net sales were down 14.2% primarily due to a decline in
sales in Nordic markets.
- Consolidated gross margin was 56.8%, an increase of 30 basis
points, compared to the twenty-six weeks ended September 30, 2023.
TCS gross margin increased 30 basis points to 56.0% primarily due
to lower freight costs, partially offset by increased promotional
activity. Elfa gross margin increased 360 basis points compared to
the twenty-six weeks ended September 30, 2023 primarily due to
price increases to customers.
- Consolidated selling, general and administrative expenses
(“SG&A”) decreased $10.1 million, or 4.6% to $210.6 million in
the twenty-six weeks ended September 28, 2024 from $220.7 million
in the twenty-six weeks ended September 30, 2023. SG&A as a
percentage of net sales increased 390 basis points to 55.6%, with
the increase primarily due to deleverage of fixed costs associated
with lower sales and increased marketing spend in the twenty-six
weeks ended September 28, 2024.
- A non-cash long-lived asset impairment charge of $4.3 million
was recorded in the twenty-six weeks ended September 28, 2024
related to one underperforming store and two store closures in
fiscal 2024.
- Consolidated other expenses was $5.2 million in the twenty-six
weeks ended September 28, 2024, primarily due to legal and
professional fees related to the strategic alternatives review, as
well as employee retention costs incurred in the twenty-six weeks
ended September 28, 2024. Consolidated other expenses was $2.5
million in the twenty-six weeks ended September 30, 2023, primarily
due to severance costs associated with the elimination of certain
positions last fiscal year.
- Consolidated net interest expense increased 12.8% to $11.5
million in the twenty-six weeks ended September 28, 2024 from $10.2
million in the twenty-six weeks ended September 30, 2023. The
increase was primarily due to higher borrowings under the Revolving
Credit Facility and a higher interest rate on the Senior Secured
Term Loan Facility during the twenty-six weeks ended September 28,
2024 compared to the twenty-six weeks ended September 30,
2023.
- The effective tax rate was 22.4% in the twenty-six weeks ended
September 28, 2024, as compared to 7.8% in the twenty-six weeks
ended September 30, 2023. The increase in the effective tax rate
was primarily related to the impact of discrete items on a pre-tax
loss in the twenty-six weeks ended September 30, 2023.
- Net loss was $30.8 million, or $9.30 per diluted share, in the
twenty-six weeks ended September 28, 2024 compared to net loss of
$35.5 million, or $10.79 per diluted share, in the twenty-six weeks
ended September 30, 2023. Adjusted net loss* was $23.4 million, or
$7.06 per diluted share, in the twenty-six weeks ended September
28, 2024 compared to adjusted net loss* of $9.8 million, or $2.97
per diluted share, in the twenty-six weeks ended September 30,
2023.
- Adjusted EBITDA* was $5.6 million in the twenty-six weeks ended
September 28, 2024 compared to $19.9 million in the twenty-six
weeks ended September 30, 2023.
New and Existing Stores
As of September 28, 2024, the Company store base was 103 as
compared to 98 as of September 30, 2023. The Company opened one
store and closed one store during the second quarter of fiscal
2024. The Company continues to plan to open two more new stores and
expects to close one store in the remainder of fiscal 2024. All new
and relocated stores in fiscal 2024 are build-to-suit.
Balance sheet and liquidity highlights:
(In thousands) (unaudited)
September 28, 2024
September 30, 2023
Cash
$
66,123
$
10,195
Total debt, net of deferred financing
costs
$
231,992
$
173,201
Liquidity1
$
96,525
$
104,303
Net cash provided by operating
activities
$
4,702
$
20,691
Free cash flow*
$
(10,568
)
$
(1,346
)
_________________________________________ (1)
Cash plus availability on revolving credit
facilities.
Share repurchase
There were no repurchases during the second quarter of fiscal
2024. The Company has $25.0 million remaining of the original $30.0
million authorization for share repurchases. However, any
repurchases under the program would require the written consent of
Beyond, Inc. pursuant to the terms of the Securities Purchase
Agreement we entered into with Beyond on October 15, 2024.
Subsequent Events
On October 15, 2024, the Company and Beyond, Inc ("Beyond").
announced that the companies have entered into a strategic
partnership with the objective of improving customer experience
utilizing both the iconic Bed Bath and Beyond Brand and The
Container Store. As part of the terms of the collaboration, Beyond
has agreed to invest $40.0 million in The Container Store through a
preferred equity transaction subject to certain terms and
conditions, including an amendment or refinancing of The Container
Store’s credit facilities in a manner commercially acceptable to
Beyond.
Pursuant to the securities purchase agreement and contingent
upon the Company refinancing or amending its secured credit
facilities, The Container Store will issue approximately 40,000
shares of a newly created series of the Company’s preferred stock
to Beyond for an aggregate purchase price of $40.0 million.
Following a refinancing or amendment of the Company’s credit
facilities and the approval by shareholders pursuant to a
shareholder vote, and subject to certain other conditions, the
preferred stock would convert to Common Stock at a price of $17.25
which would result in ownership of approximately 40% of The
Container Store common equity by Beyond.
In line with prior quarter practice and pending closure of the
transaction with Beyond, the Company is not providing financial
guidance.
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 second quarter fiscal 2024
financial results is scheduled for today, October 29, 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 13744078. The replay will be available until November 29,
2024.
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.
Additional Information About the Transaction and Where to
Find It
This communication relates to, among other things, the proposed
transaction of the issuance of preferred stock by the Company
pursuant to the definitive documents, which provides that the
Company shall use efforts to call and hold a special meeting of the
stockholders of the Company, as promptly as reasonably practicable
following the closing of the transaction, to seek stockholder
approval. In connection with the proposed special meeting of
stockholders to seek stockholder approval, the Company will file
relevant materials with the Securities Exchange Commission (the
“SEC”), including the Company’s proxy statement on Schedule 14A
(the “Proxy Statement”). This communication is not a substitute for
the Proxy Statement or any other document that the Company may file
with the Securities Exchange Commission or send to its stockholders
in connection with the proposed transaction.
INVESTORS AND STOCKHOLDERS OF THE CONTAINER STORE ARE URGED TO
READ THE DEFINITIVE PROXY STATEMENT AND OTHER RELEVANT MATERIALS
CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE CONTAINER STORE
AND THE PROPOSED TRANSACTION.
Investors may obtain a free copy of these materials (when they
are available) and other documents filed by The Container Store
with the SEC at the SEC’s website at www.sec.gov or from The
Container Store at its website at
https://investor.containerstore.com.
Participants in the Solicitation
The Container Store and certain of its directors, executive
officers and other members of management and employees may be
deemed to be participants in soliciting proxies from its
stockholders in connection with the proposed transaction.
Information regarding the persons who may, under the rules of the
SEC, be considered to be participants in the solicitation of The
Container Store’s stockholders in connection with the proposed
transaction will be set forth in The Container Store’s definitive
proxy statement for its stockholder meeting at which the proposed
transaction will be submitted for approval by The Container Store’s
stockholders. You may also find additional information about The
Container Store’s directors and executive officers in The Container
Store’s Annual Report on Form 10-K for the fiscal year ended March
30, 2024, which was filed with the SEC on May 28, 2024, The
Container Store’s Definitive Proxy Statement for its 2024 annual
meeting of stockholders, which was filed with the SEC on July 9,
2024, and in subsequently filed Current Reports on Form 8-K and
Quarterly Reports on Form 10-Q.
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
strategic alternatives review process, expectations regarding the
transaction with Beyond, Inc. and refinancing or amending our
credit facilities, our goals, strategies, priorities, challenges
and initiatives, growth opportunities, and expected store openings
and closures.
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;
risks relating to our collaboration agreement with Beyond, Inc.;
the equity investment by Beyond, Inc. is subject to conditions,
including our ability to amend or refinance our debt in a manner
commercially acceptable to Beyond, Inc., and may not close by
January 31, 2025 or at all; there is substantial doubt regarding
our ability to continue as a going concern; the Rights Agreement
includes terms and conditions that could discourage a takeover or
other transaction that stockholders may consider favorable; 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; 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 and
domestic and international manufacturing facilities; 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 comply with the
covenants in our credit facilities or refinance or amend our credit
facilities 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 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; 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; 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 28, 2024 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.
The Container Store Group, Inc.
Consolidated statements of
operations
Thirteen Weeks Ended
Twenty-Six Weeks Ended
(In thousands, except share and per
share amounts) (unaudited)
September 28,
2024
September 30,
2023
September 28,
2024
September 30,
2023
Net sales
$
196,575
$
219,731
$
378,436
$
426,843
Cost of sales (excluding depreciation and
amortization)
87,537
93,064
163,303
185,627
Gross profit
109,038
126,667
215,133
241,216
Selling, general, and administrative
expenses (excluding depreciation and amortization)
105,214
109,270
210,564
220,650
Stock-based compensation
196
615
514
1,089
Pre-opening costs
867
549
1,614
734
Depreciation and amortization
10,346
10,383
21,219
20,895
Indefinite-lived asset impairment
charges
—
23,447
—
23,447
Long-lived asset impairment charges
3,390
—
4,291
—
Other expenses
3,488
7
5,174
2,460
Loss (gain) on disposal of assets
—
220
(23
)
221
Loss from operations
(14,463
)
(17,824
)
(28,220
)
(28,280
)
Interest expense, net
6,044
5,238
11,512
10,205
Loss before taxes
(20,507
)
(23,062
)
(39,732
)
(38,485
)
(Benefit) provision for income taxes
(4,401
)
591
(8,894
)
(2,995
)
Net loss
$
(16,106
)
$
(23,653
)
$
(30,838
)
$
(35,490
)
Net loss per common share — basic and
diluted
$
(4.85
)
$
(7.17
)
$
(9.30
)
$
(10.79
)
Weighted-average common shares — basic and
diluted
3,322,940
3,297,237
3,316,881
3,290,279
The Container Store Group, Inc.
Consolidated balance sheets
(In thousands)
September 28,
2024
March 30, 2024
September 30,
2023
Assets
(unaudited)
(unaudited)
Current assets:
Cash
$
66,123
$
21,000
$
10,195
Accounts receivable, net
24,511
22,010
24,857
Inventory
152,600
158,434
173,438
Prepaid expenses
15,834
12,940
12,986
Income taxes receivable
5,291
5,118
1,091
Other current assets
8,791
11,046
9,189
Total current assets
273,150
230,548
231,756
Noncurrent assets:
Property and equipment, net
146,056
155,402
158,740
Noncurrent operating lease right-of-use
assets
396,694
400,188
355,863
Goodwill
—
—
—
Trade names
147,683
146,449
219,558
Deferred financing costs, net
71
97
123
Noncurrent deferred tax assets, net
496
393
432
Other assets
5,054
3,288
3,037
Total noncurrent assets
696,054
705,817
737,753
Total assets
$
969,204
$
936,365
$
969,509
The Container Store Group, Inc.
Consolidated balance sheets
(continued)
(In thousands, except share and per
share amounts)
September 28,
2024
March 30, 2024
September 30,
2023
Liabilities and shareholders’
equity
(unaudited)
(unaudited)
Current liabilities:
Accounts payable
$
64,692
$
59,873
$
65,275
Accrued liabilities
79,667
70,076
71,362
Current borrowings on revolving lines of
credit
—
—
2,820
Current portion of long-term debt
2,212
2,166
2,060
Current operating lease liabilities
64,465
60,692
61,533
Income taxes payable
617
280
912
Total current liabilities
211,653
193,087
203,962
Noncurrent liabilities:
Long-term debt
229,780
174,611
168,321
Noncurrent operating lease liabilities
372,122
378,524
323,230
Noncurrent deferred tax liabilities,
net
15,955
24,185
43,790
Other long-term liabilities
6,862
6,267
5,793
Total noncurrent liabilities
624,719
583,587
541,134
Total liabilities
836,372
776,674
745,096
Shareholders’ equity:
Common stock, $0.01 par value, 250,000,000
shares authorized; 3,330,165 shares issued at September 28, 2024;
3,306,986 shares issued at March 30, 2024; 3,305,871 shares issued
at September 30, 2023
33
33
33
Additional paid-in capital
874,874
874,390
873,612
Accumulated other comprehensive loss
(29,948
)
(33,443
)
(35,740
)
Retained deficit
(712,127
)
(681,289
)
(613,492
)
Total shareholders’ equity
132,832
159,691
224,413
Total liabilities and shareholders’
equity
$
969,204
$
936,365
$
969,509
The Container Store Group, Inc.
Consolidated statements of cash
flows
Twenty-Six Weeks Ended
(In thousands) (unaudited)
September 28,
2024
September 30,
2023
Operating activities
Net loss
$
(30,838
)
$
(35,490
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
21,219
20,895
Stock-based compensation
514
1,089
Impairment charges
4,291
23,447
(Gain) loss on disposal of assets
(23
)
221
Deferred tax benefit
(8,584
)
(4,603
)
Non-cash interest
942
942
Other
397
176
Changes in operating assets and
liabilities:
Accounts receivable
(2,108
)
(25
)
Inventory
6,720
(3,827
)
Prepaid expenses and other assets
(3,035
)
2,539
Accounts payable and accrued
liabilities
14,947
10,776
Net change in lease assets and
liabilities
(21
)
5,574
Income taxes
232
(684
)
Other noncurrent liabilities
49
(339
)
Net cash provided by operating
activities
4,702
20,691
Investing activities
Additions to property and equipment
(15,270
)
(22,037
)
Investments in non-qualified plan
trust
(36
)
(177
)
Proceeds from non-qualified plan trust
redemptions
750
472
Proceeds from sale of property and
equipment
52
1
Net cash used in investing activities
(14,504
)
(21,741
)
Financing activities
Borrowings on revolving lines of
credit
—
27,177
Payments on revolving lines of credit
—
(26,649
)
Borrowings on long-term debt
55,000
20,000
Payments on long-term debt
(591
)
(16,032
)
Payment of taxes with shares withheld upon
restricted stock vesting
(30
)
(140
)
Net cash provided by financing
activities
54,379
4,356
Effect of exchange rate changes on
cash
546
(69
)
Net increase in cash
45,123
3,237
Cash at beginning of fiscal period
21,000
6,958
Cash at end of fiscal period
$
66,123
$
10,195
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
Twenty-Six Weeks Ended
September 28,
2024
September 30,
2023
September 28,
2024
September 30,
2023
Numerator:
Net loss
$
(16,106
)
$
(23,653
)
$
(30,838
)
$
(35,490
)
Severance and retention charges(a)
637
9
690
2,462
Strategic alternatives fees(b)
2,853
—
4,485
—
Indefinite-lived asset impairment
charges(c)
—
23,447
—
23,447
Long-lived asset impairment charges(d)
3,390
—
4,291
—
Taxes(e)
(1,502
)
562
(2,049
)
(187
)
Adjusted net (loss) income
$
(10,728
)
$
365
$
(23,421
)
$
(9,768
)
Denominator:
Weighted-average common shares — basic and
diluted
3,322,940
3,297,237
3,316,881
3,290,279
Net loss per common share — basic and
diluted
$
(4.85
)
$
(7.17
)
$
(9.30
)
$
(10.79
)
Adjusted net (loss) income per common
share — diluted
$
(3.23
)
$
0.11
$
(7.06
)
$
(2.97
)
___________________________________ (a)
Severance and retention charges recorded
in other expenses in the first and second quarter of fiscal 2024
and 2023, which we do not consider in our evaluation of ongoing
performance.
(b)
Expenses associated with legal and
professional fees related to our review of strategic alternatives
incurred in the first and second quarters of fiscal 2024, which we
do not consider in our evaluation of ongoing performance.
(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 long-lived asset impairment
charge was recorded in the first and second quarters of fiscal 2024
related to stores which have been identified for closure in fiscal
2024, which we do not consider in our evaluation of ongoing
performance.
(e)
Tax impact of adjustments to net loss that
are considered to be unusual or infrequent tax items, 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
Twenty-Six Weeks Ended
September 28,
2024
September 30,
2023
September 28,
2024
September 30,
2023
Net loss
$
(16,106
)
$
(23,653
)
$
(30,838
)
$
(35,490
)
Depreciation and amortization
10,346
10,383
21,219
20,895
Interest expense, net
6,044
5,238
11,512
10,205
(Benefit) provision for income taxes
(4,401
)
591
(8,894
)
(2,995
)
EBITDA
$
(4,117
)
$
(7,441
)
$
(7,001
)
$
(7,385
)
Pre-opening costs(a)
867
549
1,614
734
Non-cash lease expense(b)
87
(155
)
(45
)
(329
)
Indefinite-lived asset impairment
charges(c)
—
23,447
—
23,447
Long-lived asset impairment charges(d)
3,390
—
4,291
—
Stock-based compensation(e)
196
615
514
1,089
Foreign exchange losses (gains)(f)
(10
)
2
(8
)
(73
)
Severance and retention charges(g)
637
9
690
2,462
Strategic alternatives fees(h)
2,853
—
4,485
—
Non-cash inventory reserve(i)
(1
)
—
1,080
—
Adjusted EBITDA
$
3,902
$
17,026
$
5,620
$
19,945
____________________________________________
(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 long-lived asset impairment
charge was recorded in the first and second quarters of fiscal 2024
related to stores which have been identified for closure in fiscal
2024, which we do not consider in our evaluation of ongoing
performance.
(e)
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.
(f)
Realized foreign exchange transactional
gains/losses our management does not consider in our evaluation of
ongoing performance.
(g)
Severance and retention charges recorded
in other expenses in the first and second quarters of fiscal 2024
and 2023, which we do not consider in our evaluation of ongoing
performance.
(h)
Expenses associated with legal and
professional fees related to our review of strategic alternatives
incurred in the first and second quarters of fiscal 2024, which we
do not consider in our evaluation of ongoing performance.
(i)
Non-cash charges related to lower of cost
or market inventory reserve, which was recorded in the first
quarter of fiscal 2024, 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.
Twenty-Six Weeks Ended
September 28,
2024
September 30,
2023
Net cash provided by operating
activities
$
4,702
$
20,691
Less: Additions to property and
equipment
(15,270
)
(22,037
)
Free cash flow
$
(10,568
)
$
(1,346
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241029930075/en/
Investors: ICR, Inc. Farah Soi/Caitlin Churchill
203-682-8200 Farah.Soi@icrinc.com Caitlin.Churchill@icrinc.com or
Media: ICR, Inc. Phil Denning/Lee Pacchia 332-242-4366
Phil.Denning@icrinc.com Lee.Pacchia@icrinc.com
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