The Container Store Group, Inc. Announces Fourth Quarter and Full Fiscal Year 2018 Financial Results

Fourth Quarter Comparable Store Sales up 8.5%; Consolidated Net
Sales up 8.8%

Fiscal 2018 Comparable Store Sales up 3.5%; Consolidated Net Sales
up 4.4%

Fourth Quarter EPS of $0.33 vs ($0.01) in Q417; Adjusted EPS
increases to $0.33 from $0.18 in Q417

Fiscal 2018 EPS of $0.45 vs $0.40 in Fiscal 2017; Adjusted EPS
increases to $0.42 from $0.28 in Fiscal 2017

Provides Fiscal 2019 Outlook

COPPELL, Texas–(BUSINESS WIRE)–The Container Store Group, Inc. (NYSE:TCS) (the “Company”), today
announced financial results for the fourth quarter and fiscal year 2018
ended March 30, 2019.

For the fourth quarter of fiscal 2018:

  • Consolidated net sales were $253.2 million, up 8.8%. Net sales in The
    Container Store retail business (“TCS”) were $235.7 million, up 10.1%.
    Elfa International AB (“Elfa”) third-party net sales were $17.5
    million, down 6.4% due to foreign currency translation.
  • Comparable store sales increased 8.5%, with Custom Closets up 7.4%,
    contributing 380 basis points of the increase to comparable store
    sales.
  • Consolidated net income and net income per share (“EPS”) were $15.9
    million and $0.33 compared to a net loss of $0.4 million and ($0.01),
    respectively, in the fourth quarter of fiscal 2017. Adjusted net
    income per share (“Adjusted EPS”) was $0.33 compared to $0.18 in the
    fourth quarter of fiscal 2017 (see Reconciliation of GAAP to Non-GAAP
    Financial Measures table).
  • Adjusted EBITDA (see Reconciliation of GAAP to Non-GAAP Financial
    Measures table), was $37.8 million compared to $31.1 million in the
    prior year period.

“We ended fiscal 2018 with strong results, posting an 8.5% comparable
store sales increase in Q4 that was broad-based across our core Custom
Closets business, as well as our other product categories,” said Melissa
Reiff, Chief Executive Officer. “This performance reflects the
improvements we continue to make across all aspects of our business – in
merchandising and new product development, marketing, inventory
management and in-stock levels, as well as overall execution with
excellence in our stores and our online channel. It also includes the
positive impact from the “Marie Kondo effect” that is driving even more
interest in our core category of Custom Closets and storage and
organization.”

“We have plans in fiscal 2019 to strategically build on our progress to
drive more brand awareness and market share gains, specifically in our
core Custom Closets business where we recently launched our new Avera™
product line,” Reiff added. “Our second distribution center in Maryland
is planned to become fully operational in late fiscal 2019, positioning
us to generate significant efficiencies and a considerable reduction in
delivery times leading to improved customer service in fiscal 2020 and
beyond. Across our entire company, we have clear priorities and a
go-to-market strategy grounded in our purpose – which is to help our
customers accomplish projects, maximize their space and make the most of
their homes. We intend to capitalize on the many opportunities we see
for the business and realize our vision to be a beloved brand and the
first choice for customized organization solutions and services.”

Fourth Quarter Fiscal 2018 Results

For the fourth quarter (thirteen weeks) ended March 30, 2019:

  • Consolidated net sales were $253.2 million, up 8.8% as compared to the
    fourth quarter of fiscal 2017. Net sales at TCS were $235.7 million,
    up 10.1%, driven by an increase in comparable store sales of 8.5%,
    combined with incremental sales from new stores. Elfa third-party net
    sales were $17.5 million, down 6.4% compared to the fourth quarter
    ended March 31, 2018, due to the negative impact of foreign currency
    translation during the quarter which decreased third-party net sales
    by 11.7%, partially offset by higher sales in the Nordic markets.
  • Consolidated gross margin was 58.6%, consistent with the fourth
    quarter of fiscal 2017. TCS gross margin increased 70 basis points to
    57.8%, primarily due to the impact of the Optimization Plan combined
    with a positive impact from foreign currency. Elfa gross margin
    declined 340 basis points primarily due to higher direct materials
    costs attributable to higher raw material prices and a weaker Swedish
    krona.
  • Consolidated selling, general and administrative expenses (“SG&A”)
    increased by 5.0% to $110.0 million in the fourth quarter of fiscal
    2018 from $104.9 million in the fourth quarter of fiscal 2017. SG&A as
    a percentage of net sales decreased 150 basis points. This was
    primarily due to decreased marketing expense in the fourth quarter of
    fiscal 2018 associated with a shift in the timing of recognition of
    campaign-related marketing costs from the fourth quarter to the third
    quarter as well as decreased costs incurred as part of the
    Optimization Plan, decreased professional fees and ongoing savings and
    efficiency efforts.
  • Consolidated net interest expense decreased 21.4% to $6.0 million in
    the fourth quarter of fiscal 2018 from $7.6 million in the fourth
    quarter of fiscal 2017. In September 2018, the Company amended its
    Senior Secured Term Loan Facility, which decreased the applicable
    interest rate margins.
  • The effective tax rate was 28.3%, as compared to 103.1% in the fourth
    quarter of fiscal 2017. In the fourth quarter of fiscal 2018, the
    effective tax rate rose above the U.S. statutory rate primarily due to
    items related to the Tax Cuts and Jobs Act (the “Tax Act”) and a
    pretax income position. In the fourth quarter of fiscal 2017, the
    effective tax rate increased above the blended U.S. statutory rate
    primarily due to the provisional amount recorded for the one-time
    transition tax on foreign earnings in connection with the Tax Act.
  • Net income was $15.9 million, or $0.33 per share, in the fourth
    quarter of fiscal 2018 compared to a net loss of $0.4 million, or
    ($0.01) per share in the fourth quarter of fiscal 2017. Adjusted net
    income was $16.2 million, or $0.33 per share, in the fourth quarter of
    fiscal 2018 compared to adjusted net income of $8.4 million, or $0.18
    per share in the fourth quarter of fiscal 2017 (see Reconciliation of
    GAAP to Non-GAAP Financial Measures table).
  • Adjusted EBITDA was $37.8 million in the fourth quarter of fiscal 2018
    compared to $31.1 million in the fourth quarter of fiscal 2017 (see
    Reconciliation of GAAP to Non-GAAP Financial Measures table).

For the year (fifty-two weeks) ended March 30, 2019:

  • Consolidated net sales were $895.1 million, up 4.4% as compared to
    fiscal 2017. Net sales at TCS were $829.6 million, up 5.4%, driven by
    a comparable store sales increase of 3.5% combined with incremental
    sales from new stores. Elfa third-party net sales were $65.5 million,
    down 6.2% compared to fiscal 2017, primarily due to the negative
    impact of foreign currency translation which decreased third-party net
    sales by 6.9%, partially offset by higher sales in the Nordic markets.
  • Consolidated gross margin was 58.5%, an increase of 50 basis points
    compared to fiscal 2017. TCS gross margin increased 80 basis points to
    58.0%, primarily due to lower cost of goods associated with the
    Optimization Plan, partially offset by higher promotional activities
    and increased costs associated with shipping services. Elfa gross
    margin declined 320 basis points primarily due to higher direct
    materials costs attributable to higher raw materials prices, a shift
    in product mix, and a weaker Swedish krona.
  • Consolidated SG&A expense increased by 4.7% to $431.0 million in
    fiscal 2018 from $411.7 million in fiscal 2017. SG&A as a percentage
    of net sales increased 20 basis points. The increase was primarily
    attributable to the deleverage of occupancy costs, higher payroll
    costs, and increased marketing expense associated with the branding
    campaign launch in the second quarter of fiscal 2018, partially offset
    by decreased costs associated with the Optimization Plan.
  • Pre-opening costs decreased to $2.1 million in fiscal 2018 compared to
    $5.3 million in fiscal 2017. The Company opened four new stores
    (inclusive of two relocations), in fiscal 2018, ending the fiscal year
    with 92 stores, as compared to five new stores opened (inclusive of
    one relocation) and an ending store count of 90, in fiscal 2017.
  • Other expenses decreased to $0.2 million in fiscal 2018 compared to
    $5.7 million in fiscal 2017. The decrease is primarily due to
    severance costs incurred in fiscal 2017 to implement the Optimization
    Plan.
  • Consolidated net interest expense increased 9.0% to $27.3 million in
    fiscal 2018 from $25.0 million in fiscal 2017 primarily due to the
    amendment of our Senior Secured Term Loan Facility in the second
    quarter of fiscal 2017, which increased the applicable interest rate
    margins.
  • The effective tax rate was 1.3% in fiscal 2018 as compared to -189.8%
    in fiscal 2017. In fiscal 2018, the effective tax rate was below the
    U.S. statutory rate due to the finalization of the one-time transition
    tax on foreign earnings. In fiscal 2017, the effective tax rate was
    below the U.S. statutory rate primarily due to the estimated impact of
    the Tax Act enacted in the third quarter of fiscal 2017, including the
    provisional benefit for the remeasurement of deferred tax balances.
  • Net income was $21.7 million, or $0.45 per share, in fiscal 2018
    compared to net income of $19.4 million, or $0.40 per share in fiscal
    2017. Adjusted net income was $20.4 million, or $0.42 per share, in
    fiscal 2018 compared to adjusted net income of $13.6 million, or $0.28
    per share in fiscal 2017 (see Reconciliation of GAAP to Non-GAAP
    Financial Measures table).
  • Adjusted EBITDA was $96.3 million in fiscal 2018 compared to $89.6
    million in fiscal 2017 (see Reconciliation of GAAP to Non-GAAP
    Financial Measures table).

Balance sheet and liquidity highlights:

(In thousands)     March 30, 2019     March 31, 2018
Cash $ 7,364 $ 8,399
Total debt, net of deferred financing costs $ 267,487 $ 285,165
Liquidity (1) $ 83,532 $ 90,767
Free cash flow (2) $ 21,226 $ 34,530
 
(1) Cash plus availability on revolving credit facilities.
(2) See reconciliation of GAAP to Non-GAAP Measures table.
 

Outlook

The Company is establishing its outlook for fiscal 2019 as follows:

   
  Fiscal 2019 Outlook
Net sales $915 million to $925 million
New store openings and store relocations 2 openings, including 1 relocation (2)
Comparable store sales Up 2.0% to up 3.0%
Net income per common share (1) $0.41 to $0.51
Adjusted net income per common share (1) (3) $0.41 to $0.51
Assumed tax rate 30%
Estimated share count 49 million
 
(1) Includes approximately $4 million, or $0.06 per
common share of net costs associated with the opening of a second
distribution center in Aberdeen, MD.
(2) The Company plans to open a new store in Memphis, TN
during the second quarter of fiscal 2019. Additionally, during the
second half of fiscal 2019, the Company plans to relocate an
existing store in Dallas, TX.
(3) See Reconciliation of GAAP to Non-GAAP Financial
Measures Table.
 

Conference Call Information

A conference call to discuss fourth quarter fiscal 2018 financial
results is scheduled for today, May 14, 2019, 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 two 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 13690281.
The replay will be available until June 14, 2019.

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 about our future opportunities; expectations
regarding our goals, strategies, priorities and initiatives;
expectations regarding new store openings and relocations; plans to
drive more brand awareness and attain market share gains; statements
regarding our new distribution center and its anticipated effects on our
business; and our anticipated financial performance and tax rate for
fiscal 2019.

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: our optimization plan may
not result in improved sales and profitability; our inability to open or
relocate new stores, or remodel existing stores, in the timeframe and at
the locations we anticipate; overall decline in the health of the
economy, consumer spending, and the housing market; our inability to
manage costs and risks relating to new store openings; our inability to
source and market new products to meet consumer preferences; our failure
to achieve or maintain profitability; risks relating to the opening of a
second distribution center; 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; our vulnerability to
natural disasters and other unexpected events; our reliance upon
independent third party transportation providers; our inability to
protect our brand; our failure to successfully anticipate consumer
preferences and demand; our inability to manage our growth; inability to
locate available retail store sites on terms acceptable to us; our
inability to maintain sufficient levels of cash flow to meet growth
expectations; 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; fluctuations in currency exchange rates; our inability
to effectively manage our online sales; competition from other stores
and internet-based competition; our inability to obtain merchandise on a
timely basis at competitive prices as a result of changes in vendor
relationships; vendors may sell similar or identical products to our
competitors; our reliance on key executive management, and the
transition in our executive leadership; our inability to find, train and
retain key personnel; labor relations difficulties; increases in health
care costs and labor costs; our dependence on foreign imports for our
merchandise; violations of the U.S. Foreign Corrupt Practices Act and
similar worldwide anti-bribery and anti-kickback laws; 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; effects of tax
reform; and uncertainty with respect to tax and trade policies, tariffs
and government regulations affecting trade between the United States and
other countries.

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, or SEC, on May 31, 2018, 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 (NYSE:TCS) is the nation’s leading retailer of
storage and organization products — a concept they originated in 1978.
Today, with locations nationwide, the retailer offers more than 10,000
products designed to save space and time, a suite of custom closet
systems and an array of digital shopping services. Visit www.containerstore.com
for more information about store locations, the product collection and
services offered. Visit www.containerstore.com/blog
for real solutions from the really organized and www.whatwestandfor.com
to learn more about the company’s unique culture.

                 
The Container Store Group, Inc.
Consolidated statements of operations
 
 
(In thousands, except share and Thirteen Weeks Ended Fiscal Year Ended
per share amounts) March 30, 2019 March 31, 2018 March 30, 2019 March 31, 2018
(unaudited) (unaudited) (unaudited)
Net sales $ 253,180 $ 232,764 $ 895,093 $ 857,228
Cost of sales (excluding depreciation and amortization)   104,900   96,248   371,410   360,167
Gross profit 148,280 136,516 523,683 497,061
Selling, general, and administrative expenses (excluding
depreciation and amortization)
110,048 104,855 430,997 411,721
Stock-based compensation 859 437 2,846 2,026
Pre-opening costs 185 617 2,103 5,293
Depreciation and amortization 8,953 9,398 36,305 37,922
Other expenses (120) 826 177 5,734
Loss (gain) on disposal of assets   221   42   (63)   278
Income from operations 28,134 20,341 51,318 34,087
Interest expense, net 5,982 7,615 27,275 25,013
Loss on extinguishment of debt       2,082   2,369
Income before taxes 22,152 12,726 21,961 6,705
Provision (benefit) for income taxes   6,270   13,125   281   (12,723)
Net income (loss) $ 15,882 $ (399) $ 21,680 $ 19,428
 
Net income (loss) per common share — basic and diluted $ 0.33 $ (0.01) $ 0.45 $ 0.40
 
Weighted-average common shares — basic 48,142,319 48,072,187 48,139,929 48,061,527
Weighted-average common shares — diluted 48,382,433 48,202,980 48,400,407 48,147,725
 
         
The Container Store Group, Inc.
Consolidated balance sheets
 
March 30, March 31,
(In thousands) 2019 2018
Assets (unaudited)
Current assets:
Cash $ 7,364 $ 8,399
Accounts receivable, net 25,568 25,528
Inventory 108,650 97,362
Prepaid expenses 10,078 11,281
Income taxes receivable 1,003 15
Other current assets   11,705   11,609
Total current assets 164,368 154,194
Noncurrent assets:
Property and equipment, net 152,588 158,389
Goodwill 202,815 202,815
Trade names 225,150 229,401
Deferred financing costs, net 241 312
Noncurrent deferred tax assets, net 1,912 2,404
Other assets   1,670   1,854
Total noncurrent assets   584,376   595,175
Total assets $ 748,744 $ 749,369
 
         
The Container Store Group, Inc.
Consolidated balance sheets (continued)
 
March 30, March 31,
(In thousands, except share and per share amounts) 2019 2018
Liabilities and shareholders’ equity (unaudited)
Current liabilities:
Accounts payable $ 58,734 $ 43,692
Accrued liabilities 67,163 70,494
Revolving lines of credit 5,511
Current portion of long-term debt 7,016 7,771
Income taxes payable   2,851   4,580
Total current liabilities 141,275 126,537
Noncurrent liabilities:
Long-term debt 254,960 277,394
Noncurrent deferred tax liabilities, net 51,702 54,839
Deferred rent and other long-term liabilities   36,114   41,892
Total noncurrent liabilities   342,776   374,125
Total liabilities 484,051 500,662
Commitments and contingencies
Shareholders’ equity:
Common stock, $0.01 par value, 250,000,000 shares authorized;
48,142,319 shares issued at March 30, 2019 and 48,072,187 shares
issued at March 31, 2018
481 481
Additional paid-in capital 863,978 861,263
Accumulated other comprehensive loss (26,132) (17,316)
Retained deficit   (573,634)   (595,721)
Total shareholders’ equity   264,693   248,707
Total liabilities and shareholders’ equity $ 748,744 $ 749,369
 
         
The Container Store Group, Inc.
Consolidated statements of cash flows
 
Fiscal Year Ended
March 30, March 31,
(In thousands) 2019 2018
Operating activities (unaudited)
Net income $ 21,680 $ 19,428
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 36,305 37,922
Stock-based compensation 2,846 2,026
(Gain) loss on disposal of assets (63) 278
Loss on extinguishment of debt 2,082 2,369
Deferred tax benefit (1,563) (25,545)
Non-cash interest 2,351 2,664
Other (60) 227
Changes in operating assets and liabilities:

 

Accounts receivable (1,395) 3,192
Inventory (14,688) 8,406
Prepaid expenses and other assets 1,510 (2,133)
Accounts payable and accrued liabilities 13,622 6,249
Income taxes (2,428) 625
Other noncurrent liabilities   (5,303)   6,468
Net cash provided by operating activities 54,896 62,176
 
Investing activities
Additions to property and equipment (33,670) (27,646)
Proceeds from sale of property and equipment   899   96
Net cash used in investing activities (32,771) (27,550)
 
Financing activities
Borrowings on revolving lines of credit 55,201 47,486
Payments on revolving lines of credit (49,484) (47,486)
Borrowings on long-term debt 331,500 335,000
Payments on long-term debt and capital leases (356,712) (361,403)
Payment of debt issuance costs (2,384) (11,246)
Payment of taxes with shares withheld upon restricted stock vesting   (128)   (39)
Net cash used in financing activities (22,007) (37,688)
 
Effect of exchange rate changes on cash   (1,153)   725
 
Net decrease in cash (1,035) (2,337)
Cash at beginning of fiscal period   8,399   10,736
Cash at end of fiscal period $ 7,364 $ 8,399
 

Note Regarding Non-GAAP Information

This press release includes financial measures that are not calculated
in accordance with GAAP, including adjusted net income, adjusted net
income per diluted share, 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 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., its controlling stockholder, to
assess its financial performance.

The Company presents adjusted net income, adjusted net income per
diluted share, 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.

Contacts

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.
Mara Richter, 972-538-6893
publicrelations@containerstore.com

Read full story here

The Container Store Group, Inc. Announces Fourth Quarter and Full Fiscal Year 2018 Financial Results

Fourth Quarter Comparable Store Sales up 8.5%; Consolidated Net
Sales up 8.8%

Fiscal 2018 Comparable Store Sales up 3.5%; Consolidated Net Sales
up 4.4%

Fourth Quarter EPS of $0.33 vs ($0.01) in Q417; Adjusted EPS
increases to $0.33 from $0.18 in Q417

Fiscal 2018 EPS of $0.45 vs $0.40 in Fiscal 2017; Adjusted EPS
increases to $0.42 from $0.28 in Fiscal 2017

Provides Fiscal 2019 Outlook

COPPELL, Texas–(BUSINESS WIRE)–The Container Store Group, Inc. (NYSE:TCS) (the “Company”), today
announced financial results for the fourth quarter and fiscal year 2018
ended March 30, 2019.

For the fourth quarter of fiscal 2018:

  • Consolidated net sales were $253.2 million, up 8.8%. Net sales in The
    Container Store retail business (“TCS”) were $235.7 million, up 10.1%.
    Elfa International AB (“Elfa”) third-party net sales were $17.5
    million, down 6.4% due to foreign currency translation.
  • Comparable store sales increased 8.5%, with Custom Closets up 7.4%,
    contributing 380 basis points of the increase to comparable store
    sales.
  • Consolidated net income and net income per share (“EPS”) were $15.9
    million and $0.33 compared to a net loss of $0.4 million and ($0.01),
    respectively, in the fourth quarter of fiscal 2017. Adjusted net
    income per share (“Adjusted EPS”) was $0.33 compared to $0.18 in the
    fourth quarter of fiscal 2017 (see Reconciliation of GAAP to Non-GAAP
    Financial Measures table).
  • Adjusted EBITDA (see Reconciliation of GAAP to Non-GAAP Financial
    Measures table), was $37.8 million compared to $31.1 million in the
    prior year period.

“We ended fiscal 2018 with strong results, posting an 8.5% comparable
store sales increase in Q4 that was broad-based across our core Custom
Closets business, as well as our other product categories,” said Melissa
Reiff, Chief Executive Officer. “This performance reflects the
improvements we continue to make across all aspects of our business – in
merchandising and new product development, marketing, inventory
management and in-stock levels, as well as overall execution with
excellence in our stores and our online channel. It also includes the
positive impact from the “Marie Kondo effect” that is driving even more
interest in our core category of Custom Closets and storage and
organization.”

“We have plans in fiscal 2019 to strategically build on our progress to
drive more brand awareness and market share gains, specifically in our
core Custom Closets business where we recently launched our new Avera™
product line,” Reiff added. “Our second distribution center in Maryland
is planned to become fully operational in late fiscal 2019, positioning
us to generate significant efficiencies and a considerable reduction in
delivery times leading to improved customer service in fiscal 2020 and
beyond. Across our entire company, we have clear priorities and a
go-to-market strategy grounded in our purpose – which is to help our
customers accomplish projects, maximize their space and make the most of
their homes. We intend to capitalize on the many opportunities we see
for the business and realize our vision to be a beloved brand and the
first choice for customized organization solutions and services.”

Fourth Quarter Fiscal 2018 Results

For the fourth quarter (thirteen weeks) ended March 30, 2019:

  • Consolidated net sales were $253.2 million, up 8.8% as compared to the
    fourth quarter of fiscal 2017. Net sales at TCS were $235.7 million,
    up 10.1%, driven by an increase in comparable store sales of 8.5%,
    combined with incremental sales from new stores. Elfa third-party net
    sales were $17.5 million, down 6.4% compared to the fourth quarter
    ended March 31, 2018, due to the negative impact of foreign currency
    translation during the quarter which decreased third-party net sales
    by 11.7%, partially offset by higher sales in the Nordic markets.
  • Consolidated gross margin was 58.6%, consistent with the fourth
    quarter of fiscal 2017. TCS gross margin increased 70 basis points to
    57.8%, primarily due to the impact of the Optimization Plan combined
    with a positive impact from foreign currency. Elfa gross margin
    declined 340 basis points primarily due to higher direct materials
    costs attributable to higher raw material prices and a weaker Swedish
    krona.
  • Consolidated selling, general and administrative expenses (“SG&A”)
    increased by 5.0% to $110.0 million in the fourth quarter of fiscal
    2018 from $104.9 million in the fourth quarter of fiscal 2017. SG&A as
    a percentage of net sales decreased 150 basis points. This was
    primarily due to decreased marketing expense in the fourth quarter of
    fiscal 2018 associated with a shift in the timing of recognition of
    campaign-related marketing costs from the fourth quarter to the third
    quarter as well as decreased costs incurred as part of the
    Optimization Plan, decreased professional fees and ongoing savings and
    efficiency efforts.
  • Consolidated net interest expense decreased 21.4% to $6.0 million in
    the fourth quarter of fiscal 2018 from $7.6 million in the fourth
    quarter of fiscal 2017. In September 2018, the Company amended its
    Senior Secured Term Loan Facility, which decreased the applicable
    interest rate margins.
  • The effective tax rate was 28.3%, as compared to 103.1% in the fourth
    quarter of fiscal 2017. In the fourth quarter of fiscal 2018, the
    effective tax rate rose above the U.S. statutory rate primarily due to
    items related to the Tax Cuts and Jobs Act (the “Tax Act”) and a
    pretax income position. In the fourth quarter of fiscal 2017, the
    effective tax rate increased above the blended U.S. statutory rate
    primarily due to the provisional amount recorded for the one-time
    transition tax on foreign earnings in connection with the Tax Act.
  • Net income was $15.9 million, or $0.33 per share, in the fourth
    quarter of fiscal 2018 compared to a net loss of $0.4 million, or
    ($0.01) per share in the fourth quarter of fiscal 2017. Adjusted net
    income was $16.2 million, or $0.33 per share, in the fourth quarter of
    fiscal 2018 compared to adjusted net income of $8.4 million, or $0.18
    per share in the fourth quarter of fiscal 2017 (see Reconciliation of
    GAAP to Non-GAAP Financial Measures table).
  • Adjusted EBITDA was $37.8 million in the fourth quarter of fiscal 2018
    compared to $31.1 million in the fourth quarter of fiscal 2017 (see
    Reconciliation of GAAP to Non-GAAP Financial Measures table).

For the year (fifty-two weeks) ended March 30, 2019:

  • Consolidated net sales were $895.1 million, up 4.4% as compared to
    fiscal 2017. Net sales at TCS were $829.6 million, up 5.4%, driven by
    a comparable store sales increase of 3.5% combined with incremental
    sales from new stores. Elfa third-party net sales were $65.5 million,
    down 6.2% compared to fiscal 2017, primarily due to the negative
    impact of foreign currency translation which decreased third-party net
    sales by 6.9%, partially offset by higher sales in the Nordic markets.
  • Consolidated gross margin was 58.5%, an increase of 50 basis points
    compared to fiscal 2017. TCS gross margin increased 80 basis points to
    58.0%, primarily due to lower cost of goods associated with the
    Optimization Plan, partially offset by higher promotional activities
    and increased costs associated with shipping services. Elfa gross
    margin declined 320 basis points primarily due to higher direct
    materials costs attributable to higher raw materials prices, a shift
    in product mix, and a weaker Swedish krona.
  • Consolidated SG&A expense increased by 4.7% to $431.0 million in
    fiscal 2018 from $411.7 million in fiscal 2017. SG&A as a percentage
    of net sales increased 20 basis points. The increase was primarily
    attributable to the deleverage of occupancy costs, higher payroll
    costs, and increased marketing expense associated with the branding
    campaign launch in the second quarter of fiscal 2018, partially offset
    by decreased costs associated with the Optimization Plan.
  • Pre-opening costs decreased to $2.1 million in fiscal 2018 compared to
    $5.3 million in fiscal 2017. The Company opened four new stores
    (inclusive of two relocations), in fiscal 2018, ending the fiscal year
    with 92 stores, as compared to five new stores opened (inclusive of
    one relocation) and an ending store count of 90, in fiscal 2017.
  • Other expenses decreased to $0.2 million in fiscal 2018 compared to
    $5.7 million in fiscal 2017. The decrease is primarily due to
    severance costs incurred in fiscal 2017 to implement the Optimization
    Plan.
  • Consolidated net interest expense increased 9.0% to $27.3 million in
    fiscal 2018 from $25.0 million in fiscal 2017 primarily due to the
    amendment of our Senior Secured Term Loan Facility in the second
    quarter of fiscal 2017, which increased the applicable interest rate
    margins.
  • The effective tax rate was 1.3% in fiscal 2018 as compared to -189.8%
    in fiscal 2017. In fiscal 2018, the effective tax rate was below the
    U.S. statutory rate due to the finalization of the one-time transition
    tax on foreign earnings. In fiscal 2017, the effective tax rate was
    below the U.S. statutory rate primarily due to the estimated impact of
    the Tax Act enacted in the third quarter of fiscal 2017, including the
    provisional benefit for the remeasurement of deferred tax balances.
  • Net income was $21.7 million, or $0.45 per share, in fiscal 2018
    compared to net income of $19.4 million, or $0.40 per share in fiscal
    2017. Adjusted net income was $20.4 million, or $0.42 per share, in
    fiscal 2018 compared to adjusted net income of $13.6 million, or $0.28
    per share in fiscal 2017 (see Reconciliation of GAAP to Non-GAAP
    Financial Measures table).
  • Adjusted EBITDA was $96.3 million in fiscal 2018 compared to $89.6
    million in fiscal 2017 (see Reconciliation of GAAP to Non-GAAP
    Financial Measures table).

Balance sheet and liquidity highlights:

(In thousands)     March 30, 2019     March 31, 2018
Cash $ 7,364 $ 8,399
Total debt, net of deferred financing costs $ 267,487 $ 285,165
Liquidity (1) $ 83,532 $ 90,767
Free cash flow (2) $ 21,226 $ 34,530
 
(1) Cash plus availability on revolving credit facilities.
(2) See reconciliation of GAAP to Non-GAAP Measures table.
 

Outlook

The Company is establishing its outlook for fiscal 2019 as follows:

   
  Fiscal 2019 Outlook
Net sales $915 million to $925 million
New store openings and store relocations 2 openings, including 1 relocation (2)
Comparable store sales Up 2.0% to up 3.0%
Net income per common share (1) $0.41 to $0.51
Adjusted net income per common share (1) (3) $0.41 to $0.51
Assumed tax rate 30%
Estimated share count 49 million
 
(1) Includes approximately $4 million, or $0.06 per
common share of net costs associated with the opening of a second
distribution center in Aberdeen, MD.
(2) The Company plans to open a new store in Memphis, TN
during the second quarter of fiscal 2019. Additionally, during the
second half of fiscal 2019, the Company plans to relocate an
existing store in Dallas, TX.
(3) See Reconciliation of GAAP to Non-GAAP Financial
Measures Table.
 

Conference Call Information

A conference call to discuss fourth quarter fiscal 2018 financial
results is scheduled for today, May 14, 2019, 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 two 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 13690281.
The replay will be available until June 14, 2019.

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 about our future opportunities; expectations
regarding our goals, strategies, priorities and initiatives;
expectations regarding new store openings and relocations; plans to
drive more brand awareness and attain market share gains; statements
regarding our new distribution center and its anticipated effects on our
business; and our anticipated financial performance and tax rate for
fiscal 2019.

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: our optimization plan may
not result in improved sales and profitability; our inability to open or
relocate new stores, or remodel existing stores, in the timeframe and at
the locations we anticipate; overall decline in the health of the
economy, consumer spending, and the housing market; our inability to
manage costs and risks relating to new store openings; our inability to
source and market new products to meet consumer preferences; our failure
to achieve or maintain profitability; risks relating to the opening of a
second distribution center; 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; our vulnerability to
natural disasters and other unexpected events; our reliance upon
independent third party transportation providers; our inability to
protect our brand; our failure to successfully anticipate consumer
preferences and demand; our inability to manage our growth; inability to
locate available retail store sites on terms acceptable to us; our
inability to maintain sufficient levels of cash flow to meet growth
expectations; 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; fluctuations in currency exchange rates; our inability
to effectively manage our online sales; competition from other stores
and internet-based competition; our inability to obtain merchandise on a
timely basis at competitive prices as a result of changes in vendor
relationships; vendors may sell similar or identical products to our
competitors; our reliance on key executive management, and the
transition in our executive leadership; our inability to find, train and
retain key personnel; labor relations difficulties; increases in health
care costs and labor costs; our dependence on foreign imports for our
merchandise; violations of the U.S. Foreign Corrupt Practices Act and
similar worldwide anti-bribery and anti-kickback laws; 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; effects of tax
reform; and uncertainty with respect to tax and trade policies, tariffs
and government regulations affecting trade between the United States and
other countries.

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, or SEC, on May 31, 2018, 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 (NYSE:TCS) is the nation’s leading retailer of
storage and organization products — a concept they originated in 1978.
Today, with locations nationwide, the retailer offers more than 10,000
products designed to save space and time, a suite of custom closet
systems and an array of digital shopping services. Visit www.containerstore.com
for more information about store locations, the product collection and
services offered. Visit www.containerstore.com/blog
for real solutions from the really organized and www.whatwestandfor.com
to learn more about the company’s unique culture.

                 
The Container Store Group, Inc.
Consolidated statements of operations
 
 
(In thousands, except share and Thirteen Weeks Ended Fiscal Year Ended
per share amounts) March 30, 2019 March 31, 2018 March 30, 2019 March 31, 2018
(unaudited) (unaudited) (unaudited)
Net sales $ 253,180 $ 232,764 $ 895,093 $ 857,228
Cost of sales (excluding depreciation and amortization)   104,900   96,248   371,410   360,167
Gross profit 148,280 136,516 523,683 497,061
Selling, general, and administrative expenses (excluding
depreciation and amortization)
110,048 104,855 430,997 411,721
Stock-based compensation 859 437 2,846 2,026
Pre-opening costs 185 617 2,103 5,293
Depreciation and amortization 8,953 9,398 36,305 37,922
Other expenses (120) 826 177 5,734
Loss (gain) on disposal of assets   221   42   (63)   278
Income from operations 28,134 20,341 51,318 34,087
Interest expense, net 5,982 7,615 27,275 25,013
Loss on extinguishment of debt       2,082   2,369
Income before taxes 22,152 12,726 21,961 6,705
Provision (benefit) for income taxes   6,270   13,125   281   (12,723)
Net income (loss) $ 15,882 $ (399) $ 21,680 $ 19,428
 
Net income (loss) per common share — basic and diluted $ 0.33 $ (0.01) $ 0.45 $ 0.40
 
Weighted-average common shares — basic 48,142,319 48,072,187 48,139,929 48,061,527
Weighted-average common shares — diluted 48,382,433 48,202,980 48,400,407 48,147,725
 
         
The Container Store Group, Inc.
Consolidated balance sheets
 
March 30, March 31,
(In thousands) 2019 2018
Assets (unaudited)
Current assets:
Cash $ 7,364 $ 8,399
Accounts receivable, net 25,568 25,528
Inventory 108,650 97,362
Prepaid expenses 10,078 11,281
Income taxes receivable 1,003 15
Other current assets   11,705   11,609
Total current assets 164,368 154,194
Noncurrent assets:
Property and equipment, net 152,588 158,389
Goodwill 202,815 202,815
Trade names 225,150 229,401
Deferred financing costs, net 241 312
Noncurrent deferred tax assets, net 1,912 2,404
Other assets   1,670   1,854
Total noncurrent assets   584,376   595,175
Total assets $ 748,744 $ 749,369
 
         
The Container Store Group, Inc.
Consolidated balance sheets (continued)
 
March 30, March 31,
(In thousands, except share and per share amounts) 2019 2018
Liabilities and shareholders’ equity (unaudited)
Current liabilities:
Accounts payable $ 58,734 $ 43,692
Accrued liabilities 67,163 70,494
Revolving lines of credit 5,511
Current portion of long-term debt 7,016 7,771
Income taxes payable   2,851   4,580
Total current liabilities 141,275 126,537
Noncurrent liabilities:
Long-term debt 254,960 277,394
Noncurrent deferred tax liabilities, net 51,702 54,839
Deferred rent and other long-term liabilities   36,114   41,892
Total noncurrent liabilities   342,776   374,125
Total liabilities 484,051 500,662
Commitments and contingencies
Shareholders’ equity:
Common stock, $0.01 par value, 250,000,000 shares authorized;
48,142,319 shares issued at March 30, 2019 and 48,072,187 shares
issued at March 31, 2018
481 481
Additional paid-in capital 863,978 861,263
Accumulated other comprehensive loss (26,132) (17,316)
Retained deficit   (573,634)   (595,721)
Total shareholders’ equity   264,693   248,707
Total liabilities and shareholders’ equity $ 748,744 $ 749,369
 
         
The Container Store Group, Inc.
Consolidated statements of cash flows
 
Fiscal Year Ended
March 30, March 31,
(In thousands) 2019 2018
Operating activities (unaudited)
Net income $ 21,680 $ 19,428
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 36,305 37,922
Stock-based compensation 2,846 2,026
(Gain) loss on disposal of assets (63) 278
Loss on extinguishment of debt 2,082 2,369
Deferred tax benefit (1,563) (25,545)
Non-cash interest 2,351 2,664
Other (60) 227
Changes in operating assets and liabilities:

 

Accounts receivable (1,395) 3,192
Inventory (14,688) 8,406
Prepaid expenses and other assets 1,510 (2,133)
Accounts payable and accrued liabilities 13,622 6,249
Income taxes (2,428) 625
Other noncurrent liabilities   (5,303)   6,468
Net cash provided by operating activities 54,896 62,176
 
Investing activities
Additions to property and equipment (33,670) (27,646)
Proceeds from sale of property and equipment   899   96
Net cash used in investing activities (32,771) (27,550)
 
Financing activities
Borrowings on revolving lines of credit 55,201 47,486
Payments on revolving lines of credit (49,484) (47,486)
Borrowings on long-term debt 331,500 335,000
Payments on long-term debt and capital leases (356,712) (361,403)
Payment of debt issuance costs (2,384) (11,246)
Payment of taxes with shares withheld upon restricted stock vesting   (128)   (39)
Net cash used in financing activities (22,007) (37,688)
 
Effect of exchange rate changes on cash   (1,153)   725
 
Net decrease in cash (1,035) (2,337)
Cash at beginning of fiscal period   8,399   10,736
Cash at end of fiscal period $ 7,364 $ 8,399
 

Note Regarding Non-GAAP Information

This press release includes financial measures that are not calculated
in accordance with GAAP, including adjusted net income, adjusted net
income per diluted share, 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 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., its controlling stockholder, to
assess its financial performance.

The Company presents adjusted net income, adjusted net income per
diluted share, 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.

Contacts

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.
Mara Richter, 972-538-6893
publicrelations@containerstore.com

Read full story here

The Container Store Group, Inc. Announces Fourth Quarter and Full Fiscal Year 2018 Financial Results

Fourth Quarter Comparable Store Sales up 8.5%; Consolidated Net
Sales up 8.8%

Fiscal 2018 Comparable Store Sales up 3.5%; Consolidated Net Sales
up 4.4%

Fourth Quarter EPS of $0.33 vs ($0.01) in Q417; Adjusted EPS
increases to $0.33 from $0.18 in Q417

Fiscal 2018 EPS of $0.45 vs $0.40 in Fiscal 2017; Adjusted EPS
increases to $0.42 from $0.28 in Fiscal 2017

Provides Fiscal 2019 Outlook

COPPELL, Texas–(BUSINESS WIRE)–The Container Store Group, Inc. (NYSE:TCS) (the “Company”), today
announced financial results for the fourth quarter and fiscal year 2018
ended March 30, 2019.

For the fourth quarter of fiscal 2018:

  • Consolidated net sales were $253.2 million, up 8.8%. Net sales in The
    Container Store retail business (“TCS”) were $235.7 million, up 10.1%.
    Elfa International AB (“Elfa”) third-party net sales were $17.5
    million, down 6.4% due to foreign currency translation.
  • Comparable store sales increased 8.5%, with Custom Closets up 7.4%,
    contributing 380 basis points of the increase to comparable store
    sales.
  • Consolidated net income and net income per share (“EPS”) were $15.9
    million and $0.33 compared to a net loss of $0.4 million and ($0.01),
    respectively, in the fourth quarter of fiscal 2017. Adjusted net
    income per share (“Adjusted EPS”) was $0.33 compared to $0.18 in the
    fourth quarter of fiscal 2017 (see Reconciliation of GAAP to Non-GAAP
    Financial Measures table).
  • Adjusted EBITDA (see Reconciliation of GAAP to Non-GAAP Financial
    Measures table), was $37.8 million compared to $31.1 million in the
    prior year period.

“We ended fiscal 2018 with strong results, posting an 8.5% comparable
store sales increase in Q4 that was broad-based across our core Custom
Closets business, as well as our other product categories,” said Melissa
Reiff, Chief Executive Officer. “This performance reflects the
improvements we continue to make across all aspects of our business – in
merchandising and new product development, marketing, inventory
management and in-stock levels, as well as overall execution with
excellence in our stores and our online channel. It also includes the
positive impact from the “Marie Kondo effect” that is driving even more
interest in our core category of Custom Closets and storage and
organization.”

“We have plans in fiscal 2019 to strategically build on our progress to
drive more brand awareness and market share gains, specifically in our
core Custom Closets business where we recently launched our new Avera™
product line,” Reiff added. “Our second distribution center in Maryland
is planned to become fully operational in late fiscal 2019, positioning
us to generate significant efficiencies and a considerable reduction in
delivery times leading to improved customer service in fiscal 2020 and
beyond. Across our entire company, we have clear priorities and a
go-to-market strategy grounded in our purpose – which is to help our
customers accomplish projects, maximize their space and make the most of
their homes. We intend to capitalize on the many opportunities we see
for the business and realize our vision to be a beloved brand and the
first choice for customized organization solutions and services.”

Fourth Quarter Fiscal 2018 Results

For the fourth quarter (thirteen weeks) ended March 30, 2019:

  • Consolidated net sales were $253.2 million, up 8.8% as compared to the
    fourth quarter of fiscal 2017. Net sales at TCS were $235.7 million,
    up 10.1%, driven by an increase in comparable store sales of 8.5%,
    combined with incremental sales from new stores. Elfa third-party net
    sales were $17.5 million, down 6.4% compared to the fourth quarter
    ended March 31, 2018, due to the negative impact of foreign currency
    translation during the quarter which decreased third-party net sales
    by 11.7%, partially offset by higher sales in the Nordic markets.
  • Consolidated gross margin was 58.6%, consistent with the fourth
    quarter of fiscal 2017. TCS gross margin increased 70 basis points to
    57.8%, primarily due to the impact of the Optimization Plan combined
    with a positive impact from foreign currency. Elfa gross margin
    declined 340 basis points primarily due to higher direct materials
    costs attributable to higher raw material prices and a weaker Swedish
    krona.
  • Consolidated selling, general and administrative expenses (“SG&A”)
    increased by 5.0% to $110.0 million in the fourth quarter of fiscal
    2018 from $104.9 million in the fourth quarter of fiscal 2017. SG&A as
    a percentage of net sales decreased 150 basis points. This was
    primarily due to decreased marketing expense in the fourth quarter of
    fiscal 2018 associated with a shift in the timing of recognition of
    campaign-related marketing costs from the fourth quarter to the third
    quarter as well as decreased costs incurred as part of the
    Optimization Plan, decreased professional fees and ongoing savings and
    efficiency efforts.
  • Consolidated net interest expense decreased 21.4% to $6.0 million in
    the fourth quarter of fiscal 2018 from $7.6 million in the fourth
    quarter of fiscal 2017. In September 2018, the Company amended its
    Senior Secured Term Loan Facility, which decreased the applicable
    interest rate margins.
  • The effective tax rate was 28.3%, as compared to 103.1% in the fourth
    quarter of fiscal 2017. In the fourth quarter of fiscal 2018, the
    effective tax rate rose above the U.S. statutory rate primarily due to
    items related to the Tax Cuts and Jobs Act (the “Tax Act”) and a
    pretax income position. In the fourth quarter of fiscal 2017, the
    effective tax rate increased above the blended U.S. statutory rate
    primarily due to the provisional amount recorded for the one-time
    transition tax on foreign earnings in connection with the Tax Act.
  • Net income was $15.9 million, or $0.33 per share, in the fourth
    quarter of fiscal 2018 compared to a net loss of $0.4 million, or
    ($0.01) per share in the fourth quarter of fiscal 2017. Adjusted net
    income was $16.2 million, or $0.33 per share, in the fourth quarter of
    fiscal 2018 compared to adjusted net income of $8.4 million, or $0.18
    per share in the fourth quarter of fiscal 2017 (see Reconciliation of
    GAAP to Non-GAAP Financial Measures table).
  • Adjusted EBITDA was $37.8 million in the fourth quarter of fiscal 2018
    compared to $31.1 million in the fourth quarter of fiscal 2017 (see
    Reconciliation of GAAP to Non-GAAP Financial Measures table).

For the year (fifty-two weeks) ended March 30, 2019:

  • Consolidated net sales were $895.1 million, up 4.4% as compared to
    fiscal 2017. Net sales at TCS were $829.6 million, up 5.4%, driven by
    a comparable store sales increase of 3.5% combined with incremental
    sales from new stores. Elfa third-party net sales were $65.5 million,
    down 6.2% compared to fiscal 2017, primarily due to the negative
    impact of foreign currency translation which decreased third-party net
    sales by 6.9%, partially offset by higher sales in the Nordic markets.
  • Consolidated gross margin was 58.5%, an increase of 50 basis points
    compared to fiscal 2017. TCS gross margin increased 80 basis points to
    58.0%, primarily due to lower cost of goods associated with the
    Optimization Plan, partially offset by higher promotional activities
    and increased costs associated with shipping services. Elfa gross
    margin declined 320 basis points primarily due to higher direct
    materials costs attributable to higher raw materials prices, a shift
    in product mix, and a weaker Swedish krona.
  • Consolidated SG&A expense increased by 4.7% to $431.0 million in
    fiscal 2018 from $411.7 million in fiscal 2017. SG&A as a percentage
    of net sales increased 20 basis points. The increase was primarily
    attributable to the deleverage of occupancy costs, higher payroll
    costs, and increased marketing expense associated with the branding
    campaign launch in the second quarter of fiscal 2018, partially offset
    by decreased costs associated with the Optimization Plan.
  • Pre-opening costs decreased to $2.1 million in fiscal 2018 compared to
    $5.3 million in fiscal 2017. The Company opened four new stores
    (inclusive of two relocations), in fiscal 2018, ending the fiscal year
    with 92 stores, as compared to five new stores opened (inclusive of
    one relocation) and an ending store count of 90, in fiscal 2017.
  • Other expenses decreased to $0.2 million in fiscal 2018 compared to
    $5.7 million in fiscal 2017. The decrease is primarily due to
    severance costs incurred in fiscal 2017 to implement the Optimization
    Plan.
  • Consolidated net interest expense increased 9.0% to $27.3 million in
    fiscal 2018 from $25.0 million in fiscal 2017 primarily due to the
    amendment of our Senior Secured Term Loan Facility in the second
    quarter of fiscal 2017, which increased the applicable interest rate
    margins.
  • The effective tax rate was 1.3% in fiscal 2018 as compared to -189.8%
    in fiscal 2017. In fiscal 2018, the effective tax rate was below the
    U.S. statutory rate due to the finalization of the one-time transition
    tax on foreign earnings. In fiscal 2017, the effective tax rate was
    below the U.S. statutory rate primarily due to the estimated impact of
    the Tax Act enacted in the third quarter of fiscal 2017, including the
    provisional benefit for the remeasurement of deferred tax balances.
  • Net income was $21.7 million, or $0.45 per share, in fiscal 2018
    compared to net income of $19.4 million, or $0.40 per share in fiscal
    2017. Adjusted net income was $20.4 million, or $0.42 per share, in
    fiscal 2018 compared to adjusted net income of $13.6 million, or $0.28
    per share in fiscal 2017 (see Reconciliation of GAAP to Non-GAAP
    Financial Measures table).
  • Adjusted EBITDA was $96.3 million in fiscal 2018 compared to $89.6
    million in fiscal 2017 (see Reconciliation of GAAP to Non-GAAP
    Financial Measures table).

Balance sheet and liquidity highlights:

(In thousands)     March 30, 2019     March 31, 2018
Cash $ 7,364 $ 8,399
Total debt, net of deferred financing costs $ 267,487 $ 285,165
Liquidity (1) $ 83,532 $ 90,767
Free cash flow (2) $ 21,226 $ 34,530
 
(1) Cash plus availability on revolving credit facilities.
(2) See reconciliation of GAAP to Non-GAAP Measures table.
 

Outlook

The Company is establishing its outlook for fiscal 2019 as follows:

   
  Fiscal 2019 Outlook
Net sales $915 million to $925 million
New store openings and store relocations 2 openings, including 1 relocation (2)
Comparable store sales Up 2.0% to up 3.0%
Net income per common share (1) $0.41 to $0.51
Adjusted net income per common share (1) (3) $0.41 to $0.51
Assumed tax rate 30%
Estimated share count 49 million
 
(1) Includes approximately $4 million, or $0.06 per
common share of net costs associated with the opening of a second
distribution center in Aberdeen, MD.
(2) The Company plans to open a new store in Memphis, TN
during the second quarter of fiscal 2019. Additionally, during the
second half of fiscal 2019, the Company plans to relocate an
existing store in Dallas, TX.
(3) See Reconciliation of GAAP to Non-GAAP Financial
Measures Table.
 

Conference Call Information

A conference call to discuss fourth quarter fiscal 2018 financial
results is scheduled for today, May 14, 2019, 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 two 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 13690281.
The replay will be available until June 14, 2019.

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 about our future opportunities; expectations
regarding our goals, strategies, priorities and initiatives;
expectations regarding new store openings and relocations; plans to
drive more brand awareness and attain market share gains; statements
regarding our new distribution center and its anticipated effects on our
business; and our anticipated financial performance and tax rate for
fiscal 2019.

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: our optimization plan may
not result in improved sales and profitability; our inability to open or
relocate new stores, or remodel existing stores, in the timeframe and at
the locations we anticipate; overall decline in the health of the
economy, consumer spending, and the housing market; our inability to
manage costs and risks relating to new store openings; our inability to
source and market new products to meet consumer preferences; our failure
to achieve or maintain profitability; risks relating to the opening of a
second distribution center; 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; our vulnerability to
natural disasters and other unexpected events; our reliance upon
independent third party transportation providers; our inability to
protect our brand; our failure to successfully anticipate consumer
preferences and demand; our inability to manage our growth; inability to
locate available retail store sites on terms acceptable to us; our
inability to maintain sufficient levels of cash flow to meet growth
expectations; 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; fluctuations in currency exchange rates; our inability
to effectively manage our online sales; competition from other stores
and internet-based competition; our inability to obtain merchandise on a
timely basis at competitive prices as a result of changes in vendor
relationships; vendors may sell similar or identical products to our
competitors; our reliance on key executive management, and the
transition in our executive leadership; our inability to find, train and
retain key personnel; labor relations difficulties; increases in health
care costs and labor costs; our dependence on foreign imports for our
merchandise; violations of the U.S. Foreign Corrupt Practices Act and
similar worldwide anti-bribery and anti-kickback laws; 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; effects of tax
reform; and uncertainty with respect to tax and trade policies, tariffs
and government regulations affecting trade between the United States and
other countries.

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, or SEC, on May 31, 2018, 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 (NYSE:TCS) is the nation’s leading retailer of
storage and organization products — a concept they originated in 1978.
Today, with locations nationwide, the retailer offers more than 10,000
products designed to save space and time, a suite of custom closet
systems and an array of digital shopping services. Visit www.containerstore.com
for more information about store locations, the product collection and
services offered. Visit www.containerstore.com/blog
for real solutions from the really organized and www.whatwestandfor.com
to learn more about the company’s unique culture.

                 
The Container Store Group, Inc.
Consolidated statements of operations
 
 
(In thousands, except share and Thirteen Weeks Ended Fiscal Year Ended
per share amounts) March 30, 2019 March 31, 2018 March 30, 2019 March 31, 2018
(unaudited) (unaudited) (unaudited)
Net sales $ 253,180 $ 232,764 $ 895,093 $ 857,228
Cost of sales (excluding depreciation and amortization)   104,900   96,248   371,410   360,167
Gross profit 148,280 136,516 523,683 497,061
Selling, general, and administrative expenses (excluding
depreciation and amortization)
110,048 104,855 430,997 411,721
Stock-based compensation 859 437 2,846 2,026
Pre-opening costs 185 617 2,103 5,293
Depreciation and amortization 8,953 9,398 36,305 37,922
Other expenses (120) 826 177 5,734
Loss (gain) on disposal of assets   221   42   (63)   278
Income from operations 28,134 20,341 51,318 34,087
Interest expense, net 5,982 7,615 27,275 25,013
Loss on extinguishment of debt       2,082   2,369
Income before taxes 22,152 12,726 21,961 6,705
Provision (benefit) for income taxes   6,270   13,125   281   (12,723)
Net income (loss) $ 15,882 $ (399) $ 21,680 $ 19,428
 
Net income (loss) per common share — basic and diluted $ 0.33 $ (0.01) $ 0.45 $ 0.40
 
Weighted-average common shares — basic 48,142,319 48,072,187 48,139,929 48,061,527
Weighted-average common shares — diluted 48,382,433 48,202,980 48,400,407 48,147,725
 
         
The Container Store Group, Inc.
Consolidated balance sheets
 
March 30, March 31,
(In thousands) 2019 2018
Assets (unaudited)
Current assets:
Cash $ 7,364 $ 8,399
Accounts receivable, net 25,568 25,528
Inventory 108,650 97,362
Prepaid expenses 10,078 11,281
Income taxes receivable 1,003 15
Other current assets   11,705   11,609
Total current assets 164,368 154,194
Noncurrent assets:
Property and equipment, net 152,588 158,389
Goodwill 202,815 202,815
Trade names 225,150 229,401
Deferred financing costs, net 241 312
Noncurrent deferred tax assets, net 1,912 2,404
Other assets   1,670   1,854
Total noncurrent assets   584,376   595,175
Total assets $ 748,744 $ 749,369
 
         
The Container Store Group, Inc.
Consolidated balance sheets (continued)
 
March 30, March 31,
(In thousands, except share and per share amounts) 2019 2018
Liabilities and shareholders’ equity (unaudited)
Current liabilities:
Accounts payable $ 58,734 $ 43,692
Accrued liabilities 67,163 70,494
Revolving lines of credit 5,511
Current portion of long-term debt 7,016 7,771
Income taxes payable   2,851   4,580
Total current liabilities 141,275 126,537
Noncurrent liabilities:
Long-term debt 254,960 277,394
Noncurrent deferred tax liabilities, net 51,702 54,839
Deferred rent and other long-term liabilities   36,114   41,892
Total noncurrent liabilities   342,776   374,125
Total liabilities 484,051 500,662
Commitments and contingencies
Shareholders’ equity:
Common stock, $0.01 par value, 250,000,000 shares authorized;
48,142,319 shares issued at March 30, 2019 and 48,072,187 shares
issued at March 31, 2018
481 481
Additional paid-in capital 863,978 861,263
Accumulated other comprehensive loss (26,132) (17,316)
Retained deficit   (573,634)   (595,721)
Total shareholders’ equity   264,693   248,707
Total liabilities and shareholders’ equity $ 748,744 $ 749,369
 
         
The Container Store Group, Inc.
Consolidated statements of cash flows
 
Fiscal Year Ended
March 30, March 31,
(In thousands) 2019 2018
Operating activities (unaudited)
Net income $ 21,680 $ 19,428
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 36,305 37,922
Stock-based compensation 2,846 2,026
(Gain) loss on disposal of assets (63) 278
Loss on extinguishment of debt 2,082 2,369
Deferred tax benefit (1,563) (25,545)
Non-cash interest 2,351 2,664
Other (60) 227
Changes in operating assets and liabilities:

 

Accounts receivable (1,395) 3,192
Inventory (14,688) 8,406
Prepaid expenses and other assets 1,510 (2,133)
Accounts payable and accrued liabilities 13,622 6,249
Income taxes (2,428) 625
Other noncurrent liabilities   (5,303)   6,468
Net cash provided by operating activities 54,896 62,176
 
Investing activities
Additions to property and equipment (33,670) (27,646)
Proceeds from sale of property and equipment   899   96
Net cash used in investing activities (32,771) (27,550)
 
Financing activities
Borrowings on revolving lines of credit 55,201 47,486
Payments on revolving lines of credit (49,484) (47,486)
Borrowings on long-term debt 331,500 335,000
Payments on long-term debt and capital leases (356,712) (361,403)
Payment of debt issuance costs (2,384) (11,246)
Payment of taxes with shares withheld upon restricted stock vesting   (128)   (39)
Net cash used in financing activities (22,007) (37,688)
 
Effect of exchange rate changes on cash   (1,153)   725
 
Net decrease in cash (1,035) (2,337)
Cash at beginning of fiscal period   8,399   10,736
Cash at end of fiscal period $ 7,364 $ 8,399
 

Note Regarding Non-GAAP Information

This press release includes financial measures that are not calculated
in accordance with GAAP, including adjusted net income, adjusted net
income per diluted share, 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 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., its controlling stockholder, to
assess its financial performance.

The Company presents adjusted net income, adjusted net income per
diluted share, 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.

Contacts

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.
Mara Richter, 972-538-6893
publicrelations@containerstore.com

Read full story here

error: Content is protected !!