The Container Store Group, Inc. Announces Fourth Quarter and Full Fiscal Year 2021 Financial Results

·19 min read

Highest full-year sales in history, with consolidated net sales of $1.1 billion, up 10.5% compared to fiscal 2020 and up 19.5% compared to fiscal 2019;

Highest full-year earnings per diluted share in history, with earnings per diluted share of $1.62 compared to $1.17 in fiscal 2020 and $0.30 in fiscal 2019; Adjusted earnings per diluted share* of $1.65 compared to $1.24 in fiscal 2020 and $0.30 in fiscal 2019;

Fourth quarter consolidated net sales of $305.5 million, down 2.9%compared to fourth quarter of fiscal 2020 (decrease driven by 580 basis points impact of 53rd week in the fourth quarter of fiscal 2020) and up 26.6% compared to fourth quarter of fiscal 2019;

Earnings per diluted share of $0.46 compared to $0.69in the fourth quarter of fiscal 2020 and $0.26 in the fourth quarter of fiscal 2019; Adjusted earnings per diluted share* of $0.46 compared to $0.71in the fourth quarter of fiscal 2020 and $0.26 in the fourth quarter of fiscal 2019

COPPELL, Texas, May 17, 2022--(BUSINESS WIRE)--The Container Store Group, Inc. (NYSE: TCS) (the "Company"), today announced its financial results for the fourth quarter and fiscal year ended April 2, 2022, outlook for fiscal 2022, and long-term targets. The fourth quarter and full fiscal year 2021 consisted of 13 weeks and 52 weeks, respectively. The fourth quarter and full fiscal year 2020 consisted of 14 weeks and 53 weeks, respectively. The fourth quarter and full fiscal year 2019 consisted of 13 weeks and 52 weeks, respectively.

Satish Malhotra, Chief Executive Officer and President of The Container Store, commented, "We are very pleased with our stronger than expected fourth quarter performance which capped off the best year of sales and profitability in company history. The results demonstrate the progress we are making toward our goal of doubling our sales to $2 billion, and in fiscal 2021 we proudly exceeded $1 billion in sales for the first time. In the fourth quarter of fiscal 2021, custom closet sales were up 3.6% when compared to fiscal 2020 driven by our successful Transform with Elfa event, despite limiting the depth and breadth of the promotions. On 2/22/22, we launched our new branding campaign, Welcome to The Organization, with a 22% off welcome offer that drove a record-breaking single-day sales. We followed up the branding campaign with the launch of a reimagined loyalty program, Organized Insider, and our first mobile app. Fiscal 2021 was a banner year that we believe has established a solid foundation for growth at The Container Store."

Mr. Malhotra concluded, "While fiscal 2022 will be a unique year as we contend with a dynamic macro backdrop, we will focus on our strategic initiatives to drive growth and market share gains. We will continue to emphasize the power of organization and demonstrate The Container Store’s leadership within the $20 billion addressable market of home storage and organization. With only 5% of total market share today, we are confident in the opportunity ahead to grow sales to $2 billion by fiscal 2027. We are excited to return to store growth with a plan to open two new stores in fiscal 2022, and a plan for an additional 74 new stores by fiscal 2027. This growth coupled with our more productive store base, and disciplined expense management is expected to result in low double digit operating margins over time as inflationary headwinds abate."

Fourth Quarter Fiscal 2021 Results

For the fourth quarter (thirteen weeks) ended April 2, 2022:

  • Consolidated net sales were $305.5 million, down 2.9%compared to the fourth quarter of fiscal 2020. The 53rd week of fiscal 2020 contributed approximately $17.7 million in net sales and 580 basis points of the decrease when comparing the fourth quarter of fiscal 2021 to the fourth quarter of fiscal 2020. Compared to the fourth quarter of fiscal 2019, consolidated net sales increased 26.6%.

    • Net sales in The Container Store retail business ("TCS") were $286.5 million, a decrease of 2.6%with general merchandise categories down 8.7%, contributing 440of the basis points decrease, and Custom Closets up 3.6%contributing 180basis points of the increase. Compared to the fourth quarter of fiscal 2019, TCS net sales were up 27.8%, with Custom Closets up 26.6%, contributing 1420 basis points of the increase, and general merchandise categories up 29.3%, contributing 1360 basis points of the increase.

    • Our online sales decreased 25.0% compared to the fourth quarter of fiscal 2020 and increased 29.1% compared to the fourth quarter of fiscal 2019.

    • Elfa International AB ("Elfa") third-party net sales were $19.1 million, down 7.1% compared to the fourth quarter of fiscal 2020 and up 10.4% compared to the fourth quarter of fiscal 2019. Excluding the impact of foreign currency translation, Elfa third-party net sales were up 1.8%.

    • As a result of the impact of the COVID-19 pandemic on our Company’s stores in fiscal 2019 and fiscal 2020 and the Company’s policy of excluding extended store closures from its comparable sales calculation, the Company does not believe that comparable store sales is a meaningful metric to present for the fourth quarter of fiscal 2021.

  • Consolidated gross margin was 57.0%, a decrease of 230basis points, compared to the fourth quarter of fiscal 2020. TCS gross margin decreased 10basis points to 57.0%primarily due to increased freight and commodity costs, partially offset by less promotional activity and decreased shipping costs as a result of a lower mix of online sales in the fourth quarter of fiscal 2021. Elfa gross margin decreased 750 basis points primarily due to higher direct material costs.

  • Consolidated selling, general and administrative expenses ("SG&A") increased by 3.0%to $127.1 million in the fourth quarter of fiscal 2021 from $123.4 millionin the fourth quarter of fiscal 2020. SG&A as a percentage of net sales increased 240basis points from 39.2%to 41.6% primarily due to increased marketing costs, increased compensation and benefit costs, as well as deleverage on lower sales during the fourth quarter of fiscal 2021.

  • Consolidated net interest expense decreased 14.8%to $3.2 million in the fourth quarter of fiscal 2021 from $3.7 millionin the fourth quarter of fiscal 2020. The decrease was primarily due to a lower principal balance on the Senior Secured Term Loan Facility.

  • The effective tax rate was 31.5% in the fourth quarter of fiscal 2021, as compared to 25.8%in the fourth quarter of fiscal 2020. The increase in the effective tax rate was primarily due to the impact of discrete items on lower pre-tax income in the fourth quarter of fiscal 2021.

  • Net income was $23.2 million, or $0.46 per diluted share, in the fourth quarter of fiscal 2021 compared to $35.1 million, or $0.69, per diluted share in the fourth quarter of fiscal 2020. Adjusted net income* was $23.2 million, or $0.46 per diluted share, in the fourth quarter of fiscal 2021 compared to adjusted net income* of $35.7 million, or $0.71 per diluted share in the fourth quarter of fiscal 2020. The 53rd week contributed approximately $0.07 of incremental EPS and Adjusted EPS in the fourth quarter of fiscal 2020.

  • Adjusted EBITDA* was $46.4 million in the fourth quarter of fiscal 2021 compared to $59.5 million in the fourth quarter of fiscal 2020. The 53rd week contributed approximately $5.3 million in adjusted EBITDA.

For the fiscal year (fifty-two weeks) ended April 2, 2022:

  • Consolidated net sales were $1.1 billion, up 10.5% as compared to fiscal 2020 and up 19.5% compared to fiscal 2019. The 53rd week of fiscal 2020 contributed approximately $17.7 million in net sales.

    • Net sales for the TCS segment were $1.0 billion, up 10.8%, with Custom Closets up 16.0%, contributing 740basis points of the increase, and general merchandise categories up 6.4%, contributing 340basis points of the increase. Compared to fiscal 2019, TCS net sales were up 20.0%, with Custom Closets up 22.8%, contributing 1080 basis points of the increase, and general merchandise categories up 17.5%, contributing 920 basis points of the increase.

    • Our online sales decreased 35.5% compared to fiscal 2020 and increased 35.1% compared to fiscal 2019.

    • Elfa third-party net sales were $70.9 million, up 5.9% compared to fiscal 2020 and up 11.5% compared to fiscal 2019. Excluding the impact of foreign currency translation, Elfa third-party net sales were up 5.0% compared to fiscal 2020.

  • Consolidated gross margin was 58.2%, an increase of 60 basis points compared to fiscal 2020. TCS gross margin increased 150 basis pointsto 57.6%, primarily due to less promotional activity and decreased shipping costs as a result of a lower mix of online sales, partially offset by increased freight and commodity costs in fiscal 2021. Elfa gross margin decreased 900 basis points primarily due to higher direct material costs.

  • Consolidated SG&A increased by 10.5% to $471.6 million from $426.8 million in fiscal 2020. However, SG&A as a percentage of net sales remained flat at 43.1%. During fiscal 2021, leverage of occupancy costs on higher sales was partially offset by increased compensation and benefit costs. Additionally, fiscal 2020 benefited from fixed cost leverage of approximately 30 basis points associated with $17.7 million of incremental sales in the 53rd week.

  • Consolidated net interest expense decreased 26.1% to $12.8 million in fiscal 2021 from $17.3 million in fiscal 2020. The decrease is primarily due to a lower principal balance on the Senior Secured Term Loan Facility combined with lower interest rates and decreased borrowings on the asset-based revolving credit agreement. Also, in fiscal 2020, the Company amended its Senior Secured Term Loan Facility and incurred a loss on extinguishment of debt of $0.9 million.

  • The effective tax rate was 27.5% for fiscal 2021 as compared to 27.9% in fiscal 2020. The decrease in the effective tax rate is primarily due to the impact of discrete items on higher pre-tax income in fiscal 2021.

  • Net income was $81.7 million, or $1.62 per diluted share, in fiscal 2021 compared to net income of $58.3 million, or $1.17 per diluted share in fiscal 2020. Adjusted net income* was $82.9 million, or $1.65 per diluted share in fiscal 2021, compared to adjusted net income* of $61.8 million, or $1.24 per diluted sharein fiscal 2020. The 53rd week contributed approximately $0.07 of incremental EPS and Adjusted EPS in fiscal 2020.

  • Adjusted EBITDA* was $159.0 million in fiscal 2021 compared to $150.5 million in fiscal 2020. The 53rd week contributed approximately $5.3 million in adjusted EBITDA.

* See Reconciliation of GAAP to Non-GAAP Financial Measures table.
Amount or percentage is inclusive of a 53rd week in fiscal 2020: $17.7 million in net sales, $5.3 million in adjusted EBITDA, and $0.07 in EPS and adjusted EPS.

New and Existing Stores

During fiscal 2021, the Company opened one new store in Annapolis, Maryland. As of April 2, 2022, the Company store base was 94 compared to 93 stores as of April 3, 2021.

Balance sheet and liquidity highlights:

(In thousands)

April 2, 2022

April 3, 2021

Cash

$

14,252

$

17,687

Total debt, net of deferred financing costs

$

162,450

$

165,984

Liquidity (1)

$

121,060

$

126,771

Free cash flow (*)

$

23,601

$

119,483

____________________

(1) Cash plus availability on revolving credit facilities.

Outlook

The Company today provided the following financial outlook for the fiscal year ending on April 1, 2023:

Consolidated net sales

Approximately $1.125 billion

Comparable store sales growth

Low-single digits

Earnings per diluted share

$1.20 to $1.30

Assumed fully diluted shares

51 million

Capital expenditures

$60 to $65 million

Planned store openings (1)

2

The Company also provided the following financial outlook for the fiscal first quarter ending on July 2, 2022:

Consolidated net sales growth

Mid-single digits

Comparable store sales growth

Mid-single digits

Earnings per diluted share

$0.15 to $0.20

Assumed fully diluted shares

51 million

Planned store openings

None

(1) Planned smaller footprint store openings in fiscal 2022 are as follows:

  • Colorado Springs, CO in the fall of calendar 2022

  • Salem, NH in the winter of calendar 2022

Long-Term Financial Targets

As part of today’s enhanced earnings event, the Company provided long-term financial targets. The Company expects to achieve $2 billion in consolidated net sales and more than double our earnings per diluted share by the end of fiscal 2027. Over this period of time, the Company expects to drive low double-digit annual sales growth, which encompasses low-single digit comparable store sales growth, combined with the expectation to open 76 new stores by the end of fiscal 2027. Additionally, the Company expects to spend approximately 5.5% to 6.0% of annual net sales on capital expenditures during this timeframe.

Conference Call Information

A conference call to discuss fourth quarter and full year fiscal 2021 financial results is scheduled for today, May 17, 2022, 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 13728571. The replay will be available until June 17, 2022.

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 future opportunities; our goals, strategies, priorities and initiatives; sales trends, momentum and targets; and our anticipated financial performance and long term targets.

These forward-looking statements are based on management’s current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the following: the COVID-19 pandemic and the associated impact on our business, 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; overall decline in the health of the economy, consumer spending, and the housing market; our inability to source and market new products to meet consumer preferences; failure to successfully anticipate consumer preferences and demand; competition from other stores and internet-based competition; 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 Elfa manufacturing facilities; deterioration or change in vendor relationships or events that adversely affect our vendors or their ability to obtain financing for their operations, including COVID-19; product recalls and/or product liability, as well as changes in product safety and other consumer protection laws; risks relating to operating multiple distribution centers; our dependence on foreign imports for our merchandise; our reliance upon independent third party transportation providers; our inability to effectively manage our online sales; effects of a security breach or cyber-attack of our website or information technology systems, including relating to our use of third-party web service providers; damage to, or interruptions in, our information systems as a result of external factors, working from home arrangements, staffing shortages and difficulties in updating our existing software or developing or implementing new software; our indebtedness may restrict our current and future operations, and we may not be able to refinance our debt on favorable terms, or at all; fluctuations in currency exchange rates; our inability to maintain sufficient levels of cash flow to meet growth expectations; our fixed lease obligations; disruptions in the global financial markets leading to difficulty in borrowing sufficient amounts of capital to finance the carrying costs of inventory to pay for capital expenditures and operating costs; changes to global markets and inability to predict future interest expenses; our reliance on key executive management; our inability to find, train and retain key personnel; labor relations difficulties; increases in health care costs and labor costs; violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery and anti-kickback laws; impairment charges and effects of changes in estimates or projections used to assess the fair value of our assets; effects of tax reform and other tax fluctuations; significant fluctuations in the price of our common stock; substantial future sales of our common stock, or the perception that such sales may occur, which could depress the price of our common stock; risks related to being a public company; our performance meeting guidance provided to the public; anti-takeover provisions in our governing documents, which could delay or prevent a change in control; acquisition-related risks and our failure to establish and maintain effective internal controls.

These and other important factors discussed under the caption "Risk Factors" in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, (the "SEC") on June 3, 2021 and our other reports filed with the SEC could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. Any such forward-looking statements represent management’s estimates as of the date of this press release. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.

About The Container Store

The Container Store Group, Inc. (NYSE: TCS) is the nation’s leading specialty retailer of storage and organization products and solutions and custom closets – a concept they originated in 1978. Today, with locations nationwide, the retailer offers more than 11,000 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, Twitter, Instagram, TikTok, YouTube, Pinterest and LinkedIn.

The Container Store Group, Inc.

Consolidated statements of operations

Fiscal Quarter Ended

Fiscal Year Ended

April 2,

April 3,

April 2,

April 3,

(In thousands, except share and per share amounts)

2022

2021

2022

2021

(unaudited)

(unaudited)

Net sales

$

305,546

$

314,683

$

1,094,119

$

990,088

Cost of sales (excluding depreciation and amortization)

131,519

127,990

457,882

419,611

Gross profit

174,027

186,693

636,237

570,477

Selling, general, and administrative expenses (excluding depreciation and amortization)

127,108

123,437

471,586

426,765

Stock-based compensation

1,104

2,837

4,263

7,823

Pre-opening costs

8

915

694

1,026

Depreciation and amortization

8,877

8,461

34,289

34,731

Other (income) expenses

23

1,112

(Gain) loss on disposal of assets

(35

)

4

(49

)

16

Income from operations

36,965

51,016

125,454

99,004

Interest expense, net

3,176

3,728

12,760

17,268

Loss on extinguishment of debt

893

Income before taxes

33,789

47,288

112,694

80,843

Provision for income taxes

10,631

12,204

30,976

22,560

Net income

$

23,158

$

35,084

$

81,718

$

58,283

Net income per common share — basic

$

0.47

$

0.72

$

1.65

$

1.20

Net income per common share — diluted

$

0.46

$

0.69

$

1.62

$

1.17

Weighted-average common shares — basic

49,629,758

48,667,689

49,447,612

48,537,883

Weighted-average common shares — diluted

50,286,381

50,537,033

50,294,118

49,712,637

The Container Store Group, Inc.

Consolidated balance sheets

April 2,

April 3,

(In thousands)

2022

2021

Assets

(unaudited)

Current assets:

Cash

$

14,252

$

17,687

Accounts receivable, net

30,225

28,949

Inventory

192,783

130,619

Prepaid expenses

11,628

11,429

Income taxes receivable

1,687

93

Other current assets

9,836

14,547

Total current assets

260,411

203,324

Noncurrent assets:

Property and equipment, net

140,198

131,884

Noncurrent operating lease right-of-use assets

347,519

307,147

Goodwill

221,159

202,815

Trade names

224,938

227,669

Deferred financing costs, net

203

255

Noncurrent deferred tax assets, net

865

2,305

Other assets

2,284

3,070

Total noncurrent assets

937,166

875,145

Total assets

$

1,197,577

$

1,078,469

The Container Store Group, Inc.

Consolidated balance sheets (continued)

April 2,

April 3,

(In thousands, except share and per share amounts)

2022

2021

Liabilities and shareholders’ equity

(unaudited)

Current liabilities:

Accounts payable

$

84,059

$

68,546

Accrued liabilities

89,004

86,551

Current borrowings on revolving lines of credit

1,790

Current portion of long-term debt

2,096

2,166

Current operating lease liabilities

52,540

50,847

Income taxes payable

6,026

6,803

Total current liabilities

235,515

214,913

Noncurrent liabilities:

Long-term debt

158,564

163,818

Noncurrent operating lease liabilities

317,345

285,022

Noncurrent deferred tax liabilities, net

50,493

48,923

Other long-term liabilities

7,564

12,124

Total noncurrent liabilities

533,966

509,887

Total liabilities

769,481

724,800

Commitments and contingencies

Shareholders’ equity:

Common stock, $0.01 par value, 250,000,000 shares authorized; 49,635,447 shares issued at April 2, 2022; 48,838,261 shares issued at April 3, 2021

496

488

Additional paid-in capital

874,190

873,048

Accumulated other comprehensive loss

(27,444

)

(19,003

)

Retained deficit

(419,146

)

(500,864

)

Total shareholders’ equity

428,096

353,669

Total liabilities and shareholders’ equity

$

1,197,577

$

1,078,469

The Container Store Group, Inc.

Consolidated statements of cash flows

Fiscal Year Ended

April 2,

April 3,

(In thousands)

2022

2021

(unaudited)

Operating activities

Net income

$

81,718

$

58,283

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

34,289

34,731

Stock-based compensation

4,263

7,823

(Gain) loss on disposal of assets

(49

)

16

Loss on extinguishment of debt

893

Deferred tax expense (benefit)

3,621

(4,740

)

Non-cash interest

1,883

1,870

Other

(1,321

)

161

Changes in operating assets and liabilities (exclusive of effects of acquisition):

Accounts receivable

(1,631

)

(1,497

)

Inventory

(63,533

)

(2,403

)

Prepaid expenses and other assets

(1,474

)

(3,821

)

Accounts payable and accrued liabilities

9,814

35,203

Net change in lease assets and liabilities

(6,232

)

(4,118

)

Income taxes

(1,811

)

11,346

Other noncurrent liabilities

(2,547

)

2,912

Net cash provided by operating activities

56,990

136,659

Investing activities

Additions to property and equipment

(33,389

)

(17,176

)

Closet Works acquisition, net of cash acquired

(19,445

)

Investment in non-qualified plan trust

(362

)

(182

)

Proceeds from non-qualified plan trust redemptions

2,708

1,810

Proceeds from sale of property and equipment

66

65

Net cash used in investing activities

(50,422

)

(15,483

)

Financing activities

Borrowings on revolving lines of credit

75,167

56,132

Payments on revolving lines of...

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