Q3 2021 Container Store Group Inc Earnings Call
[music].
Speaker 1: Greetings and welcome to the Container Store third quarter 2021 earnings copy.
Greetings and welcome to the container store third quarter 2021 earnings conference call.
Speaker 1: At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during today's conference, please...
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
No one should require operator assistance during todays conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded I would now like to turn this conference over to your host Ms. Caitlin Churchill Investor Relations. Thank you Ma'am you may begin your presentation.
Speaker 1: As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Ms. Kaitlyn Churchill. Investor Relations, thank you ma'am. You may begin your pre-
Speaker 2: Good afternoon, everyone. And thanks for joining us today for the container store third quarter fiscal year 2021 earnings results conference call.
Good afternoon, everyone and thanks for joining us today for the container store third quarter fiscal year 2021 earnings result conference call.
Speaker 2: Speaking today are Satish Mahaltra, Chief Executive Officer, and Jeff Miller, Chief Financial Officer.
Today, Arthur teach the whole Trust, Chief Executive Officer, and Jeff Miller, Chief Financial Officer.
Speaker 2: After Satish and Jeff have made their formal remarks, we will open the call to questions.
After fatigue and Jack have made their formal remarks, we will.
I'll open the call to questions.
Speaker 2: Before we begin, I would like to remind everyone that certain matters discussed in today's conference call are forward-looking statements relating to future events, management plans, and objectives for the business and the future financial performance of the company that are subject to risks and interests.
Before we begin I would like to remind everyone that certain matters discussed in today's conference call are forward looking statements relating to future events management's plans and objectives for the business and the future financial performance of the company that are subject to risks and uncertainties.
Speaker 2: actual results could differ materially from those anticipated in these forward-looking states.
Actual results could differ materially from those anticipated in these forward looking statements.
Speaker 2: The risk factors that may affect results are referred to in the container stores press release issued today and in our annual report on Form 10-K filed with the FCC on June 3, 2021.
The risk factors that may affect results are referred to in the container stores press release issued today and in our annual report on Form 10-K filed with the SEC on June 32021.
Speaker 2: The forward-looking statements made today are as of the date of this call, and the container store does not undertake any obligation to update the forward-looking statements.
The forward looking statements made today are as of the date of this call and the container store does not undertake any obligation to update the forward looking statements.
Speaker 2: Finally, the speakers may refer to certain adjusted or non-GAAP financial measures on this call. A reconciliation schedule of the non-GAAP financial measures to the most directly comparable GAAP measures is also available in the Container Store's press release issued today. A copy of today's press release and investor deck may be obtained by visiting the investor relations page of the website at www.containersore.com. I will now turn the call over to...
Finally, the speakers may refer to certain adjusted or non-GAAP financial measures on this call a reconciliation schedule of the non-GAAP financial measures to the most directly comparable GAAP measures is also available on the container stores press release issued today.
A copy of today's press release, and Investor deck, maybe obtained by visiting the Investor Relations page of the website at Www Dot container store Dot Com I will now turn the call over to to teach teach.
Speaker 3: Thank you, Caitlin, and thank you all for joining our poll today.
Thank you Caitlin and thank you all for joining our call today.
Speaker 3: I'll first discuss our strong fiscal Q3 performance, followed by an update on our growth initiatives. Jeff will then review our financial results in more detail and discuss our outlook.
I'll first discuss our strong fiscal Q3 performance followed by an update on our growth initiatives.
Jeff will then review our financial results in more detail and discuss our outlook.
Speaker 3: Our third quarter results surpassed our expectations and demonstrated three consecutive quarters of growth in fiscal 2021 when compared to fiscal 2019.
Our third quarter results surpassed our expectations and demonstrated three consecutive quarters of growth in fiscal 2021, when compared to fiscal 2019.
Speaker 3: For the third quarter, consolidated net sales were $267.3 million. Approximately a 17% increase compared to the third quarter of fiscal 2019. And a decrease of 3% compared to the prior year.
For the third quarter consolidated net sales were $267 $3 million.
Proximately, a 17% increase compared to the third quarter of fiscal 2019, and a decrease of 3% compared to the prior year.
Speaker 3: From a profitability perspective, we delivered adjusted EPS of 28 cents compared to 5 cents in the third quarter of fiscal 2019 and 42 cents in the third quarter of fiscal 2020.
From a profitability perspective, we delivered adjusted EPS of <unk> 28, compared to five cents in the third quarter of fiscal 2019, and 42 cents in the third quarter of fiscal 2020.
Speaker 3: Our third quarter performance when compared to 2019 was broad-based, with double digit growth seen in both our general merchandise categories and in our custom closet business.
Our third quarter performance when compared to 2019 was broad based with double digit growth seen in both our general merchandise categories and in our custom closet business.
Speaker 3: In fact, for the third consecutive quarter, we delivered close to or above 20% growth in custom closets when compared to fiscal 2019.
In fact for the third consecutive quarter, we delivered close to or above 20% growth in custom closets, when compared to fiscal 2019.
Speaker 3: This growth was fueled by not only our affordable modular alpha line, where we experienced our highest sales day in history with the launch of our Transform with Alpha event in mid-December, but also by our premium Avera line, which continues to average around $6,000 per space, and continues to outpace fiscal 2019 and fiscal 2020 sales.
This growth was fueled by not only our affordable modular Alpha line, where we experienced our highest sales day in history with the launch of our transformed with Alpha event in mid December but also by our premium very light, which continues to average around $6000 per space and continues to outpace fiscal 'twenty.
In 19 and fiscal 2020 sales.
Yeah.
Speaker 3: In lights of our continued strength, we're seeing in our custom closet business, especially in our ability to sell custom spaces above $2,000, we felt the need to significantly bolster our custom closet and home solutions with the acquisition of closet works, which closed on December 30th, 2021.
In light of our continued strength, we're seeing in our business, especially in our ability to sell custom spaces above $2000. We felt the need to significantly bolster our custom closet and home solutions with the acquisition of closet works, which closed on December 32021.
Because it works is they Chicago based manufacturer of premium custom wood based basis.
Speaker 3: All that works is a Chicago-based manufacturer of premium, custom wood-based-based-
Speaker 3: from walking closets to home offices, wine storage, wall beds, and garages. Closetworks has developed custom spaces that have been tested and refined for over three decades.
Walk in closets to home offices wine storage wall beds, and garages, because it works has developed custom spaces that had been tested and refined for over three decades.
Customizations include a vast number of finished options lighting hardware countertops trim and their distinct they've been very innovative 360 degree organize it which is a fully rotating system ideal for shoes countries valley and so much more.
Speaker 3: Customizations include a vast number of finished options, lighting, hardware, countertops, trim, and their distinctive and very innovative 360-degree organise.
Speaker 3: which is a fully rotating system ideal for shoes, pantries, valley, and so much more.
Speaker 3: This acquisition not only provides us with manufacturing capabilities in the US, but also provides us with added capacity to grow and expand our business nationwide with a much superior assaul...
This acquisition not only provides us with manufacturing capabilities in the U S. But also provides us with added capacity to grow and expand our business nationwide with a much superior assortment.
Speaker 3: and allows us the ability to improve our margin profile on wood basis.
And allows us the ability to improve our margin profile and broad based systems.
Speaker 3: We are thrilled to welcome Quasitworks to the Container Store family and look forward to meeting customer demand with an exceptional product offering.
We are thrilled to welcome closet works to the container store family and look forward to meeting customer demand with an exceptional product offering.
Speaker 3: With respect to our general merchandise categories, we have delighted to have delivered an increase of 15.6% to fiscal 2019, which was only down 5.4% compared to last year.
With respect to our general merchandise categories. We are delighted to have delivered an increase of 15, 6% to fiscal 2019, which was only down five 4% compared to last year.
Speaker 3: As a reminder, last year, a general merchandise category is benefitted greatly from the launch of the Netflix series Get Organized with the Home Edit.
As a reminder, last year, our general merchandise categories benefited greatly from the launch of the Netflix series get organized with the home edit.
Okay.
Speaker 3: The strength in our General Merchandise categories during the third quarter of 2021 was largely due to the strategic shift we made in highlighting compelling core products relevant during the holiday season, while still offering a narrow yet highly curated holiday offering.
The strength in our general merchandise categories during the third quarter of 'twenty, 'twenty, one, which largely due to the strategic shift we made in highlighting compelling cool products relevant during the holiday season.
Offering a narrow yet highly curated holiday offering.
Speaker 3: For example, we featured an expanded assortment of kitchen products at the front of the store, which supported our new ways to holiday campaign. While our dedicated holiday display showcased captivating holiday wraps, which included racially diverse centers, sustainably sourced gift boxes and bags, and desirable stocking stuff.
For example, we featured an expanded assortment of kitchen products at the front of the store, which supported our new ways to holiday campaign.
Our dedicated holiday display showcased captivating holiday box, which included racially diverse centers sustainably sourced gift boxes and bags and desirable stocking stuffers.
Speaker 3: The changes we made to revamp holiday this year drove strong customer engagement.
The changes we made to rebound holiday this year drove strong customer engagement, which improved overall sell through rates of holiday specific merchandise and also drove strong sales in our core categories, such as kitchen storage in closets.
Speaker 3: which improved overall cell-through rates of holiday-specific merchandise and also drove strong cells in our core categories, such as kitchen, storage, and closet.
Speaker 3: We were also pleased to let e-commerce performance in Q3, which was up 26.9% for online sales compared to 2019.
We were also pleased with our E Commerce performance in Q3, which was up 26, 9% for online sales compared to 2019.
Speaker 3: including curbside pickup, website generated sales were up 53% compared to 2019.
Including curbside pickup website generated sales were up 53% compared to 2019.
Speaker 3: Performance this quarter with powered by improvements in site browsing, product pages, and a continued focus on site speed.
Performance this quarter with powered by improvements in fact browsing product pages and a continued focus on site speed.
Speaker 3: Since the initial shift to e-commerce at the start of the pandemic, we have continued to maintain a higher level of penetration above the pre-pandemic period.
Since the initial shift to e-commerce at the start of the pandemic. We have continued to maintain a higher level of penetration above the pre pandemic period.
As I reflect on my initial 12 months as CEO I'm very proud of how our organization has rallied around a singular vision to transform the lives of our customers through the power of organization.
Speaker 3: As I reflect to my initial 12 months of CEO , I'm very proud of how our organization has rallied around a singular vision to transform the lives of our customers through the power of organization.
Speaker 3: Together we have delivered strong financial results, made strides against our strategic initiatives to drive growth and market share. We've also made progress on our goal of making the container store a $2 billion business over time.
Together, we have delivered strong financial results made strides against our strategic initiatives to drive growth and market share.
We've also made progress on our goal of making the container store, a 2 billion dollar business over time.
Speaker 3: Now, why we are still in the early innings, we have accomplished a great deal and have much to be proud of. Now, for an update on our three strategic pillars.
Now while we are still in the early innings, we have accomplished a great deal and have much to be proud of.
Now for an update on our three strategic pillars.
First with deepening our relationship with our customers.
Speaker 3: Over the past year, we've not only improved our in-store shopping experience by adding hosts, zoning key areas, and by adding demonstrations, but we've also refined our promotional cadence and messaging to our customers.
Over the past year with not only improved our in store shopping experience by adding hosts zone in key areas and by adding demonstrations, but we've also refined our promotional cadence and messaging to our customers.
Speaker 3: In addition, we have curated our product assortment to line with customer interest and value.
In addition, we have curated a product assortment to align with customer interests and values.
Speaker 3: For example, customers have loved seeing transformations of real spaces throughout our marketing materials, which you will see in our Transform with Alpha events.
For example, customers have loved seeing transformations of real spaces throughout our marketing materials, which you will see in our transform with alpha event.
Speaker 3: The before and after graphics and testimonials shown in store and through all digital channels are what we believe differentiates us from the rest of the root tale.
Before and after graphics and testimonials shown in store and through all digital channels, while we believe differentiate us from the rest of the retail.
Speaker 3: Additionally, we continue to expand our sustainable product mix and are pleased to offer approximately 1600 sustainable skews in our saltman.
Additionally, we continue to expand our sustainable product mix and I'm pleased to offer approximately 1600 sustainable skews in our assortment. We will continue to expand the number of sustainable products, we carry and we're excited to share our plans to launch an expansion about Marie Kondo collection in the fourth quarter. This expansion.
Speaker 3: We will continue to expand the number of sustainable products we carry, and we're excited to share our plans to launch an expansion of our Marie Condo collection in a fourth quarter.
Speaker 3: This expansion will include more than 100 new sustainable products and will broaden marine's reach in the home office and back category.
It will include more than 100, new sustainable products and will broaden its reach in the home office and back category. Additionally.
Speaker 3: Additionally, our customers love the home added lightweight sustainable wood collection for the kitchen and drawers, which we carry exclusively.
Additionally, our customers love the home edit lightweight sustainable wood collection for the kitchen and draws which we carry exclusively.
Speaker 3: After a successful test period in select stores, we're adding the Onyx collection to the existing sand collection to all stores in Mars.
After a successful test period in select stores, we're adding the Onyx collection to the existing San collection to all stores in March.
Speaker 3: And very pleased with the product selection and design work our buyers are doing to further expand and strengthen our sustainable product mix.
I'm very pleased with the product selection and design work.
Our buyers are doing to further expand and strengthen our sustainable product mix.
Speaker 3: I continued focused on deepening our customer relationship while also driving profitability demonstrates the appeal of our brand and the strength of our offering.
Our continued focus on deepening customer relationships, while also driving profitability demonstrates the appeal of our brand and the strength about offering.
To that end I'm excited to announce that later this month, we expect to launch a new brand campaign, alongside our new brand icon.
Speaker 3: To that end, I'm excited to announce that later this month we're expect to launch a new brand campaign alongside a new brand icon.
Speaker 3: The Browning Campaign, welcome to the organization, is an open invitation to all to learn and discover the power of organization.
The branding campaign won't come to the organization is an open invitation to all to learn and discover the power of organization.
Speaker 3: It is also an opportunity for our current customers to share their transformational journeys with others.
It is also an opportunity for our current customers to share their transformational journeys with others.
Speaker 3: And as we headed to a new store growth mode, the new brand campaign would allow us to welcome new markets to our extensive product of saltment, impressive custom closet solutions, and specialized in hung services.
And as we head into a new store growth mode. The new brand campaign will allow us to welcome new markets to our extensive product assortment impressive custom closet solutions and specialized in home services.
Speaker 3: We're excited to launch this branding campaign to help customers discover the power of organization and join our movement.
We're excited to launch this branding campaign to help customers discover the power of organization enjoying out movement.
Speaker 3: The welcoming will begin on 2222, the last most organized day of the century.
The welcoming will begin on to 'twenty to 'twenty two the last most organized day of the century.
Speaker 3: Lastly, at the end of March, we expect to launch a new care-based loyalty program that we believe will not only attract new customers, but will also reward a deeper level of engagement with existing customers. Moving to our second strategic...
Lastly at the end of March we expect to launch a new tiered based loyalty program that we believe will not only attract new customers, but will also reward a deeper level of engagement with existing customers.
Moving to our second strategic pillar expanding our reach.
Speaker 3: We continue to win in selling custom spaces over $2,000. For example, in Q3, we held our second Avera only event.
We continue to win and selling custom spaces over $2000. For example in Q3, we held our second there are only event.
Speaker 3: Despite a pullback in the depth of this promotional event, we saw strong sales growth with spaces averaging $6,000 each.
Despite a pullback in the depths of this promotional event, we saw strong sales growth with spaces, averaging $6000 each.
Speaker 3: especially the working hard to educate customers about our premium of their align. And the results demonstrate we are making great progress with year-to-date sales of a Vera far outpacing fiscal 2019 and 2020.
Our specialists are working hard to educate customers about our premium apparel line and the results demonstrate we are making great progress with year to date sales. Although there are far outpacing fiscal 2019 and 2020.
Speaker 3: The changes made to date in our promotional cadence also give us confidence in our decision to make changes to our annual alpha cell, which is now transformed with alpha.
The changes made to date in our promotional cadence also give us confidence in our decision to make changes to our annual Elfa sale, which has now transformed with alpha.
Speaker 3: The sale is two weeks shorter in length, and the depth of the promotion is also decreased from our historical 30% off to 20% off, purchases greater than 500, and 10% off purchases under 500.
The sale is two weeks shorter in length and the depth of the promotion is also decreased from our historical 30% off to 20% off purchases greater than 510% off.
Purchases under 500.
Speaker 3: The event kicked off on December 22nd. As I mentioned earlier, we have experienced about highest sales day in history.
They've been kicked off on December 22nd as I mentioned earlier, we experienced our highest sales day in history.
Speaker 3: With regard to stores, we are excited to open our US smaller format store in Colorado Springs, Colorado, which is expected to open in the fall of 2022.
With regard to stores, we're excited to open our newest smaller format store in Colorado Springs, Colorado, which is expected to open in the fall of 2022.
Speaker 3: We're also excited to announce a second smaller format store in Salem, New Hampshire, which is expected to open in the spring of 2023.
We're also excited to announce a second smaller format store in Salem, New Hampshire, with it which is expected to open in the spring of 2023.
Our real estate team continues to develop the pipeline for additional new store opportunities prioritizing key markets. We believe present, the most attractive growth opportunities.
Speaker 3: I real estate team continues to develop the pipeline for additional new store opportunities. Prioritizing key markets, we believe presents the most attractive growth opportunities.
Speaker 3: As a reminder, we see the potential to add at least 100 new stores in the coming years, which is in addition to the potential shop and shop concept we continue to explore. In addition to a-
As a reminder, we see the potential to add at least 100, new stores in the coming years, which is in addition to the potential shop in shop concept, we continue to explore.
In addition to our brick and mortar expansion. We're also excited for the opportunities we see within e-commerce .
Speaker 3: We're also excited for the opportunities we see within e-commerce.
Speaker 3: As I mentioned, we have maintained a healthy e-commerce penetration and continue to identify ways to grow and improve our e-commerce experience.
As I mentioned, we have maintained a healthy e-commerce penetration and continue to identify ways to grow and improve our e-commerce experience.
Speaker 3: Today we have made significant strides to enhance our site browsing experience, including a holistic redesign about product listing page and product detail page.
To date, we have made significant strides to enhance outside browsing experience, including a holistic redesign about product listing page and product detail page.
Speaker 3: For example, our multi-variant product pages will show customers additional size and color options of a product.
For example, our multi variant product pages will show customers additional size and color options of a product.
Speaker 3: We also recently launched smart filtering to allow customers to filter by the dimension of a product.
We also recently launched smart filtering to allow customers to filter by the dimension of a product.
Speaker 3: This improvement assists them in finding the right items for their space, saving them valuable time on site.
This improvement assists them in finding the right item for their space saving valuable time on site.
Speaker 3: Lastly, I'm thrilled about a new mobile app, which we expect to launch this spring.
Lastly, I'm thrilled about our new mobile App, which we expect to launch this spring.
Speaker 3: It will be another way to meet customers where they are already shopping and will allow us to introduce them to our new low-key program.
Would be another way to meet customers, where they are already shopping and will allow us to introduce them to our new loyalty program.
Speaker 3: This brings me to our third and final priority, strengthening out capability.
This brings me to our third and final priority strengthening our capabilities.
Speaker 3: Technology enhancements continue to be a core focus. Over the past year, we have added more payment options for customers, including the addition of PayPal and a mobile point of sale solution, both of which are expected to be available by the end of fiscal 2021.
Technology enhancements continue to be a core focus over the past year, we have added more payment options for customers, including the addition of Paypal and a mobile point of sale solution, both of which are expected to be available by the end of fiscal 2021.
Speaker 3: Also, we're pleased with our ability to attract great talent and recently hired an SVP of e-commerce and a new General Counsel.
Also we're pleased with our ability to attract great talent and recently hired an SVP of E Commerce, and a new general counsel.
Speaker 3: We also conducted a third party pay equity studies to ensure we are being equitable and inclusive in how we compensate our employees regardless of race, age, gender or ethnicity.
We also conducted a third party pay equity study to ensure we are being equitable and inclusive and how we compensate our employees regardless of race age gender or ethnicity.
Speaker 3: When it comes to our ESG strategy, we completed the materiality assessment mentioned last quarter, and are working on our first ever sustainability report, which is expected to be shared with our stakeholders this summer.
When it comes to our ESG strategy, we completed the materiality assessment mentioned last quarter and are working on our first ever sustainability report, which is expected to be shared with our stakeholders. This summer.
Speaker 3: From a manufacturing perspective, modular metal-based manufacturing capability coupled with our new premium wood-based manufacturing capability will provide us the opportunity to not only benefit from improved margins, but it will allow us to deliver a custom and superior offering for every space of the home.
From a manufacturing perspective, a modular metal based manufacturing capability, coupled with our new premium wood based manufacturing capability will provide us the opportunity to not only benefit from improved margins, but it will allow us to deliver a custom and superior offering for every space at the home.
Speaker 3: In summary, I am tremendously proud of the execution of our Macy team.
In summary, I'm tremendously proud of the execution of our amazing teams.
Speaker 3: their heir of excitement, attitude and endurance, are the reason we are delivering strong financial results and making operational strides on our Suzy's priority.
Their air of excitement attitude and endurance of the reason, we are delivering strong financial results and making operational strides on our strategic priorities.
Speaker 3: We're also driving more possible growth as we purposely reduce the depth, breadth, and duration of our promotional cadence.
We're also driving more profitable growth as we purposely reduced the depth breadth and duration about promotional cadence.
Speaker 3: As we look to the conclusion of our fiscal year, we are encouraged by our ability to strengthen our connection with existing customers and excited about the opportunity to welcome new customers to the organization. I will now turn.
As we look to the conclusion of our fiscal year, we are encouraged by our ability to strengthen our connection with existing customers and excited about the opportunity to welcome new customers to the organization.
I will now turn the call over to Jeff.
Jeff.
Speaker 4: Thank you and good afternoon everyone. As the team said, our third quarter results exceeded our expectations. And we are very pleased with the consistent and impressive two-year sales performance. We have continued to deliver.
Thank you and good afternoon, everyone.
S. T said, our third quarter results exceeded our expectations and we are very pleased with the consistent and impressive two year sales performance, we have continued to deliver.
Speaker 4: The third quarter, consolidated net sales, declined 3% year-over-year to 267.3 million.
For the third quarter consolidated net sales declined 3% year over year to $267 3 million.
Speaker 4: and increase 16.9% compared to the third quarter of fiscal 2019.
And increased 16, 9% compared.
For the third quarter of fiscal 2019.
Speaker 4: By segment, sales for the container store retail business decreased 3.1% to 248.6 million, and increased 17.3% compared to the third quarter of fiscal 2019.
By segment sales for the container store retail business decreased three 1% to $248 6 million and increased 17, 3% compared to the third quarter of fiscal 2019.
Speaker 4: Custom closet sales were flat compared to fiscal 2020, and general merchandise categories were down 5.4% in Q3, contributing the entire 310 basis points of the decrease in that sale.
Custom closet sales were flat compared to fiscal 2020, and general merchandise categories were down five 4% in Q3 contributing the entire 310 basis points of the decrease in net sales.
Speaker 4: Compared to Q3 fiscal 2019, custom closets were up 19.5%, and general merchandise categories were up 15.6%.
Compared to Q3 fiscal 2019 custom closets were up 19, 5% and general merchandise category were up 15, 6%.
Speaker 4: As the TIECE reviewed, we continue to be pleased with the progress we have made, with our website and our ability to maintain the higher level of e-commerce sales penetration, as compared to fiscal 2019.
Our strategic reviewed we continue to be pleased with the progress we have made with our website and our ability to maintain a higher level of e-commerce sales penetration as compared to fiscal 2019.
Speaker 4: While our online channel decreased 36% year over year in Q3, when compared to the third quarter of fiscal 2019, our online channel increased by 26.9%.
While our online channel decreased 36% year over year in Q3, when compared to the third quarter of fiscal 2019, our online channel increased by 26, 9%.
Including curbside pickup our website generated sales in Q3 were down 28, 7% from last year, but up 53% when compared to the third quarter of fiscal 2019.
Speaker 4: Including curbside pickup, our website generated sales in Q3 were down 28.7% from last year, but up 53% when compared to the third quarter of fiscal 2019.
Website generated sales represented a total of 25% of Tcs net sales in Q3 of fiscal 2021.
Speaker 4: Website Generated Sales represented a total of 20.5% of TCS net sales in Q3 of fiscal 2021. Compared to 27.9% in Q3 last year and 15.7% in Q3 of fiscal 2019.
Compared to 27, 9% in Q3 last year and 15, 7% in Q3 of fiscal 2019.
Speaker 4: We entered the quarter with online orders taken, but not shipped, totaling approximately 2.5 million compared to 1.8 million in the prior year period.
We ended the quarter with online orders taken but not ship totaling approximately $2 5 million compared to $1 8 million in the prior year period.
Speaker 4: We also had unearned revenue of $32.1 million this year versus $17.9 million last year. Thriven by a large increase in custom closet orders taken
We also had unearned revenue of $32 1 million this year versus $17 9 million last year, driven by a large increase in custom closet orders taken.
Speaker 4: but not yet installed as a result of the strong start to our transform with Elf event, which ticked off on December 20.
But not yet installed as a result of the strong start to our transform with alphabet, which kicked off on December 22nd.
Elfa third party net sales were down one 3% to $18 7 million.
Speaker 4: Alpha third party net sales were down 1.3% to 18.7 million.
Speaker 4: including the impact of foreign currency translation alpha-third party net sales increased slightly year over year.
Excluding the impact of foreign currency translation Elfa third party net sales increased slightly year over year.
Speaker 4: From a profitability standpoint, our Consolidate Gross Margin for Q3 was 57% compared to 57.9% last.
From a profitability standpoint, our consolidated gross margin for Q3 was 57% compared to 57, 9% last year the year over year decrease in gross margin was driven by <unk>.
Speaker 4: year-over-year decrease in gross margin was driven by increased freight and commodity costs, which were partially offset by tailwinds associated with less direct consumer shipping and less discounting as well as a favorable product.
Increased freight and commodity costs, which were partially offset by tailwind associated with less direct to consumer shipping and less discounting as it as well as a favorable product mix.
Speaker 4: By segment, gross margin of the container store increased 10 basis points compared to last year, primarily due to less direct to consumer shipping, less promotional activity, and a favorable mix of sales. Partially offset by increased...
By segment gross margin at the container store increased 10 basis points compared to last year, primarily due to less direct to consumer shipping less promotional activity and a favorable mix of sales, partially offset by increased freight and commodity costs Tcs gross margin declined 30 basis points compared to the third quarter of fiscal <unk>.
Speaker 4: KCS gross margin declined 30 basis points compared to the third quarter of fiscal 2019, primarily due to unfavorable mix of sales, partially offset by less promotional activity.
19, primarily due to unfavorable mix of sales, partially offset by less promotional activity.
Elfa gross margin.
Speaker 4: increased 1,330 basis points compared to last year, primarily due to the higher direct material costs associated with commodity price increases, as well as an unfavorable product and customer.
Decreased 1330 basis points compared to last year, primarily due to higher direct material costs associated with commodity price increases as well as an unfavorable product and customer mix.
Speaker 4: Alpha gross margin decrease 1,070 basis points compared to the third quarter of fiscal 2019 primarily due to a higher direct material cost.
Gross margin decreased 1070 basis points compared to the third quarter of fiscal 2019, primarily due to higher direct material costs.
Speaker 4: Consolidated SG&A dollars increase 3.8% to 120.3 million compared to 115.9 million in Q3 of last year.
Consolidated SG&A dollars increased three 8% to $120 3 million compared to $115 9 million in Q3 of last year.
Speaker 4: As a percent of sales, SGNA increased by 290 basis points versus last year, primarily due to increased compensation and benefit cost as a result of restoring certain expenses that were temporary pullback in fiscal 2020 as part of our pandemic management strategy.
As a percent of sales SG&A increased by 290 basis points versus last year, primarily due to increased compensation and benefit cost as a result of restoring certain expenses that were temporary pullback in fiscal 2020 as part of our pandemic management strategy as well as other expenses, including costs incurred related to the acquisition of clause at work.
Speaker 4: as well as other expenses, including cost incurred related to the acquisition of cost it works in the third quarter.
In the third quarter.
Speaker 4: As compared to the third quarter of 2019, SGNA decreased 400 basis points as a percent of sales, driven primarily by fixed cost leverage on higher sales.
As compared to the third quarter of 2019, SG&A decreased 400 basis points as a percent of sales driven primarily by fixed cost leverage on higher sales.
Speaker 4: Our net interest expense in the third quarter of fiscal 2021 decreased 21.6% to 3.2 million from 4.1 million in the prior year. Due to a lower principal balance on the senior secured term loan facility, combined with lower interest rates.
Our net interest expense in the third quarter of fiscal 2021 decreased 21, 6% to $3 2 million from $4 1 million in the prior year due to a lower principal balance on our senior secured term loan facility combined with lower interest rates.
Speaker 4: The effective tax rate for the quarter was 27.9%. Compared to 29.4% and the third quarter of last...
The effective tax rate for the quarter was 27, 9% compared to 29, 4% in the third quarter of last year. The decrease in the effective tax rate is primarily related to the excess tax benefits associated with share based compensation on lower pre tax income in the third quarter of fiscal 2021.
Speaker 4: The decrease in the effective tax rate is primarily related to the excess tax benefits associated with share-based compensation on lower pre-tax income in the third quarter of fiscal 2021.
Speaker 4: That income for the quarter on a gap basis was 13.7 million or 27 cents per diluted chair as compared to 19.7 million or 40 cents per diluted chair in the third quarter of last year and five cents per diluted chair in the third quarter of 2019.
Net income for the quarter on a GAAP basis was $13 7 million or 27 cents per diluted share as compared to $19 7 million or 40 cents per diluted share in the third quarter of last year and five cents per diluted share in the third quarter of 2019.
Speaker 4: Adjusted net income was 14.3 million or 28 cents per deleted chair as compared to 20.7 million or 42 cents per deleted chair last year and 5 cents per deleted chair in Q3 2019.
Adjusted net income was $14 3 million or 28 cents per diluted share as compared to $20 7 million or 42 cents per diluted share last year and five cents per diluted share in Q3 2019.
Speaker 4: Adjusted EBITDA decreased to 31.4 million in the third quarter this year, compared to 42.4 million in Q3 last year.
Adjusted EBITDA decreased to $31 4 million in the third quarter. This year compared to $42 4 million in Q3 last year and increased 42, 7% compared to $22 million in Q3 2019.
Speaker 4: and increased 42.7% compared to 22 million in Q3 2019.
Speaker 4: Turning to our balance sheet, we ended the quarter with 19 million in cash, 165.5 million in net barrings on our turnloom.
Turning to our balance sheet, we ended the quarter with $19 million in cash $165 5 million in net borrowings on our term loans.
Speaker 4: 33 million borrowed on a revolver and total liquidity, including availability on art revolving credit
33 million borrowed on our revolver and total liquidity, including availability on our revolving credit facilities of approximately $95 million.
Speaker 4: of approximately 95 million. Our current leverage ratio is approximately 1.1 times leverage.
Our current leverage ratio is approximately one one times leverage.
Speaker 4: We ended the quarter with consolidated inventory at 41.5%. Keep in mind that last year we were still operating with lower than normal inventory levels. This year we continue to increase unit levels to support strong sales trends and to count for longer lead times resulting from supply chain disruption.
We ended the quarter with consolidated inventory up 41, 5% keep in mind that last year, we were still operating with lower than normal inventory levels. This year. We continue to increase unit levels to support strong sales trends and to account for longer lead line lead times, resulting from supply chain disruption.
Speaker 4: And like other retailers, we continued to experience freight and shipping cost headwinds along with higher commodity prices, which are reflected in this increase in the value of our image.
And like other retailers, we continue to experience freight and shipping cost headwinds along with higher commodity prices, which are reflected in the in this increase in the value of our inventory.
Speaker 4: We have and plan to continue employing multiple methods to help mitigate the impacts of higher costs, which include vendor negotiations, actively managing our supply chain, along with adjusting our retail pricing and promotional case.
We have and plan to continue employing multiple methods to help mitigate the impacts of higher costs, which include vendor negotiations active actively managing our supply chain, along with adjusting our retail pricing and promotional cadence.
Speaker 4: We utilize 6.1 million in pre-cash flow during the quarter compared to last year when we generated 105 million. As a reminder, last year we focused on preserving cash due to the uncertainty related to the pandemic, including just mentioned inventory management actions, as well as deferring almost 12 million in cash lease payments for two future periods.
We utilized $6 1 million in free cash flow during the quarter compared to last year, when we generated $105 million as a reminder, last year, we focused on preserving cash due to the uncertainty related to the pandemic, including just mentioned inventory management actions as well as deferring almost $12 million in cash lease payments.
To future periods.
Speaker 4: On that note, the outstanding balance of the deferred cash lease payments as of January 1st, 2022 was 400,000, which will be paid in the fourth quarter.
On that note the outstanding balance of the deferred cash lease payments as of January one 2022 was 400000, which will be paid in the fourth quarter.
Speaker 4: Now for our outlook. As a reminder, please note that the fourth quarter last year included a 53rd week that contributed 17.7 million in sales, 5.3 million in adjusted divina, and 7 cents in EPS.
Now for our outlook as a reminder, please note that the fourth quarter last year included a 50 <unk> week.
That contributed $17 7 million in sales $5 3 million in adjusted EBITDA and seven in EPS.
Speaker 4: including the impact of the 53rd week in the prior year, fourth quarter, we expect Q4 consolidate sales to decline 6%.
Excluding the impact of the 50 <unk> week in the prior year fourth quarter, we expect Q4 consolidated sales declined 6%.
Speaker 4: Inclusive about the 53rd week in Q4 fiscal 2020, the sales decline is expected to be 11%.
Inclusive of the 50 <unk> week in Q4 of fiscal 2020, the sales decline is expected to be 11%.
Speaker 4: The 280 million and an expected Q4 2021 sales represents a 16% increase from the fourth quarter of fiscal 2019.
The $280 million and expected Q4, 2021 sales represents a 16% increase from the fourth quarter of fiscal 2019.
Speaker 4: EPS in the fourth quarter is expected to be approximately 24 cents.
EPS in the fourth quarter is expected to be approximately 24 cents.
Speaker 4: The expected decline in adjusted earnings per share is compared to Q4 fiscal 2020. It's primarily driven by gross margin of pressures associated with freight and commodity costing.
The expected decline in adjusted earnings per share as compared to Q4 fiscal 'twenty 'twenty is primarily driven by gross margin pressures associated with freight and commodity cost increases.
Speaker 4: SG&A D-Laybridge is also expected, though to a lesser extent, and is associated with the restoration of certain expenses that were temporarily pulled back in fiscal 2020 as part of our pandemic management strike.
SG&A Deleveraged is also expected, though to a lesser extent and is associated with the restoration of certain expenses that were temporarily pulled back in fiscal 2020 as part of our pandemic management strategy.
Speaker 4: We are proud to be on track to deliver EPS growth for the full 2021 fiscal year despite the margin pressures that we are experiencing and despite being up against the 53rd week last year.
We are proud to be on track to deliver EPS growth for the fall 2021 fiscal year. Despite the margin pressures that we're experiencing and despite being up against the 50 <unk> week last year.
Speaker 4: For the year, we expect total capital expenditures to be approximately 45 million. Answer six pence to be 13 million and are effective tax rate to be approximately 30%. I'll now pass it back.
For the year, we expect total capital expenditures to be approximately $45 million interest expense to be $13 million and our effective tax rate to be approximately 30%.
I'll now pass it back to <unk> for closing remarks.
Speaker 3: Thank you, Jeff. In closing, we are pleased with the strong results we have delivered in Q3.
Thank you Jeff.
In closing we are pleased with the strong results we have delivered in Q3.
Speaker 3: We have achieved three consecutive quarters of nearly 17% growth in fiscal 2021 when compared to fiscal 2019, which is outstanding.
We have achieved three consecutive quarters of nearly 17% growth in fiscal 2021, when compared to fiscal 2019, which is outstanding.
Speaker 3: In the coming quarter, we are squirrely focused on the integration of cause it looks, ending the transform with alpha event well, making the big splash without branding campaign on 2222 and launching a new loyalty program and mobile app.
In the coming quarter, we are squarely focused on the integration of closet works ending the transform with alpha event, well, making a big splash without branding campaign on to 'twenty to 'twenty, two and launching a new loyalty program and mobile App.
Speaker 3: We believe we will continue to be the leader in organizing solutions.
We believe we will continue to be the leader in organizing solutions.
Speaker 3: custom closets and in-home services, and we fully intend to finish our fiscal year strong. Applause for motion.
Custom closets and in home services, and we fully intend to finish our fiscal year strong.
This concludes our prepared remarks, I'll now turn the call over to the operator to open the lines for questions.
Speaker 3: I'll now turn the call over to the operator to open the lines for questions.
Speaker 1: At this time, it will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tommorow indicate your line is in the question queue. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary for you to pick up your hand set before pressing the start keys. One moment, while we pull for questions.
At this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation until mines.
Your line is in the question queue, you May press star to cheer them move your question from the queue for participants using speaker equipment. It may be necessary for you to pick up your handset before pressing the star keys, one moment, while we poll for questions our.
Speaker 1: Our first question comes from the line of Stephen Forbes with Guggenheim Securities who may proceed with their questions.
Our first question comes from the line of Steven Forbes with Guggenheim Securities. You May proceed with your question.
Yeah.
Speaker 5: Good evening. Ski, Shpidia, a high level question to start.
Good evening Steve.
Can you maybe a high level question to start.
Speaker 5: You're thinking as we cycle the second half compares.
Curious just your thinking as we cycle the second half compares.
Speaker 5: any color on what you're seeing in the customer data, right? Whether it's repeat trends, re-engagement trends, category participation rates, anything what you're seeing in the customer data that supports the optimism for sort of out-year secular growth in the business. Really, just how you love to hear you sort of expand on what you're seeing in the data.
Any color on what Youre seeing in the customer data right, whether it's repeat trends a reengagement trends category participation rates anything what you're seeing in the customer data that supports the optimism for sort of out year secular growth in the business I'm really would just love to hear you sort of expand on.
What you're seeing in the data.
Sure.
Speaker 3: What I would say Steve is, you know, the back half is very much indicative of all the work.
What I would say, Steve as you know the back half is very much indicative of all the work that we've taken during fiscal 2021 which for US was very much a foundational year right. As you know we worked extremely hard to improve the productivity of our existing stores and E Commerce business.
Speaker 3: that we've taken during fiscal 2021, which for us was very much a foundational year. Right, as you know, we worked extremely hard to improve the productivity of our existing stores and e-commerce business, while focusing on our growth priorities. And so we've taken...
Focusing on our growth priorities and so we've taken a very much of a disciplined approach and kind of right sizing our operating model and are continuing to see the benefits of that in our second half as we have obviously started to achieve some of those results in the first half so as a reminder.
Speaker 3: kind of right sizing our operating model and continuing to see the benefits of that in our second half as we have obviously started to achieve some of those results in the first half. So as a reminder, you know, we worked really hard in that first half of improving out intro experience.
We worked really hard in the first half of improving our in store experience.
Speaker 3: through discovery areas and specialist engagements. That continues into the second half and will obviously continue into fiscal 2022 as well. All of the improvements that we made on our e-commerce experience.
Just gotta be areas and specialist engagements that continues into the second half and one obviously continue into fiscal 2022 as well.
All of the improvements that we've made on our e-commerce experience through improved ship times and additional payment options improved features and functionalities.
Speaker 3: through improved ship times and additional payment options, improved features and functionalities. Also continues into the second half and obviously into fiscal 2022 as well.
So continues into the second half and obviously into fiscal 2022 as well yeah really impressed with how we've been able to leverage our core assortment, which was a big change for us and making sure that that was visible at the front of store and being able to engage with our customers at full price.
Speaker 3: you know, really impressed with how we've been able to leverage our core assault.
Speaker 3: which was a big change for us and making sure that that was visible at the front of store and being able to engage with our customers at full price. And we're definitely seeing the benefits of that in our second half when we think about kitchen, storage, and closets and how that's performing in particular over 2019.
And we're definitely seeing the benefits of that in a second half when we think about kitchen storage in closets and how that's performing in particular over 2019.
Speaker 3: So, you know, when I think about the work effort that we've undertaken in that first half, that foundational year, and then looking at the customer engagement in the second half.
So you know when I think about the work effort that we've undertaken in that first half that foundational year and then looking at the customer engagement in the second half.
Speaker 3: You know, we're really pleased with the response that we're getting from our customers. Engagement is high, average ticket is high, conversion is high, you see the consistency in our results both in our custom closet business and in our general merchandise business.
We're really pleased with the response that we're getting from our customers engagement is high average ticket as high conversion is high you see the consistency in our results both in our custom closet business and in our general merchandise business.
Speaker 3: And I think that bodes well for us as we look into more importantly into fiscal 2022.
And I think that bodes well for us as we look into more importantly into fiscal 2022, and then you got to take into consideration as well you know our ability to really supercharged now our performance and results. When you think about the new branding campaign that we're going to launch welcome to the organization on to 'twenty to 'twenty two.
Speaker 3: And then you've got to take into consideration as well, you know, our ability to really supercharge now, our performance and results, when you think about the new branding campaign that we're going to launch, welcome to the organization on 2222, it's a fantastic opportunity to invite new customers.
It's a fantastic opportunity to invite new customers and benefit from all the foundational work. We've done this fiscal 2021 year, including our new loyalty program that we'll be launching a new mobile app and of course fully leveraging our ability to capitalize on the acquisition.
Speaker 3: and benefit from all the foundation and we've worked, we've done this fiscal 2021 year, including our new loyalty program that we'll be launching, a new mobile app, and of course fully leveraging our ability to capitalize on the acquisition would cause it worse.
With cause it works and so that that's at a very high level, while we continue to be extremely excited about what's happening for the back half and more importantly into fiscal 2022.
Speaker 3: So that's at a very high level where we continue to be extremely excited about what's happening for the back half and more importantly into fiscal 2022.
Speaker 5: Appreciate all the color there and maybe just a quick follow up for Jeff
I appreciate all the color there and maybe just a quick follow up for Jeff.
Speaker 5: The gross margin profile within alpha, I don't know if you could provide any sort of guidance for the fourth quarter. And then more importantly, as we think about the longer term gross margin profile, the business.
Uh huh.
The gross margin profile within alpha.
I don't know if you could provide any sort of guidance for the fourth quarter and then and then more importantly, as we think about the longer term gross margin profile of the business.
Speaker 5: Anything has anything structurally changed in terms of the profitability outlook of that segment or of that product Or should we sort of expect over time to see to revisit right the prior levels of Of gross margin rate
Anything has anything structurally changed in terms of the profitability outlook of that segment or that product.
Or should we sort of expect overtime to see to revisit right prior levels of gross margin rate.
Speaker 4: Yes, Steve. Good afternoon. Listen, as it relates to alpha and looking forward, certainly they have felt the headwinds associated with commodity pricing. And it's really...
Yeah, Steve Good afternoon listen as it relates to alpha and looking forward.
They have felt the headwinds associated with commodity pricing it's really.
Speaker 4: The decline in their gross margins related directly to that and the direct material side and also on a customer mix perspective and you know I would expect that to continue in the Q4 But you know looking outward. I would expect I don't think anything structurally has changed I think it will go back to More normalized margins in the future. There's not any concern on that front
The decline in our gross margins related directly to that the direct material side and also on a customer mix perspective.
I would expect that to continue into Q4.
But looking outward I would expect I don't think anything structurally has changed I think it will go back to a.
More normalized margins in the future, there's not any concern on that front.
Thank you best of luck.
Our next question comes from the line of Kate Mcshane with Goldman Sachs. You May proceed with your question.
Speaker 1: Our next question comes from the line of Kate McShane with Goldman Sachs who may proceed with their questions.
Speaker 6: Hi, thanks, good afternoon. My first question was just about the competitive environment. I wondered if you were seeing anyone entering more of that general merchandise organizational category or exiting it in the last quarter. And just when it came to the closet business, I imagine that it's extremely fragmented. Just what's the share opportunity there? And how do you plan to scale the custom closet acquisition?
Hi, Thanks, good afternoon.
My first question was just about the competitive environment I wondered if you were seeing anyone entering more of that general merchandize organizational category are exiting it in in the last quarter.
And just when it came to the closet business.
That's extremely fragmented just what's the share opportunity there and how do you plan to scale the custom closets acquisition.
Speaker 3: Yeah, hi Kate. Thank you for the question. So the first part of it is, look, we are seeing other competitors enter into the organizational and storage market. I actually think it's indicative of the fact that there are so many people out there that are just overwhelmed with clutter. And quite frankly, they just don't know how to start.
Yeah, Hi, Kate thank.
Thank you for the question. So the first part of it is look we are seeing other competitors enter into the organizational and storage market I actually think it's indicative of the fact that there are so many people out there that are just overwhelmed with clutter and quite frankly, they just don't know how to start now thankfully we have 10000 skus.
Speaker 3: Now, thankfully we have 10,000 SKUs dedicated to organization and storage, including the 1600 SKUs I mentioned around sustainability, coupled with our specialists that are highly trained to help people navigate how best to utilize the items that they would go purchase.
Dedicated to organization and storage, including the 1600, Skus I mentioned around sustainability, coupled with our specialists that are highly trained to help people navigate how best to utilize the items that they would go purchase and so I think we're extremely well positioned to be able to cater to any new customers coming in.
Speaker 3: So I think we're extremely well positioned to be able to cater to any new customers coming through any channel for that matter because we all that safe haven't fooled them.
You know through any channel for that matter, because we are that safe haven for them and when it comes to the custom closet business, you're absolutely right. I mean, it is an extremely fragmented business and as you know the addressable market out there is about $6 billion and I can tell you from even the due diligence work that we did with closet.
Speaker 3: When it comes to the custom closet business, you're absolutely right. I mean, it is an extremely fragmented business. And as you know, the address will market out there is about $6 billion. And I can tell you from even the de-diligence work that we did with closet works, you know, a regional player in Chicago, you know, they were doing about 13 times the volume in wood-based custom closets than what we were doing at TCS in our five stores combined.
Works you know a regional player in Chicago, you know they were doing about 13 times the volume in wood based custom closets and then what we were doing at Tcs and are five stores combined.
Speaker 3: So clearly we were leaving money on the table and I think that boasts well for us as we think about how we deeper Our penetration in these regional markets and now offering a much Superior Assaultment coupled with Elf's modular system including without custom wood this
So clearly we were leaving money on the table and I think that bodes well for us as we think about how we deeper our penetration in these regional markets and now offering a much superior assortment, coupled with alpha's modular system, including without custom wood business.
Speaker 3: And we've been working extremely hard during this foundational year to really ensure that one we're comfortable selling premium spaces. We now have dedicated designers in our stores, almost 90 plus designers, which about a quite frankly are doing over a million dollars in sales to date.
We've been working extremely hard during this foundational year to really ensure that one we're comfortable selling premium spaces. We now have dedicated designers in our stores almost 90, plus designers of which about a third of them quite frankly are doing over $1 million in sales to date a.
Speaker 3: and coupled with this great assortment that we now have, thanks to the Closet Works acquisition, I think we really are off to the races, so to speak, to go after that regional market that's highly fragmented, and to offer customers a variety of product offerings.
And coupled with this great assortment that we now have thanks to the closet works acquisition I think we really are are off to the races. So to speak to go after that regional market, that's highly fragmented and to offer our customers a product.
A variety of product offerings.
Speaker 3: you know, with our quality that we're known for and our warranty that backs that those purchases as well.
With our quality that we're known for and a warranty that backs that are those purchases as well.
Speaker 6: Thank you. And if I could just ask one follow unrelated follow up question, I know you mentioned the loyalty program that's launching later. Could you just give us a few more details about what that's going to entail, maybe what some of the benefits are going to be for those that sign up for the loyalty program, and any thoughts around Complift and what it could mean for customer retention.
Thank you and if I could just ask one follow up unrelated follow up question. I know you mentioned the loyalty program that is launching later could you just give us a few more details about what that's going to entail maybe what some of the benefits are going to be for those that sign up for the loyalty.
Graham and any thoughts around comp lift and what it could mean for customer retention.
Speaker 3: Yeah, we're not at this stage, providing a lot of details around it. Unfortunately, you have to wait like our 10.8 million pop members that are out there today who are equally excited to learn more about this new program. It is a tiered base program, as we mentioned earlier in our remarks. But look, the intent of it is, is really not only attract new customers without program, but really reward those customers that are engaging with us on a day-in-day day out basis.
Yeah.
We're not at this stage and providing a lot of details around it and unfortunately, you have to wait and like our $10 8 million pop members that are out there today, who are equally excited to learn more about this new program. It is a 10 plus tier based program as we mentioned earlier in our remarks, but look the intent of it is it's really not one.
They attract new customers without program, but really reward those customers that are engaging with us on a day in day eight day out basis.
Speaker 3: We have an ability to ensure that we can improve the active rate of our pop members, improve the frequency of their visits, including their spend.
We have an ability to ensure that we can improve the active rate of a pop members improves the frequency of their visits including their spend and I think the program that will be unveiled them by the end of fiscal 'twenty, one will satisfy our objectives on the on that so super excited about <unk>.
Speaker 3: And I think the program that will be unveiled by the end of fiscal 21 will satisfy our objectives on that. So super excited about our ability to bring this to the forefront of our consumers. Amazingly, with the program that we have today, there is quite a lot of speakingness around it, but I think we can do so much more as we start to layer on some additional benefit to that program. Thank you.
Ability to bring this to the forefront of our consumers.
Amazingly with the program that we have today and there is a quite a lot of stickiness around it but I think we can do so much more as we start to layer on some additional benefits to that program.
Thank you.
Speaker 1: Our last question comes from the line of Chris Hovers with JP Morgan. You may proceed with your question.
Our last question comes from the line of Chris <unk> with J P. Morgan you May proceed with your question.
Speaker 7: Thanks, good evening. So following up on Kate's question, as you think about the custom closets market, is this sort of like historically like a GDP plus, maybe like a 4% plus kind of growth business? Does it tend to move with something like repair and remodel or home improvement spending? And as you think about the increase in rates, is there anything in sort of...
Thanks, Good evening. So following up on Kate's question, you know as you think about the custom closets market is it is this sort of like historically like a GDP plus maybe like a 4% plus kind of growth business does it does it tend to move with you know something like repair and remodel or.
Home improvement spending and you know.
And as you think about the increase in rates.
Is there anything in sort of.
Speaker 7: what you've seen in terms of your geographic footprint that would suggest that this is pretty correlated to the overall housing market. And any sense on what the Custom Clause is business has done in different parts of the housing cycle.
What you've seen in terms of your geographic footprint that would suggest that you know this is you know pretty correlated to.
The overall housing market and any sense on what the custom closets business as is done in different parts of the housing cycle.
Speaker 3: Yeah, hi, Chris. What I would tell you is like, we're not necessarily correlated to any particular index. What I would tell you is quite frankly, our results are particated on the fact that we awareness back.
Yeah, Hi, Chris what I would tell you is like.
Not necessarily correlated that to any particular index.
But I would tell I will tell you is quite frankly, our results are predicated on the fact that we the awareness factor and Theres a lot of individuals out there, they're just not aware that they were able to transform their spaces and fully benefit from those spaces and so if you look at our performance over the last three quarters, where we've been able to really hit any.
Speaker 3: And there's a lot of individuals out there, they're just not aware that they're able to transform their spaces and fully benefit from those spaces.
Speaker 3: And so if you look at our performance of the last three quarters where we've been able to really hit
Speaker 3: You know, anywhere from 20% growth of the 2019, it is our ability to get in front of our customers and get in comfortable with what we're able to offer. And so then to really see the custom closet business as an investment in their home.
We're from a 20% growth of between 19. It is our ability to get in front of our customers and getting comfortable what we're able to offer and for them to really see the custom closet business as an investment in their home that will pay dividends because they not only get to utilize it them, while they're in their space in their home.
Speaker 3: that, you know, will pay dividends because they not only get to utilize it.
Speaker 3: while they're in their space in their home, but also get the return when and should they ever want to sell their home.
But also get the return when and should they ever want to sell their homes and we definitely hear that from the real estate community at large as well and so we're not necessarily looking at you know.
Speaker 3: and we definitely hear that from the Real Estate community at large as well. And so, you know, we're not necessarily looking at...
Speaker 3: you know, external indicators, depending on that, I think ultimately it's really, you know, for us to be able to educate customers because they're not necessarily aware of these improvements and these benefits that we offer. And not only in the space, but quite frankly, how it actually impacts their life.
External indicators, depending on that I think ultimately, it's really you know for us to be able to educate customers because they're not necessarily aware of these improvements and these benefits that we offer and not only in the space, but quite frankly, how it actually impacts there their life and how it can really be a.
Speaker 3: and how it can really be a transformational moment for them. I say start to enjoy the spaces and the completion products that we offer and the additional kind of boost of motivation that they see or energy. You know, all of those great well-being benefits that come across within organized space.
One moment for them as they start to enjoy the spaces and the completion products that we offer and the additional kind of boost of motivation that they see or energy.
All of those great well being benefits that come across with an organized space. So that's that's our objective that's quite frankly, we're launching a campaign as well on to 'twenty to 'twenty two because there's a huge opportunity just help people understand the benefits of organization and how we can be that they've had in place for them.
Speaker 3: So that's our objective. That's quite frankly, we're launching our campaign as well on 222.22 because there's a huge opportunity to just help people understand the benefits of organization and how we can be that safe haven place for them.
Got it.
Speaker 7: Got it. And you know, clearly during the pandemic, home organization, you know, really took up a lot of importance. We certainly went through every single closet in our, in our home. So as you, as you look beyond the fourth quarter, we're on like the two-year anniversary of the pandemic, you will, do you expect the business to start to grow on a year-rear basis and, and, and, you know, as you think about, not just...
Clearly during the pandemic home organization, you know really took up.
A lot of importance. We certainly went through every single closet are in our AR and our in our homes. So as you as you look beyond the fourth quarter, where unlike the two year anniversary of the pandemic.
You will do you expect that business to start to grow on a year over year basis, and and and and you know as you think about not just the opportunity with the marketing and the hiring customer closets, but also just in terms of getting away from you know sure. This disc that difficult compare period, where all sort of.
Speaker 7: the opportunity with the marketing and the hiring customer closets, but also just in terms of getting away from, sure, that difficult compare period, we're all sort of locked down.
Locked down.
Speaker 3: Listen, when we think about fiscal 2022, which we have, obviously, haven't provided any details on yet, we'll do that in our next quarterly call. What I can tell you is what I mentioned earlier, and that is...
Yeah, I mean listen when we think about fiscal 2022 which we obviously haven't provided any details on yet we'll do that in our next quarterly call, but what I can tell you is what I mentioned earlier.
And that is.
Speaker 3: you know, 21 was a foundational year for us and we're very poised to now fully analyze a lot of that work that happened throughout the year. And now with the acquisition of closet works, we're in a much better position to really double down on custom closet.
21 was a foundational year for us and we're very poised to now fully annualize a lot of that work that happens throughout the year and now with the acquisition of a closet works. We're in a much better position to really double down on custom closets.
Speaker 3: You know, if 20-21 was kind of the year of our foundational year, 22 is the year of, you know, custom closets for us. As we look to fully capitalize on this acquisition and also get ready to bring about awareness around what we have to offer. I'm so comfortable about doing it. So, you know, it's really much. It's-
2022 if 21 was kind of the year of our foundational year 'twenty. Two is the year of custom closets for us as we look to fully capitalize on this acquisition and also get ready to bring about awareness around what we have to offer and feel comfortable about doing it.
You know, it's really much it's it it's essentially us to execute on the foundational pillars that we put in place and to and to get out there in a much bigger way than we have in 'twenty one.
Speaker 3: essentially us to execute on the foundational pillars that we put in place and to get out there in a much bigger way than we have in 21.
Got it thanks very much.
Speaker 1: Ladies and gentlemen, we have reached the end of today's question and answer session. I would like to turn this call back over to Satish for closing remarks.
Ladies and gentlemen, we have reached the end of today's question and answer session I would like to turn this call back over to <unk> for closing remarks.
Okay.
Speaker 3: Great, well look, thank you again for joining us today and for continuing to follow the Container Store Growth Story. I look forward to when we discuss our Q4 results and review our full fiscal year. Until then, thank you and good night.
Great well. Thank you again for joining us today and for continuing to follow the container store growth story and I look forward to when we discuss our Q4 results and review our full fiscal year until then thank you and good night.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and enjoy the rest of your day.
Speaker 1: This concludes today's conference. You may disconnect your lungs at this time. Thank you for your participation and enjoy the rest of your-
[music].
Speaker 8: I.
Speaker 8: The the.
Speaker 8: The.