Q1 2022 Container Store Group Inc Earnings Call
[music].
Greetings and welcome to continued store third quarter 2022 earnings call.
At this time all participants are in a listen only mode.
And the answer session will follow the formal presentation.
If anyone should require operator assistance Jane Mccahon thing Keith Pitts Star Zero.
On your telephone keypad.
As a reminder, this conference is being recorded.
I would like to turn the conference over to you have taken to show.
The relation cheesecake.
Good afternoon, everyone and thanks for joining us today for the container store first quarter fiscal year 2022 earnings results Conference call speaking today are the piece of the whole truth Chief Executive Officer.
Jeff Miller, Chief Financial Officer.
Doctor Citation Jets have made their formal remarks, we will open the call to questions.
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 management.
Management's plans and objectives for the business and the future financial performance of the company that are subject to risks and uncertainties.
Actual results could differ materially from those anticipated in these forward looking statements the.
The risk factors that may affect results are referred to in the container store's press release issued today and in our annual report on Form 10-K filed with the SEC on June 2nd 2022 as updated by our quarterly reports on Form 10-Q, and other public filings with the U S Securities and Exchange Commission.
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 their forward looking statements.
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 stores press release issued today.
Copy of today's press release, and Investor deck may be obtained by visiting the Investor Relations page of the website at Www Dot container store dotcom.
I will now turn the call over to the teach.
Thank you Caitlin and thank you all for joining our call today.
I'll first discuss our fiscal 2022 Q1 performance followed by an update on our growth initiatives.
Josh will then review our financial results in more detail and discuss our outlook.
Our first quarter results reflect a solid start to fiscal 2022, and they exceeded our expectations on the top and bottom line.
I'm proud of our team's agility and performance.
They continue to successfully navigate a dynamic consumer environment, while staying focused on our long term objective of reaching $2 billion in sales by the end of fiscal 2027.
For the first quarter consolidated net sales were $262 $6 million, an increase of approximately seven 1% compared to the prior year.
The outperformance versus our expectation with fueled once again by custom closet.
From a profitability perspective, we delivered adjusted EPS of 21.
<unk> to 36 cents in the prior year as we absorbed higher freight and commodity costs we.
Restored expenses that were pulled back during the height of the pandemic and investments to support our path to $2 billion in sales.
Our strong Q1 results reflect the strength of our action as we reacted to the ongoing dynamic consumer environment.
This environment, particularly impacted our general merchandise business.
As customers returned to more normalized summer activities I contended with increased inflationary pressures.
Despite today's reality, our teams did well pivoting and delivering smart and engaging promotional campaign that still drove profitable growth.
As I mentioned custom closets performed above our expectations and we were pleased with the customer response to our very premium closets event.
Helped deliver strong sales and lower promotional rate than the prior year. Yeah. There are that wasn't organized insider event requiring customers to be part of our loyalty program to be eligible for a discount.
Additionally, we tend to discount so that our most loyal customers, who we call experts received a higher discount.
Total sales for the of their events with nearly 9% higher than last year and further demonstrated our ability to sell premium spaces over $2000 as the average face value was about $7000 up 22% to last year.
The tiered discount approach that's on average discounts. So the event that was less than 20% compared to a discount of more than 25% the prior year.
Shortly after their very event ended we continue to see strong engagement and custom closet through our more space more savings Alpha and then.
And I look forward to sharing details of that event, which ended in mid July and our Q2 earnings call.
Within general merchandise, despite a tough compare in closet and storage categories over the last year. We were pleased with the strength, we saw in our kitchen office and back category.
Within our kitchen category, the home edit product sales increased over 50% compared to Q1 of last year. However.
However, we were most encouraged by the growth of our private label everything organize the collection, which saw a triple digit increase over last year.
Ah back category also benefited from sales of the home edit products, which were up nearly 40% in Q1 compared to last year.
In May we introduced a new wave of sustainable and elevated culinary products in a variety of categories.
Our office Department benefited from these new products as well as from our private label multi pump has been which were recently introduced and new colors.
As we look ahead, we have recently launched a compelling collection of premium home fragrances featuring.
Fisher and candles Diffusers last call.
Sure Capri Blue anymore.
Early results indicate this is a highly productive use of space in our stores, which is why we plan to take it a step further and refresh our impulse products located near checkout with a selection of carefully curated and eco friendly consumables.
Our results. This quarter also benefited from our new loyalty program organized in China, which is a key priority given our focus on deepening our relationship with our customers.
Since the launch in late March we have seen over 100000 customers chair out progressing either one or two tiers.
We are seeing a higher average ticket over 60% for loyalty members compared to non loyalty members.
And when it comes to a top tier members. Our experts we are seeing them spending five times more than our first chair enthusiasts and a visiting twice as frequently.
We're also seeing that our kitchen category is resonating most without enthusiasm.
Alpha is resonating most with experts.
We intend to capitalize on the opportunity to not only add new members to our loyalty program, but also to increase engagement and spend with existing customers. So they can move up in their chairs.
We've also made progress on expanding our reach with our strengths and custom closet and through a robust pipeline for new store growth.
At the close of Q1 person displays were installed in 60 about 94 stores with plans to complete the rollout during the second quarter.
As a reminder, Preston is our custom wood based system that replaced our former offering Lauren.
As an office building luxury in 11 premium finishes with a variety of door hardware lighting and accessory options like a hamper pulled out onboard and wine rack.
This premier offering is suitable not only for closet for all areas of the home, including pantries offices and living spaces.
Since launching Preston we have built a strong pipeline of design with a healthy average ticket of over $8500 in Q1.
As we laid out on our last call, we see significant white space to grow our store base.
We are on track to open our first small format store in Colorado Springs, Colorado in the second quarter of fiscal 2022.
And we plan to open a second small format store later in the winter.
As previously mentioned, we plan to open 76, new stores by the end of fiscal 2027.
We anticipate one third of these new stores to open by the end of fiscal 2024, and we have these locations targeted and active and our pipeline.
As we continue to strengthen our capabilities. We are very encouraged with the momentum we are seeing without mobile app, which launched in Q4 of fiscal 'twenty one.
Over 80% of our mobile App users are loyalty members and the App is converting at a rate double that of mobile web and with an average ticket of over 30% higher.
While the App makes up just 5% or by web generated E. Commerce sales at present and provides a superior customer experience compared to mobile and serves as an opportunity to reengage lapsed customers.
Additionally, we were pleased with website generated sales, which were up 2.2% for the quarter as consumers are pulling back from pure online shopping and returning to stores.
Given this consumer shift we are strategically encouraging and incentivizing customers to buy online and pickup installed which helped save on freight cost.
Our results reflect a solid Q1 performance. Despite some periods of softness primarily around holidays, when consumers were enjoying summer activities or traveling.
As we look to the rest of the year, we are revising our outlook to reflect the impact of inflationary pressures across our business, including higher interest rate.
Despite this environment, we believe a continued focus on our objective and executing our initiatives will position us to achieve our fiscal 'twenty two goals and make progress on that path to $2 billion in sales.
As we plan for Q2, we will be intently focused on back to college, we have created a compelling Kat mint colleagues shop at the front of our stores showcasing must have product for Don and apartment.
We've also teamed up with them up by a direct to consumer brand showcased their Betty headboards and land in 10 of our stores located in key college market.
This partnership and the product showcase help round out our colleagues offering.
To add to the success of our kitchen category. We have also launched a new and exclusive product line with New York Times, Best selling author and Youtube Star Rosanna Pasadena.
Xylem Casino collection by I design includes claims storage bin canisters, mixing bowls turn tables, I take them and more.
These products are made of sustainable materials, including 100% recycled plastic and Colorado Wood.
The collection is a fresh take on some of our best selling kitchen products and we look forward to seeing how our customer and rosanna as audience response.
With the current economic backdrop, we also see our kitchen category is a great resource for families who are cooking more at home.
We're also looking forward to launching our new custom spaces branding in Q2.
We are strategically moving our branding beyond custom closet.
Custom spaces to help educate our customers and our metal and wood based systems go beyond closet.
And that Theyre also meant for everyday living spaces, such as entertainment centers and garages.
We'll continue to see a significant opportunity to drive results and gained market share in custom spaces.
Finally, we are pleased to publish our first sustainability report this past June reviewing key areas, such as our product lifecycle, and environmental impact emissions and energy and diversity equity and inclusion initiatives.
We look forward to continuing to update our stakeholders on our progress with this work on an annual basis.
Before I close I want to thank our teams for their impactful contribution and delivering a solid start to the fiscal year.
And for their continued commitment as we navigate a dynamic environment.
We will stay focused on our long term goals, while remaining nimble and flexible to the changing consumer environment.
I will now turn the call over to Jeff to review, our first quarter performance in more detail.
Jeff.
Thank you Satish and good afternoon, everyone.
As he said we are pleased with our solid fiscal Q1 performance with top and bottom line results that exceeded our expectations.
Consolidated net sales increased seven 1% year over year to $262 6 million.
By segment net sales for the container store retail business were $246 8 million, a seven 9% increase compared to $228 7 million last year.
The seven 9% increase is inclusive of a comp store sales increase of five 1% the.
The increase in comp store sales was driven by custom closet sales, which were up 14, 7% compared to fiscal 2021 and contributed four 5% of the five 1% year over year increase in comp store sales.
Other product categories were up 0.8% in Q1 and contributing the remaining 0.6% of our comp store sales increase year over year.
The sales from the recently acquired cause it works and new stores contributed the remaining two 8% to.
So this 7.9% Tcs net sales growth year over year.
I'd like to reiterate the reminder, from our Q4 call historically, when we have referred to custom closets. We have included the general Merchandised Closet Department. However, starting this quarter.
When we refer to custom closets, we will exclude the general merchandize 'cause it departments from the amounts and only include the results of our custom closet product and service offerings.
We're making this change due to the importance of custom closets on our path to $2 billion and the desire to provide more transparency to the custom closet product and service offerings.
Please refer to the Q1 2022 investor deck for revised quarterly historical information regarding the mix of custom closets and general merchandise product categories based on this new definition.
For the first quarter fiscal 2022, our online channel decreased 0.9% year over year.
However, when including Curbside pickup our website generated sales in Q1 increased two 2% compared to last year.
Website generated sales represented a total of 21, 3% of Tcs net sales in Q1 of fiscal 2022 compared to 22, 5% in Q1 last year, reflecting the expected normalization of traffic patterns across channels. Following the pandemic driven surge in digital channel performance.
We had unearned revenue of $24 7 million this year versus $21 6 million last year.
Driven by the increase in custom closets orders taken but not yet installed associated with the successful start of the more space more savings alpha that that ended on July 11th.
Elfa third party net sales of $15 9 million decreased four 4% compared to the first quarter of fiscal 2021 and reflects the significant strengthening of the U S dollar to the Swedish krona.
Excluding the impact of foreign currency translation Elfa third party net sales increased 11, 9% year over year.
From a profitability standpoint, our consolidated gross margin for Q1 was 57, 1% compared to 59, 6% last year with the decrease driven by the higher mix of Tcs segment sales combined with lower gross margins at our Tcs segment.
By segment gross margin ex tire store decreased 140 basis points compared to last year, primarily due to higher freight costs, which was partially offset by favorable product mix.
Elfa gross margin was flat at 36, 6% compared to last year, primarily due to direct material cost increases offset by favorable customer mix and price increases.
Consolidated SG&A dollars increased 10, 7% to $121 9 million compared to $110 1 million in Q1 last year.
As a percentage of sales SG&A increased approximately 150 basis points year over year to 46, 4% due to increased compensation and benefit costs and increased marketing costs, reflecting the restoration of expenses that were pulled back during the height of the pandemic and additional investments into the business to support.
Our growth to $2 billion in sales by the end of fiscal 2027.
The compensation and marketing increases were partially offset by leverage of occupancy costs on higher sales year over year.
Our net interest expense.
In the first quarter of fiscal 2022 remained consistent year over year at $3 2 million.
The effective tax rate for the quarter was 28, 8% compared to 24, 3% in the first quarter last year the.
The increase in the effective tax rate is primarily related to the tax impact of share based compensation on lower pre tax income in the first quarter of fiscal 2022 as compared to the first quarter of fiscal 2021.
Net income for the quarter on a GAAP basis was $10 5 million or 21 cents per diluted share as compared to a GAAP net income of $17 7 million or <unk> 35 per diluted share in the first quarter of last year.
Adjusted net income was $10 5 million or 21 cents per diluted share as compared to last year's adjusted net income of $18 2 million or <unk> 36 cents per diluted share.
Our adjusted EBITDA decreased 15, 9% to $28 2 million in the first quarter this year compared to $33 5 million in Q1 last year.
Turning to our balance sheet, we ended the quarter with $23 2 million in cash $187 $1 million in total debt and total liquidity, including availability on our revolving credit facilities of approximately $115 5 million.
Our current leverage ratio is one one times.
We ended the quarter with consolidated inventory up 31, 5%, which reflects increased freight and commodity costs across our organization year over year.
On a unit basis, our Tcs on hand inventory is down slightly year over year.
We have been 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 cadence.
Capex was $17 6 million in the first quarter of this year versus $7 6 million in Q1 last year with the increase related primarily to it.
Investments in technology in our stores.
Free cash flow in the first quarter of this year was a use of $14 4 million versus a use of $3 8 million in Q1 last year.
Now for our outlook for the full year we.
We are prudently considering the current promotional environment for our general merchandise categories and that the current sales trends continue through the remainder of the year.
With that said, we still expect fiscal 2022 consolidated net sales of approximately 1.125 billion driven by a low single digit increase in comparable store sales and two planned store openings.
While we still expect operating margins to be in the high single digit range. We now expect over 50 basis points of incremental operating margin pressure as compared to our previous guidance.
Which excludes the benefit.
Of an expected one time legal settlement gain of $2 6 million from SG&A in the second quarter of fiscal 2022.
Approximately two thirds of the operating margin pressure is related to additional SG&A deleverage and the remaining one third is related to gross margin pressure.
As it relates to SG&A, we have factored in additional inflationary cost pressures into our guidance such as increased outbound transportation costs.
The incremental gross margin pressure is related to higher than expected promotional cadence as well as additional expected commodity and freight cost increases.
Fiscal 2022 interest expense is now expected to be approximately $14 million.
As a result of higher rates and our effective tax rate is still expected to be approximately 28%.
As a result, we estimate full year adjusted earnings per share to be approximately $1 10 to $1 20 per share with $51 million, assuming dilutive shares outstanding.
Our adjusted EPS estimate does not include the expected four cents earnings per share benefit associated with a legal settlement occurring in the second quarter of this fiscal year.
For Q2 of fiscal 2022, we expect consolidated sales growth to be in the low single digits, driven primarily by comparable store sales at Tcs.
She is in line with our Q2 to date trends excluding.
The impact of a onetime legal settlement benefit of four cents per share we expect adjusted EPS in the second quarter to be in the range of 20% to 25.
Per diluted share.
As a reminder, the second quarter of fiscal 2021 was the most profitable quarter of the fiscal year as a result of better than expected gross margins and lower SG&A costs.
Our better than expected gross margin performance was associated with less promotional cadence in anticipation of higher commodity and freight costs.
The lower SG&A costs were a result of expense savings from pandemic related cost reductions that were reintroduced starting late Q2 and into the remaining two quarters of fiscal 2021.
In Q2 of fiscal 2022, we expect our operating margin to be in the high single digit range with two thirds of the expected year over year profitability decline driven by SG&A deleverage associated with cost that we brought back into the business in fiscal 2021.
The expected SG&A deleverage excludes the benefit of a one time legal settlement gain of $2 6 million.
The remaining expected profitability decline is associated with gross margin pressure as a result of freight and commodity cost increases compared to Q2 of fiscal 2021.
Also hesitation mentioned earlier, we are on track to open our first small format store in Colorado Springs, Colorado in the second quarter of fiscal 2022.
Capital expenditures for the full year fiscal 2022 are still expected to be approximately 60 million to $65 million for technology infrastructure and software projects, new stores and existing store merchandising and refresh activities.
Given our strong balance sheet and in anticipation of generating positive free cash flow for the remainder of fiscal 2022 and into the future as well as our commitment to delivering shareholder value.
Our board has recently approved our first stock repurchase program.
Which includes an authorization for up to $30 million.
Stock repurchases may be made in the open market.
It could be negotiated purchases with the amount and timing determined at the company's discretion we.
We do not expect to incur additional debt as a result of these stock repurchases.
This concludes our prepared remarks, I'll now turn it over to the operator to begin the Q&A session.
Thank you very much at this time, we will be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue.
You may start to if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please while we're hopeful question.
The first question comes from Steve Forbes from Guggenheim Securities. Please proceed with your question.
Thank you and good afternoon.
That's the finish I wanted to start with the planned completion of the rollout of pressed into all stores Dori.
The current quarters. So just curious if you could help frame the cadence of the rollout when will it be completed.
Maybe you know what what space is it replacing in store as it is a consistent within region.
And whether the updated outlook assumes any productivity assumption from that space.
As we as we update our models here.
Sure. Thanks, Steve. Thank you for the question. So I'm actually pleased to announce we have now completed the rollout of Preston throughout our stores, we just completed that and there's some minor touched that need to happen, but they are now all in stores and as I mentioned in my prepared remarks.
And we're really pleased with the pipeline that we're seeing with these designs are with the average ticket of over $8500 and so the the reaction from our customers have been quite pleasant, they're amazed with not only the quality of the offering but also of all of the additional features that come.
I'm with it and we're really excited to be able to get that into a customer's home as quickly as we can.
And just yeah.
Yeah go ahead, Jeff.
Yeah, Steve just to just to follow on that the Preston product lines that are going into our stores are in replacement of the layer and lines that we have today, so and that and we do factor in into our outlook.
The ramp up of that Preston line in our stores through the remainder year it had been doing so.
As part of the original budgeting process.
Thank you and then and then just a quick follow up.
Think about the commitment to the.
The openings it really all through 2024, I think it's 24 or so.
Can you provide just some additional color on how the pipeline is coming along I think you'd mentioned right that.
The real estate is.
Is that are you sort of in the search process here, but how are the lease signings coming along and how should we expect that sort of pipeline to build here as we look out over the next 12 months.
Yeah I'll answer it first and then Jeff can chime in as well with where we're really pleased actually with our ability to locate and negotiate some really great leases as we look at not only our 2023, but also 'twenty four and 'twenty fives, and we have an amazing real estate.
And they are they have boots on the ground really securing these great places and.
And in locations that we're very very proud of and so it's still very much a fluid Ed.
It's very much fluid in terms of our ability to not only negotiate the leases, but also sign them, but we are pleased with what we've been able to identified so far and our pace of opening them.
Yeah, just to add to that again, you know we're expecting one third of the 76 stores through 2024, and while we do have a pipeline actively working.
Like I said, he said Theres a lot of factors come into play.
I will say looking into 2023, we haven't announced anything yet, but we do have a very solid pipeline as we're looking into 2023 and we're building one for 2024. So at this point in the process I think the real estate team.
Has done a great job of working on our ambition of that growth of additional 76 stores and we're looking for new sharing more in the coming months.
Thank you best of luck.
Yeah.
Thank you. The next question comes from Kate Mcshane from Goldman Sachs. Please proceed with your question.
Hi, good afternoon. Thanks for taking our question I Wonder if you could talk a little bit more about what is being assumed in your guidance for promotions. This fiscal year I know that this is something that you've been pulling back on him as he mentioned in your prepared comments I think your markdown rate with lower if I wonder if your annual sales.
As the year before but just how youre thinking about the promotional environment in the context of a tougher macro backdrop than just a promotional environment across the board and in retail.
Yeah sure thing and you know as we said earlier.
We're definitely navigating a very dynamic consumer environment, and and also not only containing with customers who are really enjoying finally enjoying their summer activities and travel and then there are customers that are also kind of looking for and expecting more value given current inflationary pressures.
That said you know we really are proud of the fact that the way that we are delivering smart and engaging promotional campaigns and we kind of do that in three ways. We do it through our loyalty program. We do it through some of our spend more save more events and also throw out amazing private label assortment, which not only delivers on quality and.
Asian, but also on value.
And so there are recent examples of that was the nevers events as we mentioned sales were up 9% over L Y and the discount was less than 20% versus 25, which was what we experienced last year and we also did it within our general merchandise, we held a limited time only buy more save more event in early June .
With the home edit and that really drove some significant growth in kitchen, and Bath again, where customers are spending more there are they have the ability to save more.
We currently have a very compelling back to call. These campaign, where customers have the opportunity to save in a variety of different ways and so its really being smart and engaging that customer and so that they can see the value in what we're offering but why we're doing it in a very profitable and mindful manner.
Thank you if I could just ask a second question about back to college could.
Could you maybe characterize for us what you're expecting in terms of the demand for back to college versus last year would you have just defined last year. They normal year for back to college or are we still lapping what might be still some easier compares when it comes to that particular season.
Sure you know, we're really excited about our back to school offering this year last year I think we were kind of playing into it are engaging with customers and this year with we've made significant improvements in the way that we come across with our expression. So we have a franchise store spotlight as I mentioned earlier.
Our and a dedicated online landing page showcasing some really amazing products blackout, we tear rolling caught on the bad storage notebooks planners.
And our most famous alpha printer French court and that really is engaging with our customers. We also partnered with Domo Fi Ah in 10 of our stores and really delivering on a more complete experience. We also went on campus for the first time engaging with local schools.
So that we could really get the awareness out there that the container store that really competes in a back to school and have recently just rolled out a an amazing reusable shopping tote, which has an instant hit with customers. So I think for US you know, we're now playing a much more strongly in back to school, we will continue to play.
Drawing your back to school than really encouraged with the results that we're seeing over L y so far.
Thank you.
Okay.
Thank you. The next question comes from Ryan Meyers from Lake Street Capital Markets. Please proceed you Brian .
Yeah, Hi, guys. Thanks for taking my questions first one for me I Wonder if you could just kind of highlight what store traffic has looked like maybe in the first quarter and kind of how it's tracking so far in Q2.
Yeah, Ryan Hey, great to hear from you you know I store traffic.
It is slightly down is what we are seeing there have been pockets in particular during the holidays that we've seen it down.
Down even more but it is a absolutely more than offset by whether it's a combination of a conversion rate or average ticket.
And so it's our ability to really engage with customers and get them to add on to their purchase I think our specialist.
Specialists in our stores, which do a brilliant job of really spending quality time now with those customers that are coming in so they can understand the projects that they're.
Taking in so that they can give a full a full level of service to them.
Great No. That's helpful. That's all I had thank you.
Sure.
Thank you. The next question comes from Christopher <unk> from Jpmorgan. Please proceed.
Thanks, Good evening, So I had a first question on Preston and then a couple model follow ups. So first impression could you talk about how expansive.
The change in the line was relative to the prior line, how you know sort of how many incremental finishes their worse or maybe how much store space space in the store, it's taken up now versus what it did currently maybe a number of skus.
Yeah.
What I would tell you Chris is that today, we offer 11 premium finishes now and which was more than I believe we had without Laren line, but I tell you what is really that the consumers are really paying attention to is the customization of that product. So we're able now to offer a far more customization.
It's draws and we obviously have the 360, a revolver that has been a great hit with our customers as well lighting hardware a variety of different accessories that come with it. So the expansiveness actually is it's quite big as our customers choose whether or not for example, they want to have back.
Panels on their on their designs or not whether or not they want to have a glass and we have a variety of different glasses, we can offer where there's frosty they'll see through our PE classes.
And that's really what's exciting at for passengers to engage in and Ah you know when I look at what we've been able to do just for the month of July alone. Impressed then it's far surpassed what we did in Q1 alone. So clearly we're seeing a huge pick up in AR and the demand for for Preston and well and I would tell you. We're just getting started with that line.
Got it makes sense, so a lot more customization and then on the in reference to the prior question that was asked him in Q&A, maybe could you delve into sort of how the cadence of the quarter looked when you talk about you know some moderation around the times of holidays have presumably.
That's it that's a July 4th.
The impact is that are you referencing that and maybe what are you seeing at the category level.
Is it more on the general merchandise, where you see the you know so that air pocket of demand as is it also showing up on the alpha and the custom closets side.
Yeah. When it comes to the holiday was definitely some of it with Memorial day, you know more so and a bit of that during the July 4th for sure.
And in terms of categories. You know it was a softer on the general much then our custom closets side of the business that continues to deliver as you saw double digit growth of railway and seen great performance not only with the werra, but also with alpha are very pleased with our ability to continue to win in the above 2000.
In space as you know, that's where we see significant upside in our growth potential and a path to hit $2 billion in sales.
Specifically within general much you know very pleased with what we saw in kitchen in particular and in bass and in office, great categories doing well for US and you know we have some tough compares in particular around closet and and storage and that's because we were essentially annabel.
Anniversarying, a pretty big promo promo event that we had last year, which is a closet essentials sale that ran from mid April to the end of May and so that's what we were trying to anniversary this time period.
Got it and then just one quick modeling one on on the GAAP.
The gap between the sale total net sales growth and and the comp growth is is that wholly made up.
Of closet works and so within that sort of low single digit outlook should sales be sort of at the high end of that and then the comps more towards the mid point of that.
Chris are you talking about the.
Q1 GAAP.
Yeah between comp yeah, yeah, and how to think about it going forward.
Yeah, So you're correct.
The difference at two 8%.
Tween comp store in the fall.
It was primarily related to closet works.
Oracle business they had the dealer network and that we've got a backlog that we're working through as we move forward.
Going forward as we're now offering that Preston line exclusively in our stores and no longer within that dealer network. We would expect the impact of the closet works.
Historical backlog to fall off sharply starting in Q2.
Got it makes sense. Thanks, so much.
Yeah.
Thank you ladies and gentlemen, we have reached the end of the question answer session and I would like to turn the call back to the teach for closing remarks. Thank you said.
Well. Thank you again for joining us today and for continuing to follow the container store's growth story I look forward to when we can discuss our Q2 results until then thank you and good night.
Yeah.
Thank you. This concludes today's conference call you may disconnect. Your lines at this time and thank you very much for your participation.
Yeah.
[music].