Q1 2024 The Container Store Group Inc Earnings Call
Operator: Greetings, and welcome to the Container Store's First Quarter 2024 Earnings Call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference call, please press star then zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Caitlin Churchill. Please go ahead, ma'am.
Operator: Greetings and welcome to the Container Store's first quarter 2020 for earnings call. After the time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation if anyone should require operated assistance during the conference call.
Greetings and welcome to the container store's first quarter 'twenty 'twenty four earnings call.
Speaker Change: At this time, all participants are in listen only mode.
Speaker Change: A question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance during the press during the conference call. Please press Star then zero on your telephone keypad.
Operator: Please first start and zero on your telephone keypad. As your reminder, this conference is being recorded.
Speaker Change: As a reminder, this conference is being recorded.
Operator: I would now like to turn on the conference over to your host, Kate and Churchill. Please go ahead, Mel.
I would now like to turn the conference over to your host Caitlin Churchill. Please go ahead ma'am.
Caitlin Churchill: Good afternoon, everyone, and thanks for joining us today for the Container Store's first quarter fiscal year 2024 earnings results conference call. Speaking today are Satish Malhotra, Chief Executive Officer, and Jeff Miller, Chief Financial Officer. After Satish and Jeff have made their formal remarks, we will open the call to questions.
Caitlin Churchill: Good afternoon, everyone, and thanks for joining us today for The Container Store's first quarter fiscal year 2024 earnings result conference call. Speaking today, our Satish Malhotra, Chief Executive Officer, and Jeff Miller, Chief Financial Officer.
Caitlin Churchill: Good afternoon, everyone and thanks for joining us today for the container stores first quarter fiscal year 'twenty 'twenty four earnings result conference call.
Speaker Change: Speaking today are to teach them the whole trusts, Chief Executive Officer, and Jeff Miller, Chief Financial Officer.
Caitlin Churchill: After Satish and Jeff have made their formal remarks, we will open the call to questions.
Speaker Change: After to teach and Jeff have made their formal remarks, we will open the call to questions.
Caitlin Churchill: 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. The actual results could differ materially from those anticipated in these forward-looking statements. 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 May 28, 2024, as updated by our quarterly reports on Form 10-Q and other public filings with the U.S. Securities and Exchange Commission.
Caitlin Churchill: 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 companies that are subject to risks and uncertainties. Actual results could differ materially from those anticipated in-four-looking statements. 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 May 20, 2024, as updated by our quarterly report on Form 10-K and other public filings with the U.S.
Speaker Change: 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 Change: Actual results could differ materially from those anticipated in these forward looking statements.
Speaker Change: The risk factors that may affect results are referred to in the container stores press release issued today.
Speaker Change: In our annual report on Form 10-K filed with the SEC on May 22024, as updated by our quarterly reports on Form 10-Q, and other public filings with the U S Securities and Exchange Commission.
Caitlin Churchill: Securities and Exchange Commission.
Caitlin Churchill: 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 statement. 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.containerstore.com. I will now turn the call over to Satish.
Caitlin Churchill: 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 Change: 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.
Caitlin Churchill: Finally, the speaker's mayor for a 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.
Speaker Change: Finally, the speakers may refer to certain adjusted or non-GAAP financial measures on this call.
Speaker Change: 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.
Caitlin Churchill: A copy of today's press release and investor deck may be obtained by visiting the Investor Relations page of the website at www.containerstore.com.
Speaker Change: A 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 Dot com.
Satish Malhotra: I'll now turn the call over to Satish. Thanks, Caitlin, and thank you all for joining us. I'll begin today's discussion with a review of our first-quarter performance, and then Jeff will discuss the details of our financial results before we open up the call to questions. Now turning to our first quarter results, while we continue to contend with a challenging macro environment, we were encouraged by the sequential improvement in year-over-year sales trend we delivered in the first quarter compared to the fourth quarter. Comparable sales declined 13.7% for the first quarter and reflected sequential month-of-a-month improvement in both general merchandise and custom spaces as the quarter progressed, with notable improvements in June.
Teach Teach: I'll now turn the call over to teach teach.
Satish Malhotra: Thanks, Caitlin, and thank you all for joining us. I'll begin today's discussion with a review of our first quarter performance, and then Jeff will discuss the details of our financial results before we open up the call to questions. Now turning to our first quarter results. While we continue to contend with a challenging macro environment, we were encouraged by the sequential improvement in year-over-year sales trends we delivered in the first quarter compared to the fourth quarter. Comparable sales declined 13.7% for the first quarter and reflected sequential month-over-month improvement in both general merchandise and custom spaces as the quarter progressed, with notable improvements in June.
Teach Teach: Thanks, Kaitlin. Thank you all for joining us.
Teach Teach: I'll begin today's discussion with a review of our first quarter performance.
Teach Teach: Then Jeff will discuss the details of our financial results before we open up the call to questions.
Satish Malhotra: General Merchandise experienced a 21.8% decline in comparable sales, while Custom Spaces delivered a positive 1.9% increase in comparable sales for the quarter. We attribute the change in custom space and sales trajectory to the enthusiastic response to our Garage Plus and Decaux Plus by Alpha launches and our premium wood-based Preston line, which had the best sales order quarter in its history. Additionally, we saw a 300 basis point improvement in our gross margin rate due to reduced freight costs.
Jeff Miller: Now turning to our first quarter results.
Satish Malhotra: Continued Discipline Promotional Activity and Fade World Product With respect to profitability, the adjusted loss per share was $0.26 for the first quarter compared to a $0.21 loss in Q1 of fiscal 2023, which was a result of de-leverage of fixed costs on lower sales despite the gross margin improvement.
Jeff Miller: While we continue to contend with a challenging macro environment.
Speaker Change: We're encouraged by the sequential improvement in year over year sales trend, we delivered in the first quarter compared to the fourth quarter.
Jeff Miller: Comparable sales declined 13, 7% for the first quarter and reflected sequential month over month improvement in both general merchandise and custom spaces as the quarter progressed.
Teach Teach: With notable improvements in June.
Satish Malhotra: General merchandise experienced a 21.8% decline in comparable sales, while custom spaces delivered a positive 1.9% increase in comparable sales for the quarter. We attribute the change in customs, space, and sales trajectory to the enthusiastic response to our garage plus and the co-plus by Alpha Launchers and our premium wood-based press online, which had the best sales order quarter in its history. Additionally, we saw a 300 basis point improvement in our gross margin rate due to reduced freight cost, continued discipline, promotional activity, and favorable product mix. With respect to profitability, adjusted loss per share was 26 cents for the first quarter, compared to a 21 cents loss in Q1 of fiscal 2023, which was a result of due leverage of fixed costs on lower sales, despite the gross margin improvement.
Teach Teach: General merchandise experienced a 21, 8% decline in comparable sales.
Jeff Miller: <unk> delivered a positive one 9% decrease in comparable sales for the quarter.
Jeff Miller: We attribute the change in customer facing sales trajectory to the enthusiastic response to our garage block.
Jeff Miller: And the cool plus alpha launches and our premium wood based Princeton line, which had the best sales order quarter in its history.
Jeff Miller: Additionally, we saw a 300 basis point improvement in our gross margin rate due to reduce freight costs.
Jeff Miller: <unk> disciplined promotional activity and favorable product mix.
Jeff Miller: With respect to profitability adjusted loss per share was 26 for the first quarter compared to a 21 loss in Q1 of fiscal 2023.
Jeff Miller: Which was the result of deleverage of fixed costs on lower sales. Despite the gross margin improvement.
Satish Malhotra: One is to take a moment now to recognize our team for their continued dedication and outstanding customer service, despite the challenging macroeconomic backdrop. Our teams from the support center to the distribution centers to our stores remained committed and focused on positioning the Container Store for success. Their hard work was rewarded this quarter by delivering exceptional net promoter scores across our retail stores, customs spaces, and buy-on-line pickup-in-store orders. Based on our latest survey work, we once again confirm consumers continue to have an undeniable need for our unique offering. We learned that one half of the Americans believes they have at least one room in their home that is overwhelmed with clutter, and that the average American wishes they had three more rooms in their home to have space for all their belongings.
Satish Malhotra: I wanted to take a moment now to recognize our team for their continued dedication and outstanding customer service. Despite the challenging macroeconomic backdrop, our teams from the support center to the distribution centers to our stores remain committed and focused on positioning the container store for success. Their hard work was rewarded this quarter by delivering exceptional net promoter schools across our retail stores, custom spaces, and by online pick-up and store orders, based on our latest survey work.
Jeff Miller: I wanted to take a moment now to recognize our team for their continued dedication and outstanding customer service.
Jeff Miller: Despite the challenging macroeconomic backdrop.
Jeff Miller: <unk> from the support center to the distribution centers to our stores.
Jeff Miller: <unk> committed and focused on positioning the container store for success.
Jeff Miller: Their hard work, which rewarded this quarter by delivering exceptional net promoter scores across our retail stores.
Jeff Miller: Basis.
Jeff Miller: Buy online pickup in store orders.
Jeff Miller: Based on our latest survey work.
Satish Malhotra: We once again confirm that consumers continue to have an undeniable need for our unique offer. We learned that one half of Americans believe they have at least one room in their home that is overwhelmed with clutter, and that the average American wishes they had three more rooms in their home to have space for all their belongings.
Jeff Miller: Once again confirmed consumers continue to have an undeniable need for our unique offering.
Speaker Change: We learned that one have been there.
Ken: Ken's believes they have at least one room in their home that is overwhelmed with.
Speaker Change: And that the average American wishes they had three more rooms in the home space for all of their belongings.
Satish Malhotra: Our customs space systems, complementary organizing solutions, and in-home services gives customers the power to overcome their clutter and utilize the existing space they have in ways they did not know possible.
Satish Malhotra: Our Custom Space Systems, Complementary Organizing Solutions, and In-Home Services give customers the power to overcome their clarity and utilize the existing space they have in ways they did not know were possible. Additionally, we recently hosted our second vendor summit, which drove incredible energy and excitement across our vendor base. During the summit, we focused on our strategies, including deepening our relationship with customers, expanding our reach, and strengthening our capabilities, while also highlighting our near-term priorities for Fiscal 24, which we discussed on our fourth-quarter earnings call.
Speaker Change: Our customer base system.
Dmitry: Dmitry organizing solutions.
Dmitry: In home services give customers the power to overcome the corner.
Dmitry: And utilize the existing space they have in ways. They did not know possible.
Satish Malhotra: Additionally, we recently hosted our second vendor summit, which drove incredible energy and excitement across our vendor base. During the summit, we focused on our strategies, including deepening our relationship with customers, expanding our reach, and strengthening our capabilities, while also highlighting our no-turn priorities for fiscal 24 that we discussed on our fourth quarter earnings call. These include growing our customs spaces business through expanding our alpha and Preston offering, stabilizing our general merchandise business, and increasing brand awareness. Following the summit, we believe there is a renewed level of conviction in our brand from our partners, who are thrilled to see our ongoing focus on our core products.
Dmitry: Additionally, we recently hosted a second vendor to them.
Dmitry: Which drove incredible energy and excitement across the have been debate.
Speaker Change: During the summer, we focused on our strategy, including deepening our relationship with customers expanding our reach and strengthening our capabilities.
Speaker Change: While also highlighting our near term priorities for fiscal 'twenty four.
Speaker Change: Discussed on our fourth quarter earnings call.
Satish Malhotra: These include growing our custom spaces business through expanding our Alpha and Preston offerings, stabilizing our general merchandise business, and increasing brand awareness. Following the summit, we believe there is a renewed level of conviction in our brand from our partners, who are thrilled to see our ongoing focus on our core products. In addition, they are looking forward to working closely with us on expanding our core offering and providing complementary solutions that complete our custom spaces.
Speaker Change: These include growing our customer base and business through expanding our alpha impressing offerings.
Speaker Change: Realizing that general merchandise business and increasing brand awareness.
Speaker Change: Following the summit, we believe there is a renewed level of conviction in our brand from our partners who are thrilled to see our ongoing focus on our core products.
Satish Malhotra: In addition, they are looking forward to working closely with us on expanding our core offering and providing complementary solutions that complete our customs spaces. As I mentioned, we were pleased to see customs spaces deliver a positive comfort for the first quarter, especially given the prevailing macro-related headwinds. Our design specialists are getting better and better at leveraging our improved design tools and convening leads, especially for our press line, which delivered a record quarter, as I mentioned earlier. We continue to see opportunities to double our press and business by improving conversion rates and believe we are on a path to achieving this over time.
Speaker Change: In addition, we are looking forward to working closely with us on expanding our core offering I'm, providing complementary solution that complete our customer bases.
Satish Malhotra: As I mentioned, we were pleased to see Custom Spaces deliver a positive comeback for the first quarter, especially given the prevailing macro-related headwinds. Our design specialists are getting better and better at leveraging our improved design tools and converting leads, especially for our Preston line, which delivered a record quarter, as I mentioned earlier. We continue to see opportunities to double our precedent business by improving conversion rates and believe we are on a path to achieving this over time.
Speaker Change: But as I mentioned, we were pleased to see continued spaces deliver a positive comp for the first quarter, especially given the prevailing macro related headwinds.
Speaker Change: Our design, especially if they're getting better and better at leveraging our improved design tools and converting leads especially for our prestige, which delivered a record quarter as I mentioned earlier.
Speaker Change: We continue to see opportunity to double our principal business by improving conversion rates.
Speaker Change: And believe we are on the path to achieving this over time.
Satish Malhotra: We're also generating great engagement throughout enhanced product offering with Alpha. Following the launch of Garage Plus by Alpha last fall, we kicked off a marketing campaign in the spring to bring awareness to our newest line. As part of this campaign, we collaborated with Jason and Kylie Kelsey, as well as Michael Sebastian, Edgar, and Chief of the Squire to transform their garages into calming spaces that are now both functional and aesthetically pleasing. These real-life transformations resonated with both our customers and their audiences across marketing channels and resulted in notable media coverage. The positive trends and reception we are seeing for Garage Plus can be attributed to the marketing efforts we launched in April.
Satish Malhotra: We're also generating great engagement through our enhanced product offering with Alpha. Following the launch of Garage Plus by Alpha last fall, we kicked off a marketing campaign in the spring to bring awareness to our newest line. As part of this campaign, we collaborated with Jason and Kylie Kelsey, as well as Michael Sebastian, editor-in-chief of Esquire, to transform their garages into calming spaces that are now both functional and aesthetically pleasing. These real-life transformations resonated with both our customers and their audiences across marketing channels and resulted in notable media coverage.
Speaker Change: We're also generating great engagement throughout enhanced product offering with alpha.
Speaker Change: Following the launch of garage plus by Alfa last fall, we kicked off a marketing campaign in the spring to bring awareness to our newest line.
Speaker Change: As part of this campaign, we collaborated with Jason and Kylie Kelsey as well as Michael Sebastian Andrew <unk> Chief of Esquire to transform their garages into common spaces that are now both functional and aesthetic really pleasing.
Speaker Change: These real life transformation resonated with both our customers and they're all equally across marketing channels.
Speaker Change: <unk> been notable media coverage.
Satish Malhotra: The positive trends and reception we are seeing for Garage Plus can be attributed to the marketing efforts we launched in April. During the quarter, we were excited to finally reveal further innovation in our modular wall-hanging custom space offering with the launch of DecorPlus by Alpha in June. This new system gives customers elevated options like LED lighting, back panels that give their space a built-in look, and the fully enclosed Birch Wood Drawers they have been asking for. And it comes at an exceptional value, in a system that they can do it themselves or have professionally installed.
Speaker Change: The positive trend and reception, we are seeing for garage spot can be attributed to the marketing efforts we launched in April.
Satish Malhotra: During the quarter, we were excited to finally reveal further innovation in our modular wallhanging custom space offering with a launch of Decore Plus by Alpha in June. This new system gives customers elevated options like LED lighting, back panels that give their space a built-in look, and the fully enclosed virtual withdrawers they have been asking for. It comes at an exceptional value and in a system that they can do it themselves or have professionally installed. While still early dates, the launch has been well received by our customers and is generating a lot of excitement in stores.
Speaker Change: During the quarter, we were excited to finally revealed further innovation in our modular wall hanging companies based offering with the launch of the core plus by Alpha in June.
Speaker Change: This new system gives customers elevating options like led lighting stockpiles that gave their space to build teamwork.
Speaker Change: That's fully enclosed birch would draw it they have been asking for.
Speaker Change: It comes at an exceptional value and in our system that they can do it themselves.
Speaker Change: Professionally installed.
Satish Malhotra: While still in its early days, the launch has been well received by our customers and is generating a lot of excitement in stores. The initial response to these recent alpha launches only strengthens our belief that we can grow custom spaces from 40% of sales to 60% of sales over time, will continue to expand and innovate across our soul, build and strengthen our in-home and in-store design services, and sharpen the focus of our marketing efforts to drive brand awareness for our differentiated, solution-oriented offering.
Speaker Change: While it's still early days the launch has been well received by our customers and is generating a lot of excitement in stores.
Satish Malhotra: The initial response to these recent Alpha launches only strengthens our belief that we can grow custom spaces from 40 percent of sales to 60 percent of sales over time. We'll continue to expand and innovate across our soulmate, build and strengthen our in-home and in-store design services, and sharpen the focus of our marketing efforts to drive brand awareness for our differentiated solution-oriented offering. Turning next to the work in stabilizing our general merchandise business, with 94 percent of our customers shopping general merchandise, it is essential that we focus on ensuring we are always in stock in the critical traffic-grabbing core skews while still infusing in-units and innovation.
Speaker Change: The initial response to these recent alpha launches only strengthens our belief that we can grow companies basis from 40% of sales to 60% of sales over time.
Speaker Change: We will continue to expand and innovate across our assortment.
Speaker Change: Build and strengthen our in home and in store design services and sharpen the focus of our marketing efforts to drive brand awareness for our differentiated solution oriented offering.
Satish Malhotra: Next, to work on stabilizing our general merchandise business, with 94% of our customers shopping general merchandise, it is essential that we focus on ensuring we are always in stock in the critical traffic-driving core SKUs while still infusing newness and innovation. This includes new core premium products to complement custom spaces, plus discovery products to build a basket.
Speaker Change: Turning next to the work and stabilizing our general merchandise business.
Speaker Change: With 94% of our customers shopping general merchandise. It is essential that we focus on ensuring we are always in stock in the critical traffic grabbing close skus.
Speaker Change: Still infusing newness and innovation.
Satish Malhotra: This includes new core premium products to complement custom spaces, plus discovery products to build a basket. In our stores, we are reallocating space and inventory to be more effective, more reflective of our core storage and organizing offering, which is resulting in significant improvements in productivity. During the quarter, we relocated our downtown San Francisco store and opened a new location in Springfield, Virginia. The new store in Springfield saw a great response, with more than 100 people waiting in line on the first day, and the relocation in San Francisco is off to a strong start as well.
Speaker Change: This includes new core premium products to complement these spaces.
Speaker Change: Discovery products to build the basket.
Speaker Change: In our stores, we are reallocating space and inventory to be more effective more reflective of our core storage and organizing offering.
Speaker Change: Which is resulting in significant improvements in productivity.
Satish Malhotra: In our stores, we are reallocating space and industry to be more effective, more reflective of our core storage and organizing offerings, which is resulting in significant improvements in productivity. During the quarter, we relocated our downtown San Francisco store and opened a new location in Springfield, Virginia. The new store in Springfield saw a great response, with more than 100 people waiting in line on the first day. And the relocation in San Francisco is off to a strong start as well. Most recently, following Quarter End, we opened another new store in Virginia in Ashburn. Again, our team experienced a robust welcome and excitement from the community, with more than 100 people waiting in line on opening day.
Speaker Change: During the quarter, we relocated our downtown San Francisco store and opened a new location in Springfield, Virginia.
Speaker Change: The new store is greenfield so a great response with more than 100 people waiting in line on the first day.
Speaker Change: The relocation in San Francisco is off to a strong start as well.
Satish Malhotra: Most recently, following quarter-end, we opened another new store in Virginia in Asperm. Again, our team experienced a robust welcome and excitement from the community, with more than 100 people waiting in line on opening day. We'll still on track to open two new stores in Florida later this year and look forward to a similar reception from those communities.
Speaker Change: Recently following quarter end, we opened another new store in Virginia in Ashburn again, our team experienced a robust welcome and excitement from the community with more than 100 people waiting in line on opening day.
Satish Malhotra: We're still on track to open two new stores in Florida later this year and look forward to a similar reception from those communities. In summary, while we cannot control the current macro environment, we are pleased with the progress we're making on our initiative and continue to believe in the opportunities ahead as more and more customers realize the power of organization. We are controlling the controllables, tightly managing expenses and capital while strengthening our competitive position.
Speaker Change: We're still on track to open two new stores in Florida later this year.
Speaker Change: For two it's similar reception from those communities.
Satish Malhotra: In summary, while we cannot control the current macro environment, we are pleased with the progress we're making on our initiative and continue to believe in the opportunities ahead as more and more customers realize the power of organization. We are controlling the controllables, tightly managing expenses and capital while strengthening our competitive position, all of which will serve us well when the market condition normalizes. The board and management continue to work on plans to refinance our credit facility, and concurrently are continuing to reduce strategic alternatives and an effort to ensure we are maximizing both the potential of the business and returns for shareholders.
Speaker Change: In summary, while we cannot control the current macro environment. We are pleased with the progress we're making on our initiatives and continue to believe in the opportunities ahead as more and more customers realize the power of organization.
Speaker Change: We are controlling the controllable.
Speaker Change: Tightly managing expenses and capital, while strengthening our competitive position.
Satish Malhotra: All of which will serve us well when market conditions normalize. The board and management continue to work on plans to refinance our credit facility and, concurrently, are continuing to review strategic alternatives in an effort to ensure we are maximizing both the potential of the business and returns for shareholders. We will not be taking any questions regarding the strategic review process at the end of the call, nor do we intend to comment further until a disclosure is deemed necessary or advisable. Now, I'll turn the call over to Jeff to discuss our financial results in more detail. Jeff?
Speaker Change: All of which will serve us well when the market condition the normalizes.
Speaker Change: Yeah.
Speaker Change: The board and management continue to work on plans to refinance our credit facility and concurrently continuing to reduce strategic alternatives in an effort to ensure we are maximizing both the potential of the business and returns for shareholders.
Satish Malhotra: We will not be taking any questions regarding the strategic review process at the end of the call, nor do we intend to comment further until disclosure is deemed necessary or advisable.
Speaker Change: We will not be taking any questions regarding the strategic review process at the end of the call nor do we intend to comment further until disclosure, it's deemed necessary or advisable.
Jeffrey Miller: And now I'll turn the call over to Jeff to discuss your financial results in more detail. Jeff?
Speaker Change: And now I'll turn the call over to Jeff to discuss our financial results in more detail.
Speaker Change: Jeff.
Jeffrey Miller: Thank you, Satish, and good afternoon, everyone. As Satish reviewed, our first quarter results reflect sequential month-over-month improvement through the period and ongoing relative strength within custom spaces, which delivered positive, comparable sales growth for the quarter. For the first quarter, consolidated net sales decrease 12.2 percent year over year to 181.9 million. By segment, net sales for the Container Store retail business will be 171.5 million, a 12.1 percent decrease compared to 195.1 million in the prior year. The decrease is inclusive of a comp store sales decrease of 13.7 percent, driven primarily by the 21.8 percent decline in our general merchandise categories, which negatively impacted comp store sales at 1,440 basis points.
Jeff Miller: Thank you, Satish, and good afternoon, everyone. As Satish reviewed, our first quarter results reflect sequential month-over-month improvement through the period and ongoing relative strength within custom space, which delivered positive comparable sales growth for the quarter. For the first quarter, consolidated net sales decreased 12.2% year-over-year to $181.9 million. By segment, net sales for the container store retail business were $171.5 million, a 12.1% decrease compared to $195.1 million in the prior year. The decrease is inclusive of a comp store sales decrease of 13.7%, driven primarily by the 21.8% decline in our general merchandise category, which negatively impacted comp store sales at 1,440 bases. Custom Spaces comp store sales increased 1.9% compared to last year and positively impacted comp store sales by 70 basis points; sales from non-comparable stores were a net benefit to total TCS sales of 160 basis points.
Jeff Miller: Thank you <unk> and good afternoon, everyone.
Jeff Miller: As to teach reviewed our first quarter results reflect sequential month over month improvement through the period and ongoing relative strength within custom spaces, which delivered positive comparable sales growth for the quarter.
Jeff Miller: For the first quarter consolidated net sales decreased 12, 2% year over year to $181 9 million.
Speaker Change: By segment.
Jeff Miller: Net sales for the container store retail business were one.
Jeff Miller: $171 5 million, a 12, 1% decrease compared to $195 1 million in the prior year.
Jeff Miller: Decrease is inclusive of a comp store sales decrease of 13, 7% driven primarily by the 21, 8% decline in our general merchandise categories, which negatively impacted comp store sales a 1440 basis points.
Jeffrey Miller: Custom spaces comp store sales increased 1.9 percent compared to last year and positively impact comp store sales by 70 basis points. Sales from non-compable stores were a net benefit to total TCS sales of 160 basis points. For the first quarter, fiscal 2024, our online channel decrease 25.6 percent year over year, and our website generated sales, which includes curbside pickup, decreased 19.2 percent compared to last year. Website generated sales represented a total of 22.2 percent of TCS net sales in Q1, which is 200 basis points lower than 24.2 percent in Q1 of last year. Unarmed revenue decreased to 16.6 million in Q1 this year versus 17 million last year.
Speaker Change: Custom spaces comp store sales increased one 9% compared to last year.
Jeff Miller: Positively impact comp store sales by 70 basis points.
Jeff Miller: Sales from non comparable stores were a net benefit to total tcs sales of 160 basis points.
Jeff Miller: For the first quarter of fiscal 2024, our online channel decreased 25.6% year over year, and our website generated sales, which includes curbside pickup, decreased 19.2% compared to last year. Website generated sales represented a total of 22.2% of TCS net sales in Q1, which is 200 basis points lower than 24.2% in Q1 of last year. Unearned revenue decreased to $16.6 million in Q1 this year versus $17 million last year, which is reflective of the decline in overall sales.
Jeff Miller: For the first quarter fiscal 2020 for our online channel decreased 25, 6% year over year.
Jeff Miller: And our website generated sales, which includes curbside pickup decreased 19, 2% compared to last year.
Jeff Miller: Website generated sales represented a total of 22, 2% of Tcs net sales in Q1, which is 200 basis points lower than 24, 2% in Q1 of last year.
Jeff Miller: Unearned revenue decreased to $16 6 million in Q1, this year versus $17 million last year.
Jeffrey Miller: which is a reflective of the decline in overall sales. Alpha third-party net sales of 10.3 million decreased 13.7% compared to the first quarter of fiscal 2023. Excluding the impact of foreign currency translation, Alpha third-party net sales decreased 12.4% year over year, primarily due to a decline in the sales and the Nordic markets. From a profitability standpoint, our consolidated gross margin for Q1 increased 300 basis points to 58.3% compared to 55.3% last year. By a segment, TCS gross margin increased 340 basis points compared to last year, primarily due to freight tailwinds, decreased promotional activity, and favorable mix in Q1 of this year.
Jeff Miller: Which is reflective of the decline in overall sales.
Jeff Miller: Alpha third-party net sales of $10.3 million decreased 13.7% compared to the first quarter of fiscal 2023; excluding the impact of foreign currency translation, Alpha third-party net sales decreased 12.4% year over year, primarily due to a decline in sales in the Nordic market.
Jeff Miller: Elfa third party net sales of $10 3 million decreased 13, 7% compared to the first quarter of fiscal 2023.
Jeff Miller: Excluding the impact of foreign currency translation Elfa third party net sales decreased 12, 4% year over year.
Jeff Miller: Primarily due to a decline in sales in the Nordic market.
Jeff Miller: From a profitability standpoint, our consolidated gross margin for Q1 increased 300 basis points to 58.3% compared to 55.3% last year. By segment, TCS gross margin increased 340 basis points compared to last year, primarily due to freight tailwinds, decreased promotional activity, and favorable mix in Q1 of this year. Alpha Gross Margin increased 470 basis points compared to last year, primarily due to price increases to customers.
Jeff Miller: From a profitability standpoint, our consolidated gross margin for Q1 increased 300 basis points to 58, 3% compared to 55, 3% last year.
Jeff Miller: By segment Tcs gross margin increased 340 basis points compared to last year.
Jeff Miller: Primarily due to freight tailwind decreased promotional activity and favorable mix in Q1 of this year also.
Jeffrey Miller: Alpha gross margin increased 470 basis points compared to last year, primarily due to price increases to customers. Consolidated SG&A dollars decreased 6 million, or 5.4%, to 105.4 million compared to 111.4 million in Q1 last year. As a percentage of net sales, SG&A increased 410 basis points year over year to 57.9%. The increase is primarily due to de-leverage of fixed cost associated with lower sales and increased marketing spend in the first quarter of fiscal 2024.
Jeff Miller: Also gross margin increased 470 basis points compared to last year, primarily due to price increases to customers.
Jeff Miller: Consolidated SG&A dollars decreased to 105.4 million compared to 111.4 million in Q1 last year. However, as a percentage of net sales, SG&A increased 410 basis points year over year to 57.9%. The increase is primarily due to deleverage of fixed costs associated with lower sales and increased marketing spend in the first quarter of fiscal 2024. Additionally, in the first quarter, we recorded $900,000 of a long-lived asset impairment related to a store which has been identified for closure in fiscal 2020.
Jeffrey Miller: In the first quarter, we recorded 900,000 of a long-live asset impairment related to a store which has been identified for closure in fiscal 2024. Also in the first quarter, we recorded 1.7 million of other expenses, almost all of which is legal and professional expertise related to strategic alternatives incurred in the first quarter of fiscal 2024. Our net interest expense and the first quarter of fiscal 2024 increased to 5.5 million compared to 5 million in the first quarter of last year. The year over year increase is primarily due to higher bonds on the revolving credit facility, as well as higher year over year interest rates on a term loan during Q1.
Jeff Miller: Also, in the first quarter, we recorded $1.7 million of other expenses, almost all of which were legal and professional fees related to strategic alternatives incurred in the first quarter of fiscal 2024. Our net interest expense in the first quarter of fiscal 2024 increased to $5.5 million, compared to $5 million in the first quarter of last year. The year-over-year increase is primarily due to higher borrowings on the revolving credit program, as well as higher year-over-year interest rates on a term loan during Q1. The effective tax rate for the first quarter was 23.4% compared to 23.3% in the first quarter of last year.
Speaker Change: Year over year increase is primarily due to higher borrowings on the revolving credit facility as well as higher year over year interest rates on our term loan during Q1.
Jeffrey Miller: The effective tax rate for the first quarter was 23.4% compared to 23.3% in the first quarter of last year. Net loss for the quarter on a GAAP basis was 14.7 million or 30 cents per share. As compared to a gap net loss of 11.8 million or 24 cents per share in the first quarter last year, adjusted net loss was 12.7 million or 26 cents per share, as compared to last year's adjusted net loss of 10.1 million or 21 cents per diluted share. Our adjusted EBITDA decreased to 1.7 million in the first quarter of this year compared to 2.9 million in Q1 last year.
Jeff Miller: The effective tax rate for the first quarter was 23, 4% compared to 23, 3% in the first quarter of last year.
Jeff Miller: Net loss for the quarter on a gap basis was $14.7 million, or $0.30 per share, as compared to a gap net loss of $11.8 million, or $0.24 per share, in the first quarter last year. Adjusted net loss was $12.7 million, or $0.26 per share, as compared to last year's adjusted net loss of $10.1 million, or $0.21 per diluted share. Our adjusted EBITDA decreased to $1.7 million in the first quarter of this year, compared to $2.9 million in Q1 last year.
Jeff Miller: Net loss for the quarter on a GAAP basis was $14 7 million or <unk> 30 per share.
Jeff Miller: As compared to a GAAP net loss of $11 8 million or 24 per share in the first quarter last year.
Jeff Miller: Adjusted net loss was $12 7 million or 26 cents per share as compared to last year's adjusted net loss of $10 1 million or 21 per diluted share.
Jeff Miller: Our adjusted EBITDA decreased to $1 7 million in the first quarter of this year compared to $2 9 million in Q1 last year.
Jeffrey Miller: Turning to our balance sheet, we ended the quarter with 44.1 million in cash, 216.7 million in total debt, and total liquidity, including availability on our revolving credit facilities, of 95.4 million. Our current leverage ratio is 3.8 times. We ended the quarter with consolidated inventory down 7.5% compared to the first quarter of last year. The decline reflects a concerted effort to tightly manage inventory in the current environment and is primarily the result of lower freight costs and fewer inventory units year over year. At TCS on a unit basis, on-hand inventory was down approximately 10.8% year over year driven by a general merchandise.
Jeff Miller: Turning to our balance sheet, we ended the quarter with $44.1 million in cash, $216.7 million in total debt, and total liquidity, including availability on our revolving credit facility, of $95.4 million. Our current leverage ratio is 3.8 times.
Jeff Miller: Turning to our balance sheet, we ended the quarter with $44 $1 million in cash $216 7 million and total debt and total liquidity, including availability on our revolving credit facilities of $95 4 million.
Jeff Miller: Our current leverage ratio is three eight times.
Jeff Miller: We ended the quarter with consolidated inventory down 7.5% compared to the first quarter of last year. The decline reflects a concerted effort to tightly manage inventory in the current environment and is primarily the result of lower freight costs and fewer inventory units year-over-year. At TCS, on a unit basis, on-hand inventory was down approximately 10.8% year-over-year, driven by General Merchant.
Jeff Miller: We ended the quarter with consolidated inventory down seven 5% compared to the first quarter of last year the.
Jeff Miller: The decline reflects a concerted effort to tightly manage inventory in the current environment and is primarily the result of lower freight costs and fewer inventory units year over year.
Jeffrey Miller: Capital expenditures were 8.6 million in the first quarter of fiscal 2024 versus 8.9 million in the first quarter of fiscal 2023. As a reminder, we plan to spend 20 to 25 million of capital in fiscal 2024. We are continuing to prioritize investments in our stores and technology this year. Free cash flow used for the first quarter of fiscal 2024 was 16.7 million versus a use of 11.9 million in the first quarter of fiscal 2023.
Jeff Miller: Capital expenditures were $8.6 million in the first quarter of fiscal 2024 versus $8.9 million in the first quarter of fiscal 2023. As a reminder, we plan to spend $20 to $25 million of capital in fiscal 2024. We are continuing to prioritize investments in our stores and technology. Free cash flow used for the first quarter of fiscal 2024 was $16.7 million versus a use of $11.9 million in the first quarter of fiscal 2020. Given our current process of evaluating strategic alternatives, we are not providing a financial outlook.
Jeffrey Miller: Given our current process of evaluating strategic alternatives, we are not providing a financial outlook. However, I will share some qualitative commentary on our quarter-to-date trends thus far, as well as initial thoughts on how we are going to remember the fiscal year. Order the date in Q2. Our year-over-year sales decline has improved slightly from the decline we just reported for Q1. Our performance in Q2 continues to be driven by relative strength in our custom spaces business, with year-over-year growth in our Alpha and Preston product lines. However, our general merchandise category remains challenged, resulting in double-digit year-over-year total sales declines, not of the magnitude reported for the first quarter of fiscal 2024.
Jeff Miller: However, I will share some qualitative commentary on our quarter-to-date trends thus far, as well as initial thoughts on how we are viewing the remainder of the fiscal year. Order to date in Q2, our year-over-year sales decline has improved slightly from the decline we just reported for Q1. Our performance in Q2 continues to be driven by relative strength in our custom spaces, with year-over-year growth in our Alpha and Preston product lines. However, our general merchandise category remains challenged, resulting in double-digit year-over-year total sales declines of the magnitude reported for the first quarter of fiscal 2024.
Jeffrey Miller: Despite freight cost pressure, we are currently seeing, for the full year, we expect to benefit from lower freight costs. We also expect to continue exercising discipline in our promotional activity, and with continued favorable business mix, should result in stable to modestly expanding consolidate gross margins for the full year. It should be noted gross margins were more negatively impacted by promotional activity in the first quarter of fiscal 2023 than any other quarters in fiscal 2023, making it the easiest compare from a gross margin rate perspective. On the SGNA front, we executed meaningful cost actions in fiscal 2023 and expected to remain extremely disciplined in our SGNA spend in fiscal 2024.
Jeff Miller: Despite the pre-cost pressure we are currently experiencing, for the full year, we expect to benefit from lower freight costs. We also expect to continue exercising discipline in our promotional activity, which with continued favorable business mix should result in stable to modestly expanding consolidated gross margins for the full year. It should be noted gross margins were more negatively impacted by promotional activity in the first quarter of fiscal 2023 than any other quarters in fiscal 2023, making it the easiest comparison from a gross margin rate perspective.
Jeff Miller: Gross margins were more negatively impacted by promotional activity in first quarter of fiscal 2023 than any other quarters in fiscal 2023, making it the easiest compare from a gross margin rate perspective.
Jeff Miller: On the SG&A front, we executed meaningful cost actions in fiscal 2023 and expect to remain extremely disciplined in our SG&A spend in fiscal 2024. Capital expenditures are expected to be approximately $20 to $25 million, primarily related to new store openings in fiscal 2024, as well as investments in technology and manufacturing infrastructure. We opened one store and relocated one store during the first quarter of fiscal 2024. Subsequent to the end of the first quarter, we opened a new store in Ashburn, Virginia, and we have plans to open two more new stores during the remainder of fiscal 2024, as well as close some existing ones. This concludes our prepared remarks. I'll now turn it over to the operator to begin the Q&A session for questions.
Jeff Miller: On the SG&A front, we executed meaningful cost actions in fiscal 2023 and expect to remain extremely disciplined in our SG&A spend in fiscal 2024.
Jeffrey Miller: Capital expenditures are expected to be approximately 20 to 25 million, primarily related to news store openings in fiscal 2024, as well as investments in technology in manufacturing infrastructure. We opened one store and relocated one store during the first quarter of fiscal 2024. Subsequent to the end of the first quarter, we opened a new store in Ashburn, Virginia, and we have plans to open two more new stores in the remainder of fiscal 2024, as well as closed one store.
Jeff Miller: Capital expenditures are expected to be approximately 20% to $25 million, primarily related to new store openings in fiscal 2024, as well as investments in technology and manufacturing infrastructure.
Jeff Miller: We opened one store and relocated one store during the first quarter of fiscal 2024.
Jeff Miller: Subsequent to the end of the first quarter, we opened a new store in Ashburn, Virginia, and we have plans to open two more new stores in the remainder of fiscal 2024 as well as close one store.
Jeffrey Miller: This concludes our prepared remarks.
Speaker Change: This concludes our prepared remarks, I'll now turn it over to the operator to begin the Q&A session for questions.
Operator: I'll now turn it over to the operator to begin the Q&A session for questions. 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 start in one on your telephone keypad. A confirmation tone will indicate your line is in the position Q. You may read Star MN2 if you would like to remove your question from the queue.
Speaker Change: Thank you very much though.
Operator: 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 and then 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and then 2 if you would like to remove your question.
Speaker Change: At this time, we will be quick.
Speaker Change: A question and answer session. If you would like to ask a question. Please press Star then one on your telephone keypad.
Jeff Miller: Okay.
Speaker Change: We will indicate your line is in the question queue.
Operator: Hope this is confusing speaker equipment. It may be necessary to pick up your handset before pressing the star keys. Again, if you would like to ask a question, please read Star MN1 now.
Katharine McShane: The first question we have comes from Kate McShane of Goldman Sachs. Please go ahead. Hi, good afternoon. Thanks for taking our questions. I wondered if I could start with asking about the reallocation of space within the store to core storage and organization.
Operator: Hi, good afternoon. Thanks for taking our questions. I wondered if I could start with asking about the reallocation of space within the store to core storage and organization. What is being changed out as a result of this change in the store?
Satish Malhotra: What is being changed out as a result of this change in the store? Hi, Kate. This is Satish.
Satish Malhotra: Yeah, hi Kate. This is Satish.
Satish Malhotra: I'll take that question. I'll take a step back and say, firstly, as we look to stabilize our general merchandise that benefited quite well during the pandemic, we're really looking at all distinct ways to really continue to stabilize that. The first is, as you quite rightly pointed out, reallocation of certain spaces relates to our end caps. Some of the seasonal merchandise that we have had there is now being replaced with some of our core, more tried and true collections, and we've definitely seen an increase in productivity there. But that's also added it to some of the other things that we're doing, such as promoting more about exclusive private label business, which currently sits around 45% of the general merchandise business.
Satish Malhotra: I'll take that question. You know, I'll take a step back and say, firstly, as we look to stabilize our general merchandise, which benefited quite well during the pandemic, we're really looking at four distinct ways to really continue to kind of stabilize that. So first, as you quite rightly pointed out, the reallocation of certain space as it relates to our end caps. Some of the seasonal merchandise that we have had there is now being replaced with some of our core, more tried and true collections.
Satish Malhotra: And we've definitely seen an increase in productivity there. But that's also additive to some of the other things that we're doing, such as promoting more of our exclusive private label business, which currently sits around 45% of our general merchandise business. And we're seeing great success with our Everything Organizer Collection, and it's up quite a lot relative to Q1 of 23. And as a reminder, the Everything Organizer Collection complements our ELFA solutions perfectly.
Satish Malhotra: And we're seeing that great success without everything organized, a collection, and it's up quite a lot relative to Q1 of 23. And as a reminder that everything organized, a collection complements our alpha solutions perfectly. And through our integrated marketing approach and store designers, we believe we can bundle alpha and out everything organized a collection in a more meaningful way and thereby driving a much higher attachment rate. Additionally, I would say we're also focusing on our discovery categories. And so you will see a lot more of that in our stores as well. They continue to do incredibly well for us, in particular on the go travel solutions and home fragrances, and believe we have significant opportunity there.
Speaker Change: And as a reminder, that everything organize a collection complements our elfa solutions perfectly and through our integrated marketing approach and in store designers. We believe we can bundle.
Satish Malhotra: And through our integrated marketing approach and in-store designers, we believe we can bundle ELFA and our Everything Organizer Collection in a more meaningful way and thereby drive a much higher attachment rate. Additionally, I would say we're also focusing on our discovery categories, and so you'll see a lot more of that in our stores as well. They continue to do incredibly well for us, in particular on-the-go travel solutions and home fragrances, and I believe we have significant opportunity there.
Speaker Change: And now everything organize a collection in a more meaningful way and thereby driving a much higher attachment rate.
Jeff Miller: Additionally, I would say, we're also focusing on our discovery categories and so you'll see a lot more of that in our stores as well they continue to do incredibly well for us in particular on the go travel solutions and home fragrances and believe we have significant opportunity there.
Satish Malhotra: And then lastly, I would say we're looking to expand our premium core assortment, which will also make its way on some of our headers, and these include products like our vegan leather bins, lots of acrylic, virtual bins, even heavyweight canvas with more leather accents. So really excited about being able to introduce that and seeing the customer reception, as we start to integrate more premium core storage and organization, general merchandise, which helps finish out our more premium custom spaces.
Satish Malhotra: And then lastly, I would say we're looking to expand our premium core assortments, which will also make their way into some of our headers, and these include products like our vegan leather bins, luxe acrylic, birch wood bins, and even heavyweight canvas with more leather accents. So, really excited about being able to introduce that and see the customer reception as we start to integrate more premium core storage and organization, and general merchandise, which helps finish out our more premium custom spaces.
Speaker Change: And then lastly, I would say, we're looking to expand our premium core assortment, which will also make its way in some of our headers and these include products like our vegan leather bins MX acrylic birchwood bins.
Speaker Change: Even heavyweight canvas with more leather accents, so really excited about being able to introduce that and seeing the customer reception as we start to integrate more premium core storage and organization general merchandise, which helps finish out our more premium custom spaces.
Katharine McShane: Okay, thank you for that.
Satish Malhotra: Okay, thank you for that. And what can we expect with regard to seasonal offering going forward? Was that historically a certain percentage of sales, and will it now be a smaller percentage of the mix going forward?
Jeff Miller: Yeah.
Katharine McShane: And what can we expect with regards to seasonal offering going forward? Was that historically a certain percentage of sales, and it will now be a smaller percentage of next going forward? Yeah, our seasonal offering typically is limited to two main occasions, and that's back to college, which is what we have in our stores right now, and then our holiday assortment. And so you would likely see more of that continue in the future years as well. Okay, thank you.
Speaker Change: Okay. Thank you for that and what can we expect with regards to seasonal offering going forward.
Speaker Change: Historically, a certain percentage of sales and it will now be a smaller percentage of mix going forward.
Satish Malhotra: Yeah, our seasonal offering is typically limited to two main occasions, and that's back to college, which is what we have in our stores right now, and then our holiday assortment, and so you would likely see more of that continue in future years as well.
Jeff Miller: Okay, thank you. And then our second question was just about the store closure you mentioned on the call. Was this store unprofitable, and can we expect to see any other store closures or store closure announcements over the next few months?
Katharine McShane: And then our second question was just about the store closure you mentioned on the call.
Jeffrey Miller: Was this store unprofitable, and can we expect to see any other store closures or store closure announcements over the next few months? Yeah, Kate. Jeff here. You know, as we look at our store portfolio, we're always evaluating continued operation in certain locations in this particular store opening. There was a renewal that we chose not to take and decided to have a closure. We have not announced any other store closures in the future at this point, but we are continuously evaluating our store fleet. As you know, we're very proud of our store fleet that's been grown over the many years of the operation of the business and very proud of the productivity of those stores.
Jeff Miller: Hey, it's Jeff here. You know, as we look at our store portfolio, we're always evaluating continued operation in certain locations. In this particular store opening, there was a renewal that we chose not to take and decided to have a closure. We have not announced any other store closures in the future at this point, but we're continuously evaluating our store fleet. As you know, we're very proud of our store fleet that's grown over the many years of the operation of the business and very proud of the productivity of those stores. You know, we're looking forward to fiscal 24.
Jeffrey Miller: You know, we're looking forward to Fiscal 24. As we mentioned on the call, we have opened two stores already. One is a relocated store at San Francisco, the other in Springfield, Virginia, and also open one post to quarter in and ask for in Virginia. Both of those store openings open with an excited customer base waiting at the door. And so, you know, we still feel really good about the new store openings that we have planned for fiscal 24, certainly just given where we are from a business standpoint, wanting to drive store growth and awareness through the store growth.
Jeff Miller: As we mentioned on the call, we have opened two stores already. One is a relocated store in San Francisco, the other in Springfield, Virginia. We also opened one post and quarter end in Ashburn, Virginia. Both of those store openings opened with an excited customer base waiting at the door. And so, you know, we still feel really good about the new store openings that we have planned for fiscal 24. Certainly, just given where we are from a business standpoint, wanting to drive store growth and awareness through store growth, we pull back on openings for fiscal 25 and beyond at this point but still see a very large white space for us to continue to expand as the business and the macroeconomic conditions change.
Jeffrey Miller: We pull back on openings for fiscal 25 and beyond at this point, but still see a very large white space for us to continue to expand as the business and the macroeconomic conditions change.
Katharine McShane: Okay, thank you.
Jeff Miller: Okay, thank you. Our last question is just on the refinancing of the credit facility. I know you mentioned in the prepared comments that that was being worked on. Is there any indication of timing as to when that can be figured out? We have not
Katharine McShane: Our last question is just the refinancing of the credit facility. I know you mentioned in the prepared comments that that was being worked on. Is there any indication of timing of when that can be figured out?
Jeffrey Miller: We have not announced any timing associated with financing. We just continue to work with our financial partners on that front.
Jeff Miller: We have not announced any timing associated with refinancing. We just continue to work with our financial partners on that front.
Speaker Change: Sustaining timing associated with the refinancing we just continue to work with our financial partners on that front.
Katharine McShane: Okay, thank you. Thank you.
Speaker Change: Okay. Thank you.
Operator: Thank you. The next question we have comes from Chris Horvers of J.P. Morgan. Please go ahead.
Julie Wasserman: The next question we have comes from Chris Wolves of JPMorgan. Please go ahead.
Speaker Change: Thank you. The next question we have comes from Chris holders of G. J P. Morgan. Please go ahead.
Julie Wasserman: Hi, good afternoon. This is Julie Wasserman on for Chris Horvors. As you mentioned, the consumer has been pretty under pressure for some time now, with peer commentary suggesting this is worse than in recent months, and we're seeing a lot of retailers investing in promotions right now to drive units. I know you mentioned sequential top line improvement, quarter to date, but are you seeing the consumer notably worse than you were six months ago? Are you seeing some more aggressive competitor pricing in response to all of the unfavorable macro you were talking about?
Operator: Hi, good afternoon. This is Jolie Wasserman on behalf of Chris Horvers.
Toni Wasserman: Hi, Good afternoon. This is totally wasserman on for Chris Whoever's Zoom.
Satish Malhotra: As you mentioned, the consumer has been pretty under pressure for some time now, with peer commentary suggesting this has worsened in recent months, and we're seeing a lot of retailers investing in promotions right now to drive units. I know you mentioned sequential top-line improvement quarter-to-date, but are you seeing the consumer notably worse than you were six months ago? Are you seeing some more aggressive competitor pricing in response to all of the unfavorable macro you were talking about?
Speaker Change: You mentioned the consumer has been pretty under pressure for some time now with peer commentary, suggesting this is worse than in recent months and we're seeing a lot of retailers investing in promotions right now to drive units I know you mentioned sequential top line improvement quarter to date, but are you seeing the consumer notably worse than you were six months ago are you seeing some more.
Satish Malhotra: And if the answer to that last part is yes, would that suggest that you would also need to keep investing in price to continue to stay competitive, especially as you're heading into back-to-school season? Yeah, I'll take perhaps the first part and then let Jeff weigh in as it relates to gross margins.
Speaker Change: And aggressive competitor pricing in response to all of the unfavorable macro you were talking about and if the answer to that last part is yes would that suggest that you would also need to keep investing in price to continue to stay competitive, especially as you're heading into back to school season.
Julie Wasserman: And if the answer to that last part is yes, would that suggest that you would also need to keep investing in price to continue to stay competitive, especially as you're heading into back to school season?
Satish Malhotra: Yeah, I'll take that the first part, and then let Jeff weigh in as it relates to gross margins. Look, there's no data; customers continue to contend with elevated interest rates, inflation, rising living costs, uncertainties in the job and housing markets. And they do impact their purchase decisions, especially as it relates to general merchandise products. We have observed strong customer engagement during promotional events, but we've also seen a nose will retreat during non-promotional periods. That's why our promotional strategies are so carefully targeted. We found that creating a sense of urgency through time events, time-limited events really enables us to drive sales more profitably compared to extended promotion.
Satish Malhotra: Yeah, I'll take perhaps the first part and then let Jeff weigh in as it relates to gross margins. Look, there's no doubt our customers continue to contend with elevated interest rates, inflation, rising living costs, uncertainties in the job and housing market, and they do impact their purchase decisions, especially as it relates to general merchandise products. We have observed strong customer engagement during promotional events, but we've also seen a noticeable retreat during non-promotional periods.
Speaker Change: Yeah I'll take the first part and then let Jeff weigh in as it relates to gross margins.
Satish Malhotra: That's why our promotional strategies are so carefully targeted. We found that creating a sense of urgency through time events, time-limited events, really enables us to drive sales more profitably compared to extended promotions at www.containerstore.com. And we are uniquely equipped to help them reclaim not only their well-being but their spaces as well. And so that's how we are counterbalancing the current macro environment that we are living in today.
Speaker Change: Look there's no doubt our customers continue to contend with elevated interest rates inflation rising living costs uncertainties in the job and housing markets.
Satish Malhotra: You know, having said that, let's not forget the consumer need for the Container Store still remains incredibly strong as the Americans continue to contend with the stress of clutter in their homes and the need for more space. And we are uniquely equipped to help than we claim not only their well-being, but their spaces as well. And so that's how we are counter-balancing the current macro environment that we are living in today.
Julie Wasserman: Any other follow-ups? That'll be it.
Operator: That'll be it. Thank you.
Operator: Thank you.
Operator: Thank you. Ladies and gentlemen, we have reached the end of our question and answer session, and we have reached the end of our conference. Thank you for joining us today. You may now disconnect your lines.
Operator: Ladies and gentlemen, we have reached the end of our question-and-answer session. And we have reached the end of our conference. Thank you for joining us today. Here we now disconnect your lines.