Container Store (The)

Greetings and welcome to the Container Store fourth quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during today's conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Ms. Caitlin Churchill, Investor Relations. Thank you, ma'am. You may begin your presentation.

Good afternoon, everyone, and thanks for joining us today for the Container Store's fourth quarter and fiscal year 2021 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. There are supplemental slides that will be referenced in today's call that are available online at investor.containerstore.com. 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. 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 Consumer Source Press Week issue today and in our annual report on Form 10-K, filed with the SEC on June 3, 2021, 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 on 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.

Thank you, Caitlin, and thank you all for joining us today. Our call today will follow a different format. As Caitlin mentioned, We have posted a slide deck to our investor relations site that will accompany our remarks today. I'll first highlight key financial 2021 accomplishments, and then Jeff will review the details of our fourth quarter and full year financial results, followed by our outlook for fiscal 2022. I'll then review our exciting path to $2 billion, which will be followed with additional financial details from Jeff. We'll then open up the call to questions. I'd like to begin our call today by highlighting the great accomplishments we have achieved over the past fiscal year, which was capped off by a stronger than expected fourth quarter performance. As shown on slide four of our supplemental deck, for fiscal 2021, we delivered the best financial results in the company's history with net sales of over $1 billion for the first time. This performance represented growth of 10.5% compared to the 53-week fiscal year 2020 and 19.5% compared to the 52-week fiscal year 2019. And despite ongoing macro headwinds related to inflation, labor, and supply chains, Through our refined promotional cadence, pricing actions and expense control, we drove operating margin expansion of 150 basis points compared to fiscal 2020 and 680 basis points of expansion compared to fiscal 2019. Fiscal 2021 was truly an outstanding year for the Container Store. Over the past year, We've been living out our mission to transform lives through the power of organization and have built a strong foundation for the container store's next chapter of growth. We accomplished a great deal in fiscal 2021, and we maintained our focus on our three strategic pillars, deepening our relationship with customers, expanding outreach, and strengthening our capabilities. With regards to deepening our relationship with customers, we successfully reduced our promotional cadence throughout the year, which continued with our fourth quarter Transform with Alpha event. The duration of the event was reduced by more than two weeks, and the average discount given was approximately 19% compared to 30% in the prior year. Our Spend More, Save More strategy delivered a 33% increase in average space values with approximately 60% of event sales coming from average tickets that were over $2,000. With less of a dependence on promotions in fiscal 2021, we focused on enhancing our in-store experience by adding store greeters, front of store product spotlights, and product demonstrations. We continue to align our merchandising assortment to customers' interests and values, including offering over 1,600 sustainable products, an increase of 60% over last year. We proudly ended the fiscal year with a net promoter score of 79 and strong average conversion rates and average tickets. During the fourth quarter, we launched our new branding campaign, welcome to the organization, and fully reimagined our new company logo. The campaign resonated with new and existing customers across our channels and resulted in a record-breaking sales day on 2-22-22. Our TikTok hashtag challenge, show us your draws, was also well-received and resulted in over 8 billion video views. We closed out the quarter by launching our new tier-based loyalty program, Organized Insider, to not only attract new customers, but also to reward a deeper level of engagement with existing customers. Customers expressed their genuine excitement for our new program and the many benefits that come with it. With regards to expanding outreach, we fortified our position in the $6 billion market for custom closets through the acquisition and integration of closet works. Through this acquisition, we expect to significantly improve our product offering, gross margin profile, and sales of premium wood-based custom spaces. Additionally, we expect our new premium wood-based offering to complement our premium metal-based offering Avera, which in fiscal 21 saw its sales more than double over fiscal 2020. Over the past year, we also increased the number of design specialists focused on designing and selling premium spaces from 64 to 96, with at least half of the designers selling more than a million dollars in fiscal 21. Also, sales of spaces over $2,000 were up 26% in fiscal 21, when compared to fiscal 2020, demonstrating our ability to sell premium spaces. We also made significant strides this year in e-commerce, including improving site speed across our category and product pages by 45%. We added more compelling content, enhanced the browsing experience, and streamlined our checkout process. The positive impact of these enhancements was fully enjoyed by customers during the biggest online sales day in the company's history on 2-22-22. where e-commerce sales were eight and a half times higher than a typical average day. Additionally, we are now consistently shipping 90% of orders in two days compared to only 38% last year. Finally, we continue to strengthen our capabilities. In Q4, we successfully launched our first ever mobile app to meet customers where they are already shopping. The app features a convenient biometric login, an organized insider dashboard, and makes it simple for customers to shop using their digital wallet. Customers can also use the app to check an order status, find organizing inspiration, or use it in-store to scan barcodes for more product information and options. Since launch, we have driven nearly 50,000 downloads of our mobile app, and it currently boasts a 4.7 star rating. Mobile app sales continue to grow and are currently accounting for over 4% of total online sales, with a 35% higher average ticket than mobile web sales. Additionally, we successfully piloted a mobile point of sale solution in store so customer transactions can take place efficiently and directly on the sales floor. With regards to being an employer of choice, we've made great progress. We raised our hourly minimum wage to $15 per hour and recognize the incredible contributions to our company's success in fiscal 21 by providing a one-time special bonus to our part-time and full-time hourly employees. Starting in fiscal twenty two, we will offer paid time off benefits to part time employees and all employees of the company will benefit from variable incentive plans tied directly to our company's performance. Diversity, equity and inclusion continues to be a focus for our company, and we're proud of both the racial and gender diversity reflected company wide. with 42% of our total workforce identifying as black, indigenous, or a person of color, and 64% identifying as female. We're also investing in diverse vendors through our supplier diversity program. For our environmental, social, and governance strategy, we completed an assessment to identify key areas of focus and plan to issue our first sustainability report next month. To demonstrate our commitment to creating a better environment, we are focused on reducing consumption and transitioning to renewable energy. Since fiscal 21, the power consumed by all of our stores, distribution centers, and support center is offset by our investment in 100% renewable energy. As we look ahead, our three strategic pillars will serve to drive our future growth and address the incredible opportunity we have to gain market share. As I reflect on my first full year as CEO, I am in awe of what our teams have been able to accomplish. Our people are the lifeblood of this great organization, and they are executing our strategy brilliantly. I'm immensely grateful for their contributions and energized for the year ahead. With that, let me now turn the call over to Jeff to review our strong fourth quarter performance in more detail.