Container Store (The)

Greetings and welcome to the Container Store second quarter 2024 earnings 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 the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Caitlin Churchill, Investor Relations. Thank you. You may begin.

Good afternoon, everyone, and thanks for joining us today for the Container Store's second 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. 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, including the transaction with Beyond, and the future financial performance of the companies 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 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. 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. 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 It is also available in the Container Store's press release issued today. A copy of today's press release and investor desk may be obtained by visiting the investor relations page of the website at www.containerstore.com. I will now turn the call over to Tateesh. Tateesh?

Thanks, Caitlin, and thank you all for joining us. I'll begin today's discussion with a review of our second quarter performance and progress we are making to drive improvements across the business. including our exciting new strategic partnership with Beyond. Then Jeff will discuss the details of the quarter's financial results before we open up the call to questions. While we are still contending with a challenging macro and industry backdrop, we are encouraged by the improvements we are seeing in our top-line trends as compared to earlier this year. For the second quarter, year-over-year comparable sales declined 12.5%. However, we continue to see relative outperformance in custom spaces and achieved another quarter of sequential improvement in general merchandise trends. Traffic also improved, partly due to increased promotional activity, which, while putting pressure on profitability, allowed us to move slower-moving products. This also enabled us to engage more effectively with customers seeking compelling value offerings. Within general merchandise, we believe our efforts to stabilize the business are gaining traction, particularly through improving in-stock levels of our core SKUs that continue to resonate with customers, while also delivering innovation and newness across the assortment. Earlier this fall, we introduced our new Everything Organizer Drop Front Shoebox at SneakerCon, the world's premier sneaker event. This elevated version of a longtime customer favorite features crystal clear 360-degree views, a magnetic closure, four corner feet for stable stacking, and a tuck-away door for easy access and was met with great enthusiasm at the event. As we move into the holiday season, we look forward to showcasing this new product and this year's curated selection of stocking stuffers, gift wraps, boxes, and storage solutions. While we are optimistic about our holiday campaign, we have taken a more disciplined approach with tighter inventory buys around our seasonal items, maintaining our focus on top performing SKUs. Post-holiday season, we are excited about the expected front feature display of our highly sought-after Everything Organizer collection. Developed in collaboration with professional organizers, this collection is designed to optimize any space, simplify organization, and seamlessly complement any office space. We plan to expand the product line with additional SKUs for the kitchen and closet as well as introducing it to the Bath category. Additionally, we entered into a new licensing partnership with our manufacturer, which is expected to expand the Everything Organizer collection internationally, beginning in the new calendar year. Now, turning to custom spaces. As noted in our press release, our reported comparable store sales metric reflect only delivered sales. However, when we assess comp trends based on operational demand, Custom Spaces orders placed but not yet delivered, we were up 4.5% compared to the prior year. This relative strength in Custom Spaces is partly due to the newness we've introduced over the past few quarters. For example, we're seeing more and more customers choosing Garage Plus by Alpha to transform their cluttered garages into organized aesthetically pleasing spaces that meet their storage needs. Similarly, DecorPlus by Alpha continues to also gain traction, offering innovative modular wall-hanging solutions with elevated design options that create a built-in look at exceptional value while maximizing space. Last week, we launched a new campaign partnership with fashion designer and TV personality Tan Tramp, where he transformed two of his kids' spaces with Alpha Decor Plus and the necessary general merchandise completion products, highlighting the durability and versatility of the line. Looking ahead, we are excited to continue rolling out innovative products for custom spaces. Our next launch will introduce a more affordable premium wood closet in a box system designed for easy do-it-yourself installation. Building on our success and expertise in custom spaces and alpha metal box solutions, this new product offers nine versatile configurations for closets up to six feet. We believe customers will appreciate its elevated premium design and flexible options throughout their home. Organization should be effortless, and this do-it-yourself solution empowers customers to creatively personalize how they organize their spaces. With the recent decline in interest rates, we are also optimistic about the future of our premium custom space offering Preston, which continues to demonstrate strength despite the current macroeconomic climate. We are pleased to see improvements in our conversion rates for Preston, as well as in our ability to sell more spaces at a higher average space value when compared to the same period last year. Additionally, we are looking forward to the newly announced strategic partnership with Beyond. We believe this partnership would strengthen our capabilities by leveraging Beyond's data analytics to improve our lead management and conversion model while offering customers additional financial solutions to support their purchases. This is just one aspect of the partnership with Beyond that we believe will enhance our capabilities, expand our reach, and deepen our relationship with customers. Through the licensing of the iconic Bed Bath & Beyond brand, we expect to enhance our store format and general merchandise offering to drive increased traffic across our businesses. Our customers are also expected to benefit from Beyond's global loyalty program, multiple payment solutions, and ancillary insurance and protection products. In addition, we plan to utilize Beyond's growing data platform to enhance our marketing strategies and reduce customer acquisition and retention costs. We plan to integrate our custom spaces offering across Beyond's portfolio of e-commerce banners, as well as other ventures where Bed, Bath, and Beyond future license stores exist, thereby creating expanded distribution of our iconic custom spaces offering. I would now like to take an opportunity to acknowledge our teams. for their unwavering commitment and exceptional customer service. Despite the challenging economic conditions, our teams, from the support center and distribution centers to our designers and stores, have remained dedicated and focused on advancing our strategy and supporting initiatives. While external economic factors are beyond our control, our focus remains on managing what we can, providing the excellent customer service we are known for controlling expenses and capital, progressing on our initiatives, including stabilizing the general merchandise business, and positioning ourselves for when the market conditions become more favorable. And now I'll turn the call over to Jeff to discuss our financial results in more detail.