The Container Store (NYSE:TCS) reported a 19.4% decrease in consolidated net sales to $219.7 million in the second quarter of fiscal year 2023. Despite the decline, primarily due to decreased customer traffic and fewer core category purchases, the retailer remains confident in its strategy to deepen customer relationships and expand its reach. Key takeaways from the earnings call:
- The Container Store's net sales decreased by 19.4% YoY to $219.7 million, with retail business sales down 19.8% and online channel sales down 21.7% YoY.
- The company has started testing AI-generated content on their website to improve the online customer experience.
- The company reinstated its annual employee pay increase effective October 1 and launched a new recognition program.
- The company expects consolidated net sales for Q3 to be $220 million to $225 million, and an adjusted net loss per share in the range of $0.08 to $0.04.
- For fiscal 2023, the company revised its consolidated net sales outlook to be $870 million to $885 million and expects an operating loss of $20 million to $13 million.
- The company plans to open five new stores in fiscal 2023 and four new stores in fiscal 2024.
Despite the challenging market conditions, The Container Store is banking on its strategy of store experience, product assortment, and custom spaces to attract customers. The company plans to open more small-format stores and launch new products and seasonal assortments. It is also investing in pay increases and store payroll, expecting to reduce overall SG&A expense by approximately $17 million in the second half of the fiscal year compared to the same period in the previous year.The company is also testing AI-generated content on its website to enhance the online customer experience. It reinstated its annual employee pay increase effective October 1 and launched a new recognition program. For the third quarter, The Container Store expects consolidated net sales to be approximately $220 million to $225 million, driven by a mid-to-low teens decline in comparable store sales. It also expects an adjusted net loss per share in the range of $0.08 to $0.04. Looking ahead to fiscal 2023, the company revised its consolidated net sales outlook to be in the range of $870 million to $885 million. It also reduced its gross margin projection by about 100 basis points and increased its SG&A spend expectations due to incremental investments in store payroll and marketing. The company expects an operating loss of $20 million to $13 million for the fiscal year and a net GAAP loss per share in the range of $0.82 to $0.70.Capital expenditures are expected to be around $45 million to $50 million, with plans to open five new stores in fiscal year 2023 and four new stores in fiscal year 2024. The company aims to be free cash flow neutral to slightly positive in fiscal 2023.
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