The Container Store Group (NYSE: TCS) reported Q4 revenue for the quarter came in at $241.3 million versus the consensus estimate of $249.95 million.

Preliminary Unaudited Fourth Quarter and Full Year Fiscal 2019 Results

For the fourth quarter (thirteen weeks) ended March 28, 2020:

• The Company’s consolidated net sales are estimated to be $241.3 million, down 4.7% compared to the fourth quarter of fiscal 2018, due primarily to the impact of COVID-19. Net sales in The Container Store retail business (“TCS”) are estimated to be $224.1 million, down approximately 4.9%. Elfa International AB (“Elfa”) third-party net sales are estimated to be $17.3 million, down approximately 1.1% compared to the fourth quarter of fiscal 2018, however, excluding the impact of foreign currency translation, Elfa third-party sales are expected to be up 4.6%.
• Comparable store sales are estimated to decrease 3.6% with Custom Closets sales expected to increase 1.5%, positively contributing approximately 80 basis points to comparable store sales. Other product categories are expected to decline 9.0%, negatively contributing approximately 440 basis points to comparable store sales.
• Consolidated gross margin is expected to be 59.0%, an increase of 40 basis points, compared to the fourth quarter of fiscal 2018. TCS gross margin is expected to decrease 10 basis points to 57.7%, primarily due to successful marketing and merchandising campaigns that drove a higher mix of lower margin product and service sales in the fourth quarter of fiscal 2019 and the negative impact of foreign currency. Elfa gross margin is expected to increase 570 basis points primarily due to lower direct material costs and production efficiencies. Consolidated gross margin is expected to improve 40 basis points primarily due to the improvements in Elfa’s gross margin during the fourth quarter of fiscal 2019.
• Consolidated selling, general and administrative expenses (“SG&A”) are expected to decrease by 3.6% to $106.1 million in the fourth quarter of fiscal 2019 from $110.0 million in the fourth quarter of fiscal 2018. SG&A as a percentage of net sales is expected to increase approximately 50 basis points primarily due to the deleverage of occupancy, payroll, marketing and other costs associated with lower than expected sales resulting from the impact of COVID-19, partially offset by a reduction of credit card fee expenses associated with a bankcard settlement received during the quarter.
• Pre-opening costs are expected to increase to $2.2 million in the fourth quarter of fiscal 2019 as compared to $0.2 million in the fourth quarter of fiscal 2018. The increase is primarily due to $2.2 million of net costs associated with the opening of the Company’s second distribution center. The Company did not open any stores in the fourth quarter of fiscal 2019 or fiscal 2018.
• Consolidated net interest expense is expected to decrease 11.5% to $5.3 million in the fourth quarter of fiscal 2019 from $6.0 million in the fourth quarter of fiscal 2018. The decrease is primarily due to lower interest rates, combined with a lower principal balance on the Senior Secured Term Loan Facility (the “Term Loan Facility”).

Melissa Reiff, Chairwoman and Chief Executive Officer commented, “Our fourth quarter performance was tracking to our expectations until the last few weeks of the quarter when the COVID-19 pandemic resulted in disruption to our operations, including store closures. As previously announced, to protect the health and safety of our employees and customers, we temporarily closed all stores and shifted select locations to operate with click & pick up/contactless curbside delivery and scheduled in-store appointments (allowing only limited customers in the store at a time). We also made difficult decisions to swiftly cut costs and reduce cash outlays to preserve our financial health during this time. We will follow state and local directives when making re-opening decisions.”

Ms. Reiff continued, “I am so proud of our teams’ contributions during this incredibly difficult time for all. It is their hard work and commitment that has enabled us to be nimble and flexible. We have executed difficult but necessary actions in managing our costs, while simultaneously maximizing the opportunities for our customers with our fully-integrated website, click & pickup/contactless curbside delivery service and in-store appointments in select stores. Since the beginning of fiscal 2020, which began on March 29, online customer orders have nearly quadrupled the level of the prior year. While we are not providing financial guidance for fiscal 2020 at this time, with the strength of our online business and the swift cost actions we are implementing, I feel confident in our ability to successfully navigate this unprecedented environment.”

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