The Container Store (NYSE: TCS) has reported a significant decline in comparable store sales in the fourth quarter of fiscal year 2023, with a 21.8% drop primarily attributed to the general merchandise category. Despite this, the company witnessed strength in its custom spaces segment, especially in premium lines.
Facing a notice of noncompliance from the New York Stock Exchange regarding its share price, The Container Store is considering measures such as a reverse stock split to regain compliance. Concurrently, the company's board has initiated a strategic review process, advised by J.P. Morgan and Latham & Watkins LLP, to explore options that could enhance shareholder value. Amidst this review, financial guidance has been suspended.
Key Takeaways
- The Container Store reports a 21.8% decrease in comparable store sales, with a sharp 26.7% drop in the general merchandise category.
- The custom spaces segment, particularly premium offerings, remains a relative strong point.
- The company has received a notice from the NYSE concerning noncompliance with share price listing rules.
- A strategic review process is underway to consider options to maximize potential and shareholder returns.
- Financial guidance is on hold during the strategic review.
- A new marketing campaign, "Make Space 4," will be launched to emphasize the brand's focus on organization.
- The company plans to open four new smaller format stores in fiscal 2024.
- Consolidated net sales for Q4 fell to $206 million, with the online channel sales declining sharply.
- The company ends the quarter with $21 million in cash and $176.8 million in total debt.
Company Outlook
- The Container Store is exploring a reverse stock split among other options to comply with NYSE listing requirements.
- Strategic alternatives to maximize shareholder value are being evaluated with guidance from J.P. Morgan and Latham & Watkins LLP.
Bearish Highlights
- The company experienced a significant drop in comparable store sales, particularly in the general merchandise category.
- Online sales and website-generated sales have both seen a considerable decline.
- The Container Store has suspended issuing financial guidance due to the ongoing review of strategic alternatives.
Bullish Highlights
- The custom spaces segment, including the Elfa and Preston product lines, continues to show growth.
- The company is investing in marketing to enhance brand awareness and customer engagement.
Misses
- The company missed expectations in the general merchandise category with a 26.7% decline in comp store sales.
- Online sales dropped by 30.8%, indicating a struggle in e-commerce performance.
Q&A Highlights
- Executives emphasized the growth in Elfa and Preston lines and premium products.
- The company plans to maintain promotional discipline while considering customer price sensitivity.
- Investment in private label general merchandise offerings will continue, aiming to create synergy with custom closet sales.
In conclusion, The Container Store is navigating a challenging retail environment with a strategic review and a focus on strengthening its custom spaces and premium product lines. The company is adapting its marketing strategies and store formats to better align with consumer trends and operational efficiency.
As The Container Store refrains from providing financial guidance, investors and stakeholders are closely watching the company's next moves to restore compliance and drive future growth.
InvestingPro Insights
The recent financial performance of The Container Store (NYSE: TCS) has been under scrutiny as the company grapples with various challenges. Here are some insights based on the latest data from InvestingPro that provide additional context to the company's situation:
InvestingPro Data indicates a market capitalization of $45.28 million USD, reflecting the company's current valuation in the market. Despite the challenges, TCS trades at a low Price / Book multiple of 0.2, which could suggest that the company's assets are potentially undervalued in relation to its share price. This is particularly relevant as the company considers a reverse stock split to address NYSE compliance issues.
Revenue for the last twelve months as of Q3 2024 stands at $901.46 million USD, with a notable decline of 17.53% in revenue growth during the same period. This aligns with the reported decrease in comparable store sales and could be a contributing factor to the stock's performance, which is trading near its 52-week low.
InvestingPro Tips highlight two key points for investors: TCS exhibits a high shareholder yield and is trading at a low Price / Book multiple. These insights could be significant for value-oriented investors looking for potential opportunities in a company with a strong asset base relative to its share price.
For those interested in a deeper analysis, InvestingPro offers additional tips on TCS, including insights on valuation, profitability, and stock performance trends. With a total of 14 InvestingPro Tips available, investors can gain a more comprehensive understanding of the company's financial health and market position.
To access these valuable insights, consider subscribing to InvestingPro. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, which could be a strategic tool for those monitoring The Container Store's progress through its strategic review and beyond.
Full transcript - Container Store Group Inc (NYSE:TCS) Q4 2023:
Operator: Greetings. Welcome to Container Store's Fourth Quarter of Full Year Fiscal 2023 Earnings Call. At this time all participants are in listen only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. At this time, I'll now turn the conference over to Caitlin Churchill with Investor Relations. Caitlin, you may now begin your presentation.
Caitlin Churchill: Good morning, everyone, and thanks for joining us today for the Container Store's fourth quarter and full year fiscal 2023 earnings results conference call. Speaking today are Satish Malhotra, Chief Executive Officer; and Jeff Miller, Chief Financial Officer. After Satish and Jeff has 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 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 follow-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 26, 2023 as updated by our quarterly report 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 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. Satish?
Satish Malhotra: Thanks, Caitlin, and thank you all for joining us. I'll begin today's discussion by addressing two company announcements made this morning, followed by a review of our fourth quarter and full year performance. Jeff will then discuss the details of our fourth quarter financial results before we open up the call to questions. First, we reported receiving a notice from the New York Stock Exchange regarding noncompliance with their trading share price listing rule. We intend to consider available options to cure this deficiency and restore compliance, including a reverse stock split, subject to stockholder approval no later than our next annual meeting late this summer. Second, in our fiscal 2023 press release, we announced today that our board has initiated a formal review process to evaluate strategic alternatives for the company in an effort to ensure we are maximizing both the potential of the business and returns for shareholders. The company's board of directors, along with the management team, do not believe the company's current market value is reflective of its intrinsic value and are committed to acting in the best interest of the company and its stockholders. The company is being advised by J.P. Morgan and Latham & Watkins LLP. As the board evaluates potential strategic alternatives, we are suspending financial guidance. We will not be answering any questions related to these announcements at the end of the call. All available public information can be found in the press releases that were distributed this morning. We do not intend to comment further regarding the strategic review process until disclosure is determined necessary or advisable. Now turning to our fourth quarter and full fiscal 2023 results. We ended the fourth quarter with a 21.8% comp sales decline as customers continue to contend with the macroeconomic pressures affecting their consideration of spend in the home improvement and organization categories. The challenges in general merchandise remained elevated, contributing to the majority of the sales decline. However, we saw relative strength in custom spaces, particular with our premium lines, and remain encouraged by the slightly positive comp our premium lines delivered in Q4. We closed the year with $6.9 million in positive free cash flow. This past year, we navigated headwinds, which pressured both sales and profitability. However, we still made important progress in positioning the Container Store for long-term success through executing our strategic initiatives of deepening our relationship with customers, expanding our reach, and strengthening our capabilities. In addition, we were extremely disciplined on the cost front, exercising tight expense control and taking difficult but necessary actions to reduce overhead costs against a declining sales trend. We asked for tremendous support from our teams this past year, and I'd like to thank each and every team member for their many contributions towards furthering our goals. I'd also like to thank our incredible vendor partners for their unwavering support and commitment to our partnership. Together, we are ensuring that the Container Store is poised to capitalize on the significant opportunities during a more normalized backdrop. I also want to emphasize that the consumer need for the Container Store and the comprehensive solution-oriented offerings we provide remain strong. In a recent survey we conducted of 2,000 homeowners in the United States, 40% shared that they are afraid of facing the clutter in their home. And more than 70% feel overwhelmed when their homes are untidy. We are uniquely equipped with the expertise, solutions, and services to solve the challenges these potential customers have across all areas of the home. With this in mind, we made significant progress towards helping our customers realize the many benefits of living an organized life. Highlights from the past fiscal year include, first, enhancing our custom spaces offering to give customers more solutions for their home with innovative additions like integrated European lighting, new on-trend finishes and mesh door inserts to our premium wood-based Preston line, and diversifying our Elfa offering with the soft launch of Garage+. Second, developing our in-home design service to make it convenient for customers to transform their spaces with more than 100 highly trained designers. These designers are focused on selling premium spaces and drove 87% of premium spaces sales for the year. Third, delivering newness and innovation across our assortment with the introduction of compelling new brands and discovery categories like Cadence, which offers original magnetic travel capsules, CALPAK, which has brought modern luggage options to our assortment, and for Tessa, known for its innovative brake-resistant barway. These new brands and categories have resonated well with customers and complement our core offering so customers don't have to go anywhere else to complete their spaces. Fourth, strengthening our internal product sourcing and development capabilities. This enhancement enables us to create supply chain efficiencies and supports the expansion of our Everything Organized Collection, which complements our Elfa Custom Space’s line. And lastly, expanding our accessibility through the opening of five new small format stores, including our 100th store location in Princeton, New Jersey, a milestone for our company. The positive progress we made on deepening our connection with our customers and expanding our reach is demonstrated by strong net promoter scores across all areas of the business, including existing and new stores, custom spaces, focus, and e-commerce. In addition, we made impactful improvements to our site and saw strength in our B2B business throughout the fiscal year. On our sites, we enhance product detail pages with AI-driven content to streamline browsing and shopping experience, resulting in a 9% increase in add-to-cart rates. An online appointment schedule feature was introduced for custom space design appointments, empowering customers to book directly online for in-home or in-store consultations or request a callback for assistance. And our online store local pages will revamped to improve local SEO performance and drive engagements with local events, leading to an almost 15% rise in customers reaching these pages via natural search. Additionally, Customs Space's appointment bookings surged 275% from these new pages. And finally, as it relates to our B2B business, we saw operational sales increase almost 5% over the last fiscal year. While we have achieved significant progress against our initiative, we've also gained valuable insights over the past fiscal year that we have incorporated into our planning. For example, we found through testing different promotional durations and messaging, customers engage more when there is a sense of urgency and we continue to implement this learning in our future promotions. We also acknowledge that in today's challenging economic climate, there is increased price sensitivity. We see opportunities to pass savings on to our customers on certain items, as we benefit from decreased costs in raw materials and freight. While we have made steadfast improvements in our custom spaces assortment, we recognize the importance of delivering custom designs more quickly and within the budget expectations of our customers. And actually during a challenging year with constrained marketing budgets, we focused on immediate conversion efforts rather than long-term brand awareness. We reduced full-funnel marketing activities, which resulted in decreased awareness of our custom spaces business, a segment that typically requires a longer consideration period. This, along with inconsistent messaging between general merchandise and custom spaces, further weakened our marketing effectiveness. With these key insights in mind, the long-term market share potential within the over 20 billion home storage and organization category remains as compelling as when we first outlined our growth objective two years ago, even considering the current economic challenges. We remain committed to delivering on our long-term objectives of driving growth in custom spaces to better capitalize on the $6 billion custom spaces total addressable markets, as well as stabilizing our general merchandise business. As I discussed on our last earning calls, we still believe we can grow custom spaces from 40% of sales to 60% of sales over time, through expanding our assortment, continuing to build and strengthen our in-home and in-store design services, and increasing the focus of our marketing efforts to drive brand awareness for our solution-oriented offerings. As it relates to custom spaces, we expect fiscal 2024 to be a big year for Elfa. A marketing launch of Garage+ kicked off in April, aligned with an Elfa sale campaign. And we're gearing up to the soft launch of our new Decor+ line, also by Elfa. Our new Decor+ line enhances our offering with features such as fully enclosed drawers and integrated lighting, delivering exceptional value through a modular component-based system. Additionally, there is continued innovation and newness coming to our premium Preston line, and we are committed to enabling our designers to drive meaningful improvements in their conversion rates, an area where we see significant opportunity. To start, we have initiated training for our designers on our centralized 3D design tool, enabling them to deliver designs to customers more quickly. We've also refined the compensation structure to better incentivize existing talent, while also attracting new designers to the container store. And we aim to increase the number of in-home designers by over 50% by the end of fiscal 2024. Turning next to our plan for general merchandise for fiscal 2024. As I noted, our goal is to stabilize performance in this area of the business, which has seen a greater impact from the macro environments and changes in customer spending behavior throughout fiscal 2023. The Container Store has always stood for the best selection and quality and that will not change. But we also recognize the need to have various price points across our core storage and organization assortment. To deliver this, we plan to expand our private label offering and more closely collaborate with our vendor partners. By leveraging our newer product innovation and sourcing capabilities, we believe we are better positioned to effectively compete in general merchandise categories without compromising our reputation that is synonymous with quality, and also continue to provide complementary solutions that complete our custom spaces offering. Connecting custom spaces and general merchandise leads me to our marketing plans. As I mentioned earlier, we have tremendous untapped potential on the brand awareness front, especially as it relates to our custom spaces capabilities. Building this awareness is an important area of focus for us this year. We're excited to launch a new marketing campaign that more comprehensively and effectively showcases the transformative power of organization, highlighting why we at the Container Store are uniquely positioned to unleash it. Our campaigns will focus on three key elements of our solution-based offering for organizations, namely custom spaces, complementary product offering, and organizational tips. Our Make Space 4 full funnel marketing campaign will focus on connecting custom spaces and general merchandise and launches this month in five key markets. As we always do, we will be testing and closely measuring results, to determine the best approach for expanding into other markets. We've also identified opportunities in our stores to help with awareness of our custom spaces offering. Our Elfa line will now have permanent fixtures in the front of the store as part of our campaign feature area, which is what the customer sees first when they walk through our doors. The displays will be brought to life with complementary general merchandise rotated during each campaign and help reduce store workload since the displays themselves will remain in place year round. Another component of our awareness driving efforts will include buzzworthy partnerships to support key initiatives throughout the year. These partnerships are designed to help us reach new customers through their audiences, and we will be amplifying them through PR and our own and operated channels as well. One media partnership with Hearst is slated to go live later this month, featuring an incredible relatable Garage transformation for the editor and chief of the Esquire magazine with our new Garage+ line. As it relates to new stores, we expect to open four new smaller format stores in fiscal 2024 in line with our previously communicated plans. These stores will be built to suit the design and construction leading our specifications before we take possession and therefore requiring less capital spend. In summary, as we navigate the current challenging environment with discipline, we remain laser focused on the long-term opportunity of our business and brand. We intend to continue to execute on the key initiatives that will best position us to capitalize on this long-term opportunity, while maintaining strong expense and capital discipline. We also continue to work with our financial partners on the future refinance of our credit facility. As always, thank you for your interest in the Container Store and our growth story. And now I'll turn the call over to Jeff to discuss our financial results in more detail. Jeff?
Jeff Miller: Thank you, Satish, and good afternoon, everyone. As Satish reviewed, our fourth quarter results saw relative strength within custom spaces, while general merchandise continued to weigh on performance. In addition, we maintained disciplined expense management given the challenging top line trends. For the fourth quarter, consolidated net sales decreased 20.7% year-over-year to $206 million. By segment, net sales for the Container Store retail business were $195.3 million, a 20.4% decrease compared to $245.5 million last year. A decrease is inclusive of a comp store sales decrease of 21.8% driven primarily by the 26.7% decline in our general merchandise categories, which negatively impacted comp store sales by 1,620 basis points. Custom spaces comp store sales declined 14.2% compared to last year and negatively impacted comp store sales by 560 basis points. However, as Satish mentioned, we remained encouraged by the slightly positive comp sales our premium lines delivered in Q4. Sales from new stores benefited total TCS net sales by 140 basis points. For the fourth quarter of fiscal 2023, our online channel decreased 30.8% year-over-year, and our website-generated sales, which includes curbside pickup, decreased 24.5% compared to last year. Website-generated sales represented a total of 22.8% of TCS net sales in Q4, which is slightly lower than Q4 last year. Unearned revenue decreased to $14.4 million in Q4 this year versus $15.7 million last year, which is reflective of the decline in overall sales. Elfa third-party net sales of $10.7 million decreased 24.6% compared to the fourth quarter of fiscal 2022. Excluding the impact of foreign currency translation, Elfa third-party net sales decreased 25.3% year-over-year, primarily due to a decline in sales in Nordic markets. From a profitability standpoint, our consolidated gross margin for Q4 increased 50 basis points to 59.4% compared to 58.9% last year. The 50 basis point increase in gross margin was primarily driven by a higher mix of customs space sales this year. By segment, TCS gross margin increased 60 basis points compared to last year, primarily due to freight tailwinds, which were partially offset by product and service mix headwinds driven by general merchandise, as well as the impact from increased promotional activity in Q4 of this year. Elfa gross margin decreased 980 basis points compared to last year, primarily due to unfavorable mix, partially offset by pricing increases to customers. Consolidated SG&A dollars decreased $17.3 million, or 13.9%, to $107 million, compared to $124.3 million in Q4 last year, which reflects the impact of cost management actions taking this year, including our most recent actions in the fourth quarter. As a percentage of net sales, SG&A increased 400 basis points year-over-year to 51.9%. The increase is primarily due to deleverage of fixed costs associated with lower sales in the fourth quarter of fiscal 2023. In the fourth quarter, we conducted an annual impairment test of our trade names balance as of January 1, 2024, and an interim assessment as of March 30, 2024, due to indicators identified during the fourth quarter of fiscal 2023, which resulted in a $63.8 million non-cash impairment of the TCS trade name and a $10.1 million non-cash impairment of the Elfa trade name. Also in the fourth quarter, we recorded $4.8 million of other expenses, of which $3.1 million is related to a previously disclosed legal settlement and related legal fees, and $1.7 million is severance expense associated with a reduction in force. Our net interest expense in the fourth quarter of fiscal 2023 increased to $5.3 million compared to $4.8 million last year. The year-over-year increase is primarily due to higher year-over-year interest rates on our term loan during Q4, as well as higher borrowings on our revolving credit facility. The effective tax rate for the quarter was 25.3%, compared to a negative 1.7% in the fourth quarter last year. The increase in the effective tax rate was primarily related to the impact of the non-cash goodwill impairment charge recorded in the fourth quarter of fiscal 2022. Net loss for the quarter on a GAAP basis was $61.4 million or $1.24 per share as compared to a GAAP net loss of $189.3 million or $3.85 per share in the fourth quarter of last year. Adjusted net loss was $2 million or $0.04 cents per share as compared to last year's adjusted net income of $8.8 million or $0.18 cents per diluted share. Our adjusted EBITDA decreased to $15.4 million in the fourth quarter this year compared to $29.2 million in Q4 last year. Turning to our balance sheet, we ended the quarter with $21 million in cash, $176.8 million in total debt, and total liquidity, including availability on our revolving credit facilities of $112.3 million. Our current leverage ratio is 3.2 times. We ended the quarter with consolidated inventory down 7.2% compared to the fourth quarter 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 4.8% year-over-year driven by general merchandise. Capital expenditures were $39.9 million in fiscal 2023 versus $64.2 million in fiscal 2022, which reflects the planned pullback in capital spending in fiscal 2023. We're continuing to prioritize investments in our stores and technology. Free cash flow generated for fiscal 2023 was $6.9 million versus a use of $4.9 million in fiscal 2022. As you saw in our press release and Satish mentioned, at the outset of the call, we are not issuing financial outlook given the company's announcement of evaluating strategic alternatives. However, I will share some qualitative commentary on our quarter to date trends thus far, as well as initial thoughts on how we're viewing the remainder of the fiscal year. First quarter 2024 to date, we have seen an improvement in sales trends versus prior year when compared to the fourth quarter of fiscal 2023. Our performance continued to be driven by relative strength in our custom spaces business with year-over-year growth in our Elfa and Preston product lines. However, our general merchandise category remains challenged, resulting in double digit year-over-year total sales declines, though not of the magnitude reported for the fourth quarter of fiscal 2023. This year, we expect to benefit from lower freight costs, disciplined promotional activity, and continued favorable business mix, which should result in stable to modestly expanding consolidated gross margins. 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 million to $25 million, primarily related to the four new and one relocation build-to-suit store openings expected in fiscal 2024, as well as investments in technology and manufacturing infrastructure. This concludes our prepared remarks. I'll now turn it over to the operator to begin the Q&A session for questions regarding fiscal 2023 performance. As stated earlier, we will not be discussing the potential strategic alternatives process that is underway or financial outlook.
Operator: Thank you. [Operator Instructions] Our first question is from the line of Christopher Horvers with JP Morgan. Please proceed with your questions.
Christopher Horvers: Thanks, good morning guys. So my first question is reflecting on the quarter to date improvement, do you think it's -- I guess to what extent is just like the comparisons are just much easier and we're getting further along into it, understanding that you have a lot of newness going on on the custom spaces side, but I guess maybe trying to drill down into the gen merch performance, are you seeing any sort of less worsening there because of the comparisons overall or is that still tough?
Jeff Miller: Hey Chris, this is Jeff. Just looking at the business quarter to date, as we stated, we are seeing improved trends overall, but as it relates to general merchandise, it's still pretty challenged. From what we saw on Q4, we are pleased to see that we are seeing growth in the Elfa and Preston product lines. The premium product lines continue to perform well for us. In the areas that we're investing in business, we're excited to see some traction on that front.
Christopher Horvers: Got it. And then just on the Elfa side, I know sometimes you move the sales around. Are there any year-on-year promotion or sales shifts related to the Elfa business in the TCS stores?
Jeff Miller: Now there's no notable change in the year-over-year timing, the promotional cadence for the Elfa event.
Christopher Horvers: Understood. And then on the gross margin outlook, it would seem like just based on cadence and how freight might come through that expansion, stable to up is more weighted to the first part of the year? And I guess, how are you contemplating your interest and willingness in being more promotional and putting more back into price to try to compel the consumer to convert?
Satish Malhotra: Yes, Chris, I'll take that. This is Satish. As you know, we learned a lot last quarter in terms of -- or the first quarter of fiscal 2023 in terms of our promotional cadence and the intensity of it with our customers. And so, through Q2 through Q4 of fiscal 2023, and as we look into fiscal 2024, we continue to be much more disciplined in our promotional activities. What I will tell you is that, we acknowledge that today challenging economic climate, there is a lot more price sensitivity. So with the support of our vendor partners, we see opportunities to pass savings along to uncertain general merchandise items to our customers. Additionally, by strengthening our internal product sourcing capabilities, we believe we can expand our private label general merchandise offerings across various price points and categories so that we can cater to those needs, while still preserving our gross margin rate.
Christopher Horvers: Understood, best of luck.
Satish Malhotra: Thank you.
Operator: Our next question is from the line of Kate McShane with Goldman Sachs. Please proceed with your questions.
Kate McShane: Hi, good morning. Thanks for taking our questions. We just were curious with regards to general merchandise, what you're maybe seeing in the competitive environment. I know with Chris's last question, with regards to promotions, there is a focus on conveying more value, but how would you assess maybe the competitive environment with regards to price, how you're positioned, and what you're offering?
Satish Malhotra: Yes, I can take that first part and then let Jeff add some more color. The current macro environment continues to be very competitive and customers are contending with elevated interest rates and inflation. And so, we recognize their value conscious consumers out there and want to deal. What we have found is, when we can create a sense of urgency through testing various promotional campaigns, our customers engage more with us. When we are able to tell a more comprehensive and integrated story where we can couple custom spaces with our general merchandise completion products plus organizational tips, we find that that ends up being a stronger message for them to engage with us. Let's not forget that the need for the Container Store continues to be incredibly strong. Especially when we just launched our survey recently where there's so many consumers out there contending with the stress of clutter in their homes and we are uniquely equipped to help them to reclaim their lives and their spaces back. So the more that we can tell that story, the better we can help our customers overcome their current constraints.
Kate McShane: Okay, thank you. And I know there was an effort, or there is an effort to tie the general merchandise more into the custom closet sales as well. I wondered if that was partially what was driving the sequential improvement that you were seeing or where we are in that effort in trying to drive general merch sales along with the custom closet space?
Satish Malhotra: Yes, I would say, look, when we look at our general merchandise, we know we are looking at stabilizing the general merchandise business. We're doing it, as I mentioned earlier, through our exclusive private label offering, our push and expanding our Everything Organizer Collection, which pairs beautifully with our Elfa Solutions, as well as delivering private label opportunities and various price points. But also we see strength in our discovery categories. We mentioned that on our prepared remarks. Great success with on-the-go travel solutions, home fragrances, still believe we have significant growth there, as well as growth through our expanded premium assortment, which as you mentioned really allows us to complement our premium custom spaces. So in any which way we can engage our customers through value or through a differentiated assortment we continue to do that while still leaning in in significant ways with our custom space business which you heard us mention continues to do well in particular in the premium offering. And as you know, we've invested a significant amount this past fiscal year in our Custom Spaces business, whether that's expanding our premium assortment within Preston or increasing the number of highly trained in-home designers who now have access to our 3D design tool, or even allowing customers to now make appointments online through our online scheduler, plus with the addition -- two new additions of our Garage+ line from Elfa and Décor+ line with Elfa. So this renewed conviction and focus around our assortment of custom spaces ends up creating a halo effect that we look to really engage with on our general merchandise business as well.
Kate McShane: Thank you. And just my last question, I know there was a lot of cost cutting in fiscal year 2023. Are there any buckets or any areas in which you've identified that there could be additional room to improve on the cost side in 2024?
Satish Malhotra: We're always -- Kate, we're always looking at opportunities and efficiencies within the business to reduce costs, improve efficiency, effectiveness, without impacting the overall customer experience in our stores and online. So we're continuously looking for that. We did, as I mentioned on the call, we did take a couple large actions in fiscal 2023 one being announced during our -- one happening during the first quarter, the second happening at the latter half of the fourth quarter in anticipation of fiscal 2024. And so, we'll continue to look for opportunities to remain extremely disciplined around our SG&A as we move through 2024.
Jeff Miller: Yes, I would just add to that, look, while we take a very prudent approach towards our cost actions. So it's important that we continue to invest in our business, in particular as it relates to marketing. And I think that's one where we realized in fiscal 2023, we were too constrained there. And so in fiscal 2024, as we look to really build upon the green shoots of custom spaces, we're actually investing quite diligently as it relates to our marketing campaigns, in particular around our full funnel marketing efforts. And so as we mentioned, we have five key markets we are looking to drive increased awareness of how the container store is uniquely positioned to unleash our transformative power of organization to customers that continue to struggle with clutter.
Kate McShane: Thank you.
Operator: Thank you. This will conclude our question-and-answer session and also this will conclude today's conference. Thank you for your participation and have a wonderful day everyone.
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