Container Store Group [TCS] Conference call transcript for 2022 q3
2022-11-01 21:57:04
Fiscal: 2022 q2
Operator: Greetings and welcome to The Container Storeâs Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. Iâd now like to turn the conference over to your host, Caitlin Churchill, Investor Relations, The Container Store. Please go ahead.
Caitlin Churchill: Good afternoon, everyone and thanks for joining us today for The Container Storeâs second quarter fiscal year 2022 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 todayâs conference call are forward-looking statements, relating to future events, managementâs 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 Container Storeâs press release issued today and in our annual report on Form 10-K filed with the SEC on June 2nd, 2022, 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 measure is also available in The Container Storeâs press release issued today. A copy of todayâs 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 Malhotra: Thank you, Caitlin, and thank you all for joining our call today. I'll first discuss the highlights of our fiscal Q2 performance, and then update you on our strategic initiatives. Jeff will then review our financial results in more detail and discuss our outlook. For the second quarter, we delivered bottom-line results above our expectations despite a shortfall in our sales performance. We continue to navigate a challenging consumer environment as we have seen customers change their discretionary spending patterns. We've also had a negative impact of 110 basis points in sales growth headwinds from foreign exchange. While consolidated net sales declined 1.2%. compared to the prior year, we delivered adjusted earnings per diluted share above our expectations at $0.27, compared to $0.54 in the prior year. As discussed on the last earnings call, we expected the year-over-year earnings decline as we continued to absorb higher freight and commodity costs. We restored expenses that were pulled back during the height of the pandemic and made investments to support our past to $2 billion in sales. Our team did a phenomenal job at maintaining a strong cost discipline despite these headwinds and continue to execute with excellence. It is encouraging to see the continued strong performance of our customers spaces business and initiatives despite the softness in our general merchandise categories. We remain committed to our strategic initiatives to support our long-term growth and $2 billion revenue goal. As reflected in our updated guidance, which Jeff will review in more detail, we expect many of the macro headwinds we faced in Q2 related to the continued inflationary pressures and rising interest rates to persist. While we recognize the more promotional environment we are in, we have experimented without promotional cadence with varying success. Our expectation is to continue to manage profitability and top-line growth thoughtfully. Additionally, we continue to remain disciplined on the cost front, prudently managing and allocating expenses while staying committed to our long-term growth plans. The near-term external headwinds, notwithstanding and very encouraged by the continued strength we are seeing in our retail net promoter score of 78 for the quarter, and the progress we continue to make against our key strategic priorities, which include expanding our reach, strengthening our capabilities, and deepening our relationship with our customers. We are as focused as ever on deepening our relationship with our customers. In Q2, we wrapped up a successful back to college event to help our customers and their students get organized for the new school year. As a reminder, we created a compelling college shop at the front of our stores and online, partnered with direct-to-consumer brand to enhance our offering. And we had campus ambassadors in key college markets. We were pleased with the results of this event and see an opportunity to add new products to our assortment next year. In addition to starting the event earlier. Average daily sales for the event would double that of last year, with an average ticket 33% higher than last year. More than a third of our back-to-college customers were new to The Container Store. And we enrolled them in our loyalty program Organized Insider. We see back-to-college as an opportunity to drive additional growth in the years ahead. Turning to our loyalty program Organized Insider, we're pleased to see over 126,000 customers tier up in Q2, progressing either one or two tiers. As we continue to see a higher average ticket for loyalty members versus non-loyalty members at 61%. In Q3, we plan to invite our highest tier experts to an exclusive online event hosted by professional organizer Cas Aarssen, to help our most valuable customers get their homes ready for the holidays. Also in Q2, we refreshed our impulse products located near checkout with a selection of cleaning products, many of which are non-toxic and plant-based, and are not available at other large retailers. Some of the brands include Levante, Times, and Common Good with products ranging from counter sprays, hand and dish soaps, and much, much more. We are also proud that several of the brands we're carrying are female owned. Early results indicate a strong customer interest in our new offerings. As you look to the remainder of the year, we're delighted with our curated holiday products and how the offering has been brought to life online and in stores. The front of our stores will feature a kitchen spotlight showcasing solutions to help customers with their holiday prep. Some key products will include our new private label pantry bins, and entertaining essentials from our collection and bakeware essentials from Chicago Metallic Bakeware. We will also have our holiday shop of high-quality wraps, ribbons, bags and tags and coordinating themes and are excited to offer our customers an assortment that is 48% exclusive to The Container Store. We also have an expansive assortment of gifts and stocking stuffers with over 130 new products this year. Also new this year, customers can choose from a variety of ready to give gift sets, boxed in themes from our stocking stuffer assortment. Finally, to encourage sales during this time period, our customers will enjoy a limited edition reusable tote in holiday read when they purchase $100 in gift wrap and/or stocking stuffers. With regards to expanding our reach, we continued to see strength and customer spaces this quarter with comp store sales performance up 7% compared to last year, which partially offset the pullback in general merchandise we saw during the quarter. The customer response to our new premium would baseline Preston began to accelerate in the second quarter. With Preston now offered in all stores, our teams are fully certified in design and sales activities. And we look forward to adding to our sales pipeline through our first ever Preston event earlier this month. This introductory offer is part of our strategy to gain market share in spaces over $2,000. We are excited about the opportunities we see ahead for Preston and are investing to expand the product line with new woodgrain and super matte finishes and luxurious decorative accents including reclaimed leather, glass tops and frameless mirror doors. All these product additions align with leading industry design trends. Additionally, we recently participated in Kips Bay decorator show House Dallas, in which we demonstrated the incredible capabilities of Preston. In partnership with two accomplished designers, we brought two primary closets to life that featured glass front cabinets, warm LED lighting used both vertically and horizontally, and a floating credenza wrapped in cold crocodile recycled leather with push to open drawers. Both spaces received high accolades from the interior design community. In addition to our focus on Preston, today, we launched new branding Custom Spaces, which moves our offering beyond closets and naturally aligned with key areas of the home, including closet, living and garage spaces. Customers can learn more about custom spaces through a new section on our website, or in the Custom Spaces studio in any of our stores. Online we also added chat capabilities that not only support customers, but also allow for enhanced lead integration for future sales opportunities. We also continuing to invest in custom spaces through a new design tool, and have added talent across the business and technology, engineering and sourcing to name a few areas. Lastly, we have also begun to pilot our own in-home installation teams in both the Chicago and Dallas markets, inclusive of branded vehicles. By bringing this service in-house combined with our Dallas Pilot for in-home organizing, we will be able to deliver a comprehensive and unmatched customer experience comprised of organizing solutions, custom spaces, and in-home services. I believe we are well positioned to capitalize on the sizeable growth opportunity ahead. At the end of August, we also kicked off our alpha savings for every space event, which concluded in mid-October. The event was a spend more say more offer available only to our loyalty members. While our customer engagement for this event was only slightly down year-over-year, we noted that our customers purchased fewer spaces at a higher average face value reflective of the softening of customer traffic and spend as a result of inflationary pressures and rising interest rates. Despite the current softness, we remain focused on long-term growth and are developing new and innovative premium alpha product that we plan to launch throughout next year. These offerings will span multiple spaces and will include elevated features. Turning to our store expansion plans, during the quarter we opened our first smaller format store in Colorado Springs. Initial customer response has exceeded our sales productivity expectations in total, and in particular for custom spaces. We remain on track to open a store in Salem, New Hampshire this winter, and are excited to announce plans for the opening of our next location in 1000 Oaks, California in early spring 2023. As previously stated, we plan to open 76 stores by the end of fiscal â27. We anticipate one-third of these new stores to open by the end of fiscal 2024 and we have these locations targeted and active in our pipeline. Lastly, we continue to make progress related to strengthening our capabilities. We are leveraging technology across the organization, and it is elevating the customer experience of our multi-channel customer. As it relates to custom spaces, we not only launched our new experience online, but also enhanced the lead platform to better understand a customer's omnichannel journey from lead to conversion. We also began rolling out mobile point of sale in stores for express checkout and assisted selling to help our customers more efficiently find solutions or sign up for our loyalty program. From 3D views in our online custom spaces designed tool to improve both experience and piloting an AI powered chatbot on our site and app, we believe our technology initiatives are enhancing the customer experience. Looking ahead, we will remain focused on execution of our near-and-long-term objectives. We are mindful of the macro backdrop and the prospects of a recession. However, we have spent the last few years paying down debt and fortifying our balance sheet and we enter this period from a position of financial strength. Even as we tighten our spending and will closely manage our costs, we plan to continue to prudently invest in our strategic growth initiatives that support our path to $2 billion in revenue. With that, I'll now hand it over to Jeff to discuss our results and outlook in more detail. Jeff?
Jeff Miller: Thank you, Satish, and good afternoon, everyone. As Satish reviewed, we are pleased to have delivered second quarter earnings above our expectations despite the shortfall in sales. Consolidated net sales decreased 1.2% year-over-year to 272.7 million. By segment, net sales for The Container Store retail business were 259.9 million, a 0.2% increase compared to 259.4 million last year. The increase is inclusive of a comp store sales decrease of 0.8% driven by the 4.6% decline in our general merchandise categories, which negatively impacted comp store sales by 310 basis points. The performance in general merchandise was partially offset by the increase in customer space sales, which were up 7.1% compared to fiscal 2021 and contributed 230 basis points to the comp store sales. The sales from recently acquired closet works and new stores contributed the remaining 100 basis points to the 0.2% TCS net sales growth year-over-year. As a reminder, beginning in Q1, we changed our definition of Custom Spaces to exclude general merchandise, closet departments and only include results of our custom spaces product and service offerings. This change was driven by the importance of Custom Spaces on our path to 2 billion and a desire to provide more transparency to the custom spaces product and service offerings. Please refer to the Q2 2022 investor deck for revised quarterly information regarding a mix of Custom Spaces and General Merchandise product categories based on the new definition. For the second quarter of fiscal 2022, our online channel decreased 0.7% year-over-year. However, when including curbside pickup, our website generated sales in Q2 increased 5.4% compared to last year. Website generated sales represented a total of 20.9% of TCS net sales in Q2 of fiscal 2022 compared to 19.9% in Q2 last year. Unearned revenue decreased slightly to 22.1 million in Q2 this year, versus 22.4 million last year. Alpha third party net sales of 12.8 million decreased 22.8% compared to the second quarter of fiscal 2021 primarily due to the negative impact of foreign currency translation. Excluding the impact of foreign currency translation, Alpha third-party net sales decreased 5.3% year-over-year, primarily due to stopping sales in the Russian market. From a profitability standpoint, our consolidated gross margin for Q2 was 56.6% compared to 59.3% last year, with the decrease driven primarily by commodity and freight increases. By segment TCS gross margin decreased 130 basis points compared to last year, primarily due to more promotional discounting and freight costs partially offset by favorable product and service mix. Alpha gross margin decreased to 26.2% compared to 31.8% last year, primarily due to higher direct material costs. Consolidated SG&A dollars increased 4% to 118.7 million, compared to 114.1 million in Q2 last year. SG&A spend in Q2 this year includes a 2.6 million net benefit from a legal settlement. As a percentage of sales, SG&A increased approximately 220 basis points year-over-year to 43.5%. The increase is primarily due to the normalization of SG&A cost post pandemic combined with the deleverage of fixed costs associated with lower sales and partially offset by the legal settlement received in Q2. Our net interest expense in the second quarter of fiscal 2022 increased 18.7% year-over-year to 3.8 million due to higher interest rates. The effective tax rate for the quarter was 25.9% compared to 25.7% in the second quarter last year. The increase in the effective tax rate is primarily related to the tax impact associated with share-based compensation on lower pre-tax income in the second quarter of fiscal 2022. Net income for the quarter on a GAAP basis was 15.7 million or $0.31 per diluted share, as compared to a GAAP net income of 27.2 million or $0.54 per diluted share. In the second quarter of last year. Adjusted net income was 13.8 million or $0.27 per diluted share, as compared to last year's adjusted net income of 27.2 million or $0.54 per diluted share. Our adjusted EBITDA decreased 24.8% to 35.9 million in the second quarter of this year, compared to 47.7 million in Q2 last year. Turning to our balance sheet, we ended the quarter with 19.8 million in cash, 174.2 million in total debt and total liquidity, including availability on our revolving credit facilities of 123.2 million. Our current leverage ratio is 1.1x. We ended the quarter with consolidated inventory up 9.8%, which reflects increased freight and commodity costs across the business year-over-year. On a unit basis, our TCS on-hand inventory is relatively flat year -over-year. However, we anticipate increasing unit levels in the second half of the fiscal year in advance of the previously mentioned new Alpha product offerings expected to launch next year, as well as increasing safety stock on key skews to ensure positive customer experiences. Capital expenditures were 32 million in the first half of fiscal 2022 versus 14.6 million in the first half of last year, with the increase related primarily to investments and technology and our stores. Free cash flow in the first half of this year with a use of 5.3 million versus 7.9 million generated in the first half of last year. As announced on our first quarter earnings call, our Board has approved the stock repurchase program, which includes an authorization for up to 30 million. After the end of the second fiscal quarter, the company repurchased approximately 940,000 shares for 5 million. Under a rule 10b5-1 plan. We have 25 million remaining of the original $30 million authorization for share repurchases. Additional stock repurchases may be made in the open market or can be negotiated purchases with the amount and timing determined at the company's discretion. We do not expect to incur additional debt as a result of the stock repurchases. Now for outlook. For Q3 of fiscal 2022, we expect consolidated sales to be approximately 240 million to 250 million, driven primarily by a comparable store sales decline of high single digits. We expect earnings per share in the third quarter to be in the range of $0.02 to $0.07 per diluted share. The implied year-over-year operating margin decline is expect to be driven primarily by SG&A deleverage associated with fixed costs deleverage on lower sales. While we have taken action to pull back on certain corporate expenses and have reallocated spend due to the current economic environment, we plan to continue prudently investing and our strategic efforts. As Satish reviewed, while profit dollar maximization is a priority, we do expect some headwinds to Q3 gross margins associated with the more promotional environment. And freight and commodity costs headwinds while abating versus a year ago, remain elevated compared to historical trends. However, we do expect a favorable product mix to serve as a partial offset to these headwinds. Interest expense for the third quarter is expected to be 4.4 million driven by higher rates and/or effective tax rate is expected to be 30%. Our third quarter outlook reflects the expectation that we will continue to navigate a challenging macro environment. Given the economic uncertainty, we are withdrawing our previously issued full year guidance. That said, we believe a prudent scenario would reflect trends not dissimilar to our Q3 expectations for the remainder of the fiscal year. In this scenario, where we continue to experience comparable store sales declines of high single digits for the remainder of fiscal 2022, we would expect to achieve operating margins in the mid-single digits with a decline on a year-over-year basis, primarily result of SG&A deleverage in the back half of the year and to a lesser extent, gross margin pressure. Interest expense for the full fiscal year is now expected to be 15.9 million driven by higher interest rates, and the effective tax rate for the year is expected to be approximately 27%. Before I close, I also want to reiterate our confidence in the plans and the ability to deliver on our longer-term sales target of 2 billion. While the duration of the current macro headwinds may impact our originally contemplated timeline for achieving those goals, we are focused on the long-term opportunity. With a strong balance sheet in place and continued focus on operational disciplines, we believe we are well positioned to navigate the ongoing dynamic macro environment. This concludes our prepared remarks. I'll now turn it over to the operator to begin the Q&A session.
Operator: Thank you. At this time, we will be conducting a question-and-answer session. . We have a first question from the line of Steven Forbes with Guggenheim Securities. Please go ahead.
Steve Forbes: I wanted to start with the chain wide merchandising reset in the migration to here because selling spaces, so curious Satish, if you can provide some high-level commentary on how you see your customer today, you have both a loyal one and a non-loyal one as you define them, how are they engaging with the Preston line? How many baskets these sort of see that that engagement factor in as a percentage and any initial thoughts on how you sort of begin to contextualize the potential impact of this strategic shift to the business's secular growth ?
Satish Malhotra: Hey, Steve, thank you for the question. Let me first say, as I think about the current consumer sentiment, that we're definitely navigating a challenging consumer environment, obviously, with continued inflationary pressures and rising interest rates. We see our customers continuing to engage, they are changing their discretionary spending patterns due to these external headwinds. They're spending more but fewer items, in some cases, fewer spaces. And they're definitely more intentional about their visits to us, and hence, the softness in our traffic. Having said all that, though, I'll point to a few factors that we are very pleased with and speak a little bit more around custom spaces in general. We were delighted with the success we had with our back-to-college event definitely shows they are able to engage with us when we have a compelling offering. And we were able to attract more than a third customers that were new to TCS, that was extremely encouraging to see that event. We also saw great results with our other events as well, where average space values continued to be over $6,000. And that too, with a slightly lower average discount. And finally, we've seen great excitement and momentum around our Preston line. So as I kind of look forward, as I stated a couple of times, we really believe we have an opportunity to win in customer spaces in particular, over the $2,000 space. Today, we do well under $2,000 but it represents less than 15% of the $6 billion addressable market that's out there in terms of value. And that's why we've been consistently focusing our attention to more -- towards the more premium lines, whether it be Avera and Preston, you saw that we delivered plus seven comp, store sales performance of LY. We've also continued to invest in the number of in-home designers that we have. We've now gone, we're actually over 100 and plan to get to 140 by Q3. We've certified our designers to make sure that they're very comfortable understanding and selling more of our premium lines. We've got a dedicated section now on our website, if you go check it out, you'll see it's completely re-envisioned in terms of how we talked about custom spaces, including enabling an online chat. We've completely elevated the in-store expression as well with our new branding. We are also excited about introducing new finishes that we now focused on whether it's in woodgrain, or super matte, adding the decor of accents as well, all things that our customers have told us that they're interested in, and that we are able to provide for them. And it was underscored by having just a really successful Kips Bay Dallas event with the interior design community. So I really see great strength and success in our customer space business. It represents around 35% of our sales today for TCS, and I believe it will continue to penetrate even more as we look to grow and get towards the $2 billion. I'm also really pleased with the way that our new store opened up in Colorado Springs, which as you know, is a smaller store, it's only 12,000 square feet. And while it's got a much-curated down assortment within general merchandise, it has an uncompromised expression of custom spaces and the productivity for both custom spaces and the store overall, is doing incredibly well. And that builds a lot of confidence as we look to open more of these small format stores in the way that we believe we can drive incremental growth and higher productivity out of stores as well.
Steve Forbes: Super helpful, Satish. Maybe just a quick follow up here for Jeff. I don't know think you guys updated the CapEx guide for the year, but I'm not sure if you can help us frame it where you sort of see current spending for 2022. And then as we look out here is that 5.5% to 6% of sales, the right target to still be thinking about, as we look out for -- to the path to 2 billion.
Jeff Miller: Yes, Steve. We were still projecting CapEx for fiscal 2022, to be in that $60 million to $65 million range. And as we talked about in our path to 2 billion financial model, we still have that is 5.5%. 6.5% of total sales as part of a planned CapEx spend. Certainly the current environment, could impact the timing and duration of our path to 2 billion. But we think right now, it's a little too early to rerun the numbers till we get a better understanding of how long the current environment is going to take us. So more to come on that. But at the end of the day, we still feel really good about the specific strategic objectives and activities that we're doing to get us to that path to 2 billion whether it's store growth. The focus on custom spaces, as Satish just outlined, are focusing online and our Organized Insider program, just engaging the customer. So still feel really confident on that front and looking forward to continue to grow the business.
Operator: Thank you. We have next question from the line of Ryan Meyers with Lake Street Capital Markets. Please go ahead.
RyanMeyers: First one for me just kind of wondering if you can unpack some of the commentary that you gave surrounding elevated ticket prices. There's a lot of those coming from higher price increases or, how much are you seeing customers just spending more on higher ticket items, whether it's more customizable products, or whatever it might be, I think that would be helpful to understand.
Jeff Miller: Hey, Ryan. I can take that and Satish, you can add on it, if possible. When you take a look at the different areas of the business from a general merchandise perspective, average ticket is related to more pricing and promotional activity, that we're not necessarily seeing more units per transaction. So more challenge on that front, as we talk about the customer pullback. On the space front, when you look at an average ticket, while the average space value has gone up could be related to maybe a larger space, could be related to pricing, but they're purchasing less spaces. So from an overall average it does have quite a bit of headwind on that front.
Ryan Meyers: Got it. Makes sense. And then just second one for me, is there any strengths that you guys want to call out across certain product categories, more specifically in the general merchandise as consumers are maybe shifting their buying preferences a little bit?
Satish Malhotra: Yes. Hi, Ryan. What we have seen some strength in is within particular, kitchen area, particular when we have it focused on the spotlight is doing incredibly well. Our private label business continues to penetrate really well, in particular with our organizers that we have. We called everything organized as a private label franchise that we have. Thatâs doing exceptionally well as well. We typically see when new customers are coming in, they gravitate towards our kitchen department as they get to understand what The Container Store has to offer. And then we see them graduate into storage, and we get to see them into our alpha grab-and-go, and eventually into our custom spaces. So we're obviously working on the consumer mapping, the journey to understand how best to move customers along as they enter us. But overall, I would say kitchen is doing quite well for us.
Operator: Thank you. We have next question from the line of Chris Horvers with JPMorgan. Please go ahead.
Chris Horvers: Can you maybe talk about when you saw the consumer change in terms of cadence over the quarter? Was there a certain, I don't know, when did things start to change? Was there any, regionality to that change and with the high single digit decline for the third quarter? Is that what you're seeing in October?
Jeff Miller: Yes, Chris. This is Jeff. Listen as part of the Q1 call, we were actually seeing -- we based our guidance for Q2 based on the current quarter trends. And so we had finished out the month of July, in line with that, and then once early August, hit, we started seeing traffic declines, pretty significant traffic declines. And all the while comping on the general merchandise side, a customer favorites promotion period that we did not introduce in the current year. Since August, though, we did, we have seen traffic moderate back, although still down, but not to the same levels that we saw in August. But based on where we're seeing current traffic trends, through the end of September and into October, we based our Q3 outlook and guidance based on what we're seeing in the current trend perspective.
Chris Horvers: Got it. That's very helpful. And then, in terms of the -- was there any sort of regional change that was observable to you? And as you think about general merchandise being weak, obviously, it's very promotional out there in the home decor category, across the board. But is there any other than regionality? Are you seeing anything in terms of the customers willingness to take on some of these bigger ticket spending around, custom closet or and custom space?
Satish Malhotra: Yes. We didn't really see much of a difference in terms of the regionality. I will tell you that the customers that are committed to getting custom space done are engaging and getting it done. Hence, the success that we had with the Avera event that we had for the summer. It did quite well for us, again, customer spending average spaces over $6,000. And we're seeing great traction and acceleration with our Preston line and actually affected today. We've introduced it with a promotion. And we're hopeful about the way that introduces this beautiful, luxurious new line to our customers, which is very customizable, and can play the gamut in terms of pricing. So essentially, what I will tell you is that, as I said earlier, the customers are more intentional around their visits and their willingness to spend. And then, we are able to capitalize on that and hence the high NPS scores that we have is 78. And that's what we are continuing to work through. Yes, we've seen some softness in general merch, but we're pleased with the performance we're seeing with custom spaces.
Chris Horvers: Got it. One last question. Just in terms of, the SG&A, the performance that you had in the second quarter. Is that right sort of the right baseline to think about from -- as we think about just the seasonality of the businesses, the 120-ish, the right number to build from going forward.
Jeff Miller: Well, given the fact Chris that some of our SG&A is variable nature, depending on the quarter, it could fluctuate. But, when you look at it from a Q3 perspective, Q3 is our second lowest quarter historically from a trend standpoint on a top-line and Q4 is one of our stronger. So I think from a cadence standpoint could fluctuate at or above the Q2 numbers.
Chris Horvers: Got it. Very helpful. Thanks for very much.
Satish Malhotra: Hey Chris. One other thing I should remind you is that in Q2 of this year, we had $2.6 million benefit from a legal settlement.
Chris Horvers: Right, okay. Understood, very clear. Thank you.
Operator: Thank you. Ladies and gentlemen, this concludes our question-and-answer session. Now I'd like to turn the call back over to Satish Malhotra, CEO for closing remarks. Over to you sir.
Satish Malhotra: Great. Thank you once again for joining us today and for continuing to follow The Container Storeâs growth story. Hope you have a great night.
Operator: Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
