The Container Store Group - Q3 2021

Transcript

Speaker 0

Good afternoon, everyone, and thanks for joining us today for The Container Store's 3rd Quarter Fiscal Year 2021 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 Our forward looking statements relating to future events, management's 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 Store's press release issued today and in our annual report on Form 10 ks filed with the SEC on June 3, 2021. The forward looking statements made today are as of the date of this call, 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 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 An 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?

Speaker 1

Thank you, Caitlin, and thank you all for joining our call today. I'll first discuss our strong fiscal Q3 performance followed by an update on our growth initiatives. Jeff will then review our financial results in more detail and discuss our outlook. Our 3rd quarter results surpassed our expectations and demonstrated 3 consecutive quarters growth in fiscal 2021 when compared to fiscal 2019. For the Q3, consolidated net sales were 200 and $67,300,000 approximately a 17% increase compared to the Q3 of fiscal 2019 and a decrease of 3% compared to the prior year.

From a profitability perspective, we delivered adjusted EPS of $0.28 compared to $0.05 in the Q3 of fiscal 2019 and $0.42 in the Q3 of fiscal 2020. Our Q3 performance when compared to 2019 was broad based with double digit growth seen in both our general merchandise categories and in our Custom Closets business. In fact, for the 3rd consecutive quarter, we delivered close to or above 20% growth in Custom Closets when compared to fiscal 2019. This growth was fueled by not only our affordable modular alpha Where we experienced our highest sales day in history with the launch of our Transform with Alpha event in mid December, But also by our premium Avera line, which continues to average around $6,000 per space and continues to outpace fiscal 2019 and fiscal 2020 sales. In light of our continued strength we're seeing in our custom closet business, Especially in our ability to sell custom spaces above $2,000 we showed the need to significantly bolster our custom closet and home solutions With the acquisition of ClosetWorks, which closed on December 30, 2021.

ClosetWorks is a Chicago based manufacturer of premium Custom wood based spaces. From walk in closets to home offices, wine storage, wall beds and garages, ClosetWorks has developed custom spaces that have been tested and refined for over 3 decades. Customizations include a vast number of finish options, lighting, hardware, countertops, trim and their distinctive and very innovative 360 Degree Organizer, which is a fully rotating system ideal for shoes, pantries, valet and so much more. This acquisition not only provides us with manufacturing capabilities in the U. S, but also provides us with added capacity To grow and expand our business nationwide with a much superior assortment and allows us the ability to improve our margin profile on wood based systems.

We are thrilled to welcome ClosetWorks to the Container Store family and look forward to meeting Customer demand with an exceptional product offering. With respect to our general merchandise categories, we are delighted to have delivered an increase of 15.6% to fiscal 2019, which was only down 5.4% compared to last year. As a reminder, last year, our general merchandise categories benefited greatly from the launch of the Netflix series Get Organized With the Home Edit. The strength in our general merchandise categories during the Q3 of 2021 was largely due to the strategic shift We made in highlighting compelling core products relevant during the holiday season, while still offering a narrow yet highly curated holiday offering. For example, we featured an expanded assortment of kitchen products at the front of the store, which supported our new ways to holiday campaign, While our dedicated holiday display showcased captivating holiday wraps, which included racially diverse centers, Sustainably sourced gift boxes and bags and desirable stocking stuffers.

The changes we made to revamp holiday this year Drove strong customer engagement, which improved overall sell through rates of holiday specific merchandise and also drove Strong sales in our core categories such as kitchen, storage and closets. We were also pleased with our e commerce performance in Q3, which was up 26.9% for online sales compared to 2019. Including curbside pickup, Website generated sales were up 53% compared to 2019. Performance this quarter was powered by improvements in site browsing, product pages and a continued focus on site speed. Since the initial shift to e commerce at the start Of the pandemic, we have continued to maintain a higher level of penetration above the pre pandemic period.

As I reflect on my initial 12 months as CEO, I'm very proud of how our organization has rallied around a singular vision To transform the lives of our customers through the power of organization. Together, we have delivered strong financial results, Made strides against our strategic initiatives to drive growth and market share. We've also made progress Our goal of making The Container Store a $2,000,000,000 business over time. Now while we are still in the early innings, We have accomplished a great deal and have much to be proud of. Now for an update on our 3 strategic pillars, Starting first with deepening our relationship with our customers.

Over the past year, we've not only improved our in store shopping experience by adding hosts, Zoning key areas and by adding demonstrations, but we've also refined our promotional cadence and messaging to our customers. In addition, we have curated our product assortment to align with customer interest and values. For example, customers have loved Seeing transformations of real spaces throughout our marketing materials, which you will see in our Transform with Alpha event. The before and after graphics and testimonials shown in store and through all digital channels are what we believe differentiate us from the rest of retail. Additionally, we continue to expand our sustainable product mix and are pleased to offer approximately 1600 sustainable SKUs in our assortment.

We will continue to expand the number of sustainable products we carry and we're excited to share our plans to launch an expansion of our Marie Kondo collection in the 4th quarter. This expansion will include more than 100 new sustainable products and will broaden Marie's reach in the home office and bath category. Additionally, our customers love the Home Edit's lightweight sustainable wood collection for the kitchen and drawers, which we carry exclusively. After a successful test period in select stores, we're adding the Onyx collection to the existing sand collection to all stores in March. I'm very pleased with the product selection and design work our buyers are doing to further expand and strengthen our sustainable product mix.

Our continued focus on deepening our customer relationship, while also driving profitability demonstrates the appeal of our brand and the strength about offering. To that end, I'm excited to announce that later this month, we're expect to launch a new brand campaign alongside Our new brand icon. The branding campaign, Welcome to the Organization, is an open invitation to all To learn and discover the power of organization. It is also an opportunity for our current customers to share their transformational journeys with others. And as we head into a new store growth mode, the new brand campaign will allow us to welcome new markets to our extensive product assortment, Impressive custom closet solutions and specialized in home services.

We are excited to launch this branding campaign to help customers discover The power of organization enjoying our movement. The welcoming will begin on 2, 2022, 2022, The last most organized day of the century. Lastly, at the end of March, we expect to launch a new tier based loyalty program that we believe will not only attract new customers, but will also reward a deeper level of engagement with existing customers. Moving to our 2nd strategic pillar, expanding our reach. We continue to win in selling custom spaces over $2,000 For example, in Q3, we held our 2nd Avira only event.

Despite a pullback in the depth of this promotional event, We saw strong sales growth with spaces averaging $6,000 each. Our specialists are working hard to educate customers about our premium Avera line and the results demonstrate we are making great progress with year to date sales Well, the vera far outpacing fiscal 2019 2020. The changes made to date in our promotional cadence also give us Confidence in our decision to make changes to our annual Alpha sale, which is now transformed with Alpha. The sale is 2 weeks shorter in length and the depth of the promotion is also decreased from our historical 30% off So 20% of purchases greater than 500 and 10% of purchases under 500. The event kicked off on December 22.

As I mentioned earlier, we experienced our highest sales day in history. With regard to stores, we are excited to open our U. S. Smaller format store in Colorado Springs, Colorado, which is expected to open in the fall of 2022. We're also excited to announce a second smaller format store in Salem, New Hampshire, which is expected to open in the spring of 2023.

Our real estate team continues to develop the pipeline for additional new store opportunities, Prioritizing key markets, we believe present the most attractive growth opportunities. As a reminder, we see the potential to add at least 100 new stores in the coming years, which is an addition to the potential shop in shop concept we continue to explore. In addition to our brick and mortar expansion, we're also excited for the opportunities we see within e commerce. As I mentioned, we have maintained a healthy e commerce penetration and continue to identify ways to grow and improve our e commerce experience. To date, we have made significant strides to enhance our site browsing experience, including a holistic redesign of our product listing page and product detail page.

For example, our multi variant product pages will show customers additional size and color options of a product. We also recently launched smart filtering to allow customers to filter by the dimension of a product. This improvement assists them in finding the right item for their space, saving them valuable time on-site. Lastly, I'm thrilled about our new mobile app, which we expect to launch this spring. It will be another way to meet customers where they are already shopping and will allow to introduce them to our new loyalty program.

This brings me to our 3rd and final priority, strengthening our capabilities. Technology enhancements continue to be a core focus. Over the past year, we have added more payment options for customers, including the addition of PayPal and a mobile point of sale solution, both of which are expected to be available by the end of fiscal 2021. Also, we're pleased with our ability to attract great talent and recently hired an SVP of E Commerce and a new General Counsel. We also conducted a 3rd party pay equity study to ensure we are being equitable and inclusive in how we compensate our employees regardless of race, Age, gender or ethnicity.

When it comes to our ESG strategy, we completed the materiality assessment mentioned last quarter And I'm working on our first ever sustainability report, which is expected to be shared with our stakeholders this summer. From a manufacturing perspective, our modular metal based manufacturing capability coupled with our new premium wood based manufacturing capability will provide us the opportunity to not only benefit from improved margins, but it will allow us to deliver a custom and superior offering For every space of the home. In summary, I am tremendously proud of the execution of our amazing teams. Their air of excitement, attitude and endurance are the reason we are delivering strong financial results and making operational strides on our strategic priority. We are also driving more profitable growth as we purposely reduce the depth, breadth and duration of our promotional cadence.

As we look to the conclusion of our fiscal year, we are encouraged by our ability to strengthen our connection with existing customers and excited about the opportunity to welcome new customers to the organization. I will now turn the call over to Jeff. Jeff?

Speaker 2

Thank you, and good afternoon, everyone. As Satish said, our Q3 results exceeded our expectations, And we are very pleased with the consistent and impressive 2 year sales performance we have continued to deliver. For the 3rd quarter, Consolidated net sales declined 3% year over year to $267,300,000 an increase 16.9% compared to the Q3 of fiscal 2019. By segment, sales for The Container Store retail business decreased 3.1% $248,600,000 an increased 17.3% compared to the Q3 of fiscal 2019. Custom Closet sales were flat compared to fiscal 2020 and general merchandise categories were down 5.4% in Q3, contributing the entire 3 10 basis points of the decrease in net sales.

Compared to Q3 fiscal 2019, Custom closets were up 19.5% and general merchandise categories were up 15.6%. As Satish reviewed, we continue to be pleased with the progress we have made with our website and our ability to maintain the higher level of e commerce sales penetration as compared to fiscal 2019. While our online channel decreased 36% year over year in Q3 When compared to the Q3 of fiscal 2019, our online channel increased by 26.9%. Including curbside pickup, our website generated sales in Q3 were down 28.7% from last year, but up 53% when compared to the Q3 of fiscal 2019. Website generated sales represented a total of 20.5% TCS net sales in Q3 of fiscal 2021 compared to 27.9% in Q3 last year and 15.7% in Q3 of fiscal 2019.

We ended the quarter with online orders taken but not shipped totaling approximately $2,500,000 compared to $1,800,000 in the prior year period. We also had unearned revenue of $32,100,000 this year versus $17,900,000 last year, driven by a large increase in Custom Closet orders taken But not yet installed as a result of the strong start to our Transform with Alpha event, which kicked off on December 22. Alpha third party net sales were down 1.3 percent to $18,700,000 Excluding the impact of foreign currency translation, Elfa 3rd party net sales increased slightly year over year. From a profitability standpoint, our consolidated gross margin For Q3, it was 57% compared to 57.9% last year. The year over year decrease in gross margin was driven by Increased freight and commodity costs, which were partially offset by tailwinds associated with less to direct to consumer shipping and less discounting as well as a favorable product mix.

By segment, gross margin at The Container Store increased 10 basis points compared to last year, primarily due to less direct to consumer shipping, Less promotional activity and a favorable mix of sales, partially offset by increased freight and commodity costs, TCS gross margin declined 30 basis points compared to the Q3 of fiscal 2019, primarily due to unfavorable mix of sales, partially offset by less promotional activity. Elfa gross margin decreased 13.30 basis points compared to last year, primarily due to higher direct material costs associated with commodity price increases as well as an unfavorable product and customer mix. Elfa gross margin decreased 10.70 basis points compared to the Q3 of fiscal 2019, primarily due to higher direct material costs. Consolidated SG and A dollars increased 3.8 percent to $120,300,000 compared to $115,900,000 in Q3 of last year. As a percent of sales, SG and A increased by 2.90 basis points versus last year, Primarily due to increased compensation and benefit costs as a result of restoring certain expenses that were temporarily pulled back In fiscal 2020, as part of our pandemic management strategy, as well as other expenses, including costs incurred related to the acquisition of ClosetWorks in the Q3.

As compared to the Q3 of 2019, SG and A decreased 400 basis points as a percent of sales, driven primarily by fixed cost leverage on higher sales. Our net interest expense in the Q3 of fiscal 2021 decreased 21.6 percent to $3,200,000 from $4,100,000 in the prior year due to a lower Principal balance on the senior secured term loan facility combined with lower interest rates. The effective tax rate for the quarter was 27.9% compared to 29.4% in the Q3 of last year. The decrease in the effective tax rate is primarily related to the excess tax benefits associated with Share based compensation on lower pre tax income in the Q3 of fiscal 2021. Net income for the quarter on a GAAP basis was $13,700,000 or $0.27 per diluted share as compared to $19,700,000 or $0.40 per diluted share in the Q3 of last year and $0.05 per diluted share in the Q3 of 2019.

Adjusted net income was $14,300,000 or 0.28 dollars per diluted share as compared to $20,700,000 or $0.42 per diluted share last year and $0.05 per diluted share in Q3 2019. Adjusted EBITDA decreased to $31,400,000 in the Q3 this year compared to $42,400,000 in Q3 last year and increased 42.7% compared to $22,000,000 in Q3 2019. Turning to our balance sheet. We ended the quarter with $19,000,000 in cash, dollars 165,500,000 in net borrowings on our term loans, $33,000,000 borrowed on our revolver and total liquidity, including availability on our revolving credit facilities of approximately 95,000,000 Our current leverage ratio is approximately 1.1 times leverage. We ended the quarter with consolidated inventory at 41.5%.

Keep in mind that last year we were still operating with lower than normal inventory levels. This year we continue to increase unit levels to support strong sales trends And to account for longer lead times resulting from supply chain disruption. And like other retailers, We continue to experience freight and shipping cost headwinds along with higher commodity prices, which are reflected in this increase in the value of our inventory. We have and plan to continue employing multiple methods to help mitigate the impacts of higher costs, which include vendor negotiations, Actively managing our supply chain along with adjusting our retail pricing and promotional cadence. We utilized $6,100,000 in free cash flow during the quarter compared to last year when we generated $105,000,000 As a reminder, last year, We focused on preserving cash due to the uncertainty related to the pandemic, including just mentioned inventory management actions, as well as deferring almost $12,000,000 in cash lease payments to future periods.

On that note, the outstanding balance of Now for our outlook. As a reminder, please note that the Q4 last year included a 53rd week that contributed $17,700,000 in sales, dollars 5,300,000 in adjusted EBITDA and $0.07 in EPS. Excluding the impact of the 53rd week in the prior year Q4, we expect Q4 consolidated sales to decline 6%, Inclusive of the 53rd week in Q4 of fiscal 2020, the sales decline is expected to be 11%. The $280,000,000 and expected Q4 2021 sales represents a 16% increase from the Q4 of fiscal 2019. EPS in the Q4 is expected to be approximately $0.24 The expected decline in adjusted earnings per share as compared to q4 fiscal 2020 is primarily driven by gross margin pressures associated with freight and commodity cost increases.

SG and A deleverage is also expected, Though to a lesser extent and is associated with the restoration of certain expenses that were temporarily pulled back in fiscal 2020 as part of our pandemic management strategy. We are proud to be on track to deliver EPS growth for the full 2021 fiscal year Despite the margin pressures that we are experiencing and despite being up against the 53rd week last year. For the year, We expect total capital expenditures to be approximately $45,000,000 interest expense to be $13,000,000 and our effective tax rate to be approximately 30%. I'll now pass it back to Satish for closing remarks.

Speaker 1

Thank you, Jeff. In closing, we are pleased with the strong results we have delivered in Q3. We have achieved 3 consecutive quarters of nearly 17% growth in fiscal 2021 when compared to fiscal 2019, which is outstanding. In the coming quarter, we are squarely focused on the integration of ClosetWorks, ending the Transform with Alpha event well, Making the big splash with our branding campaign on 2,022, 2022 and launching our new loyalty program and mobile app. We believe we will continue to be the leader in organizing solutions, Custom Closets and in home services And we fully intend to finish our fiscal year strong.

This concludes our prepared remarks. I'll now turn the call over to the operator To open the lines for questions.

Speaker 3

At this time, we will be conducting a question and answer session. Our first question comes from the line of Stephen Forbes with Guggenheim Securities. You may proceed with your question.

Speaker 4

Good evening. Satish, maybe a high level question to start. Curious just your thinking as we cycle The second half compares. Any color on what you're seeing in the customer data, right, whether it's repeat trends, Re engagement trends, category participation rates, anything what you're seeing in the customer data that supports the optimism For sort of out year secular growth in the business. Really, I would just love to hear you sort of expand on what you're seeing in the data.

Speaker 1

Sure. What I would say Steve is the back half is Very much indicative of all the work that we've taken during fiscal 2021, which for us was very much a foundational year, Right. As you know, we worked extremely hard to improve the productivity of our existing stores and e commerce business, while focusing on our growth priorities. And so we've taken very much a disciplined approach, kind of rightsizing our operating model and Continuing to see the benefits of that in our second half as we have obviously started to achieve some of those results in the first half. So as a reminder, We worked really hard in the first half of improving our in store experience through discovery areas and specialist engagements.

That continues into the second half and will obviously continue into fiscal 2022 as well. All of the improvements that we made on our e commerce experience Through improved ship times and additional payment options, improved features and functionalities, Also continues into the second half and obviously into fiscal 2022 as well. Yes, I'm really impressed with How we've been able to leverage our core assortment, which was a big change for us and making sure that that was visible at the front of store And being able to engage with our customers at full price and we're definitely seeing the benefits of that in our second half When we think about kitchen, storage and closets and how that's performing in particular over 2019. So when I think about The work effort that we've undertaken in that first half, that foundational year and then looking at the customer engagement in the second half, We're really pleased with the response that we're getting from our customers. Engagement is high, average ticket is high, conversion is high.

You see the consistency in our results, both in our Custom Closet business and in our general merchandise business. And I think that bodes well for us as we look into more importantly into fiscal 2022. And then you got to take into consideration as well Our ability to really supercharge now our performance and results, when you think about the new branding campaign that we're going to launch, Welcome to the organization on 2,022, 2022. It's a fantastic opportunity to invite new customers And benefit from all the foundational work we've done this fiscal 2021 year, including our new loyalty program that we'll be launching, A new mobile app and of course fully leveraging our ability to capitalize on the acquisition with ClosetWorks. So that's at a very high level, while we continue to be extremely excited about what's happening for the back half and more importantly, into fiscal 2022.

Speaker 4

Appreciate all the color there. And maybe just a quick follow-up for Jeff. The gross margin profile within Alpha,

Speaker 1

I don't know if

Speaker 4

you can provide any sort of guidance for the Q4. And then more importantly, as we think about the longer term gross margin profile of the business, anything Has anything structurally changed in terms of the profitability outlook of that segment or of that product? Or should we sort of expect over time to see to revisit prior levels of gross margin rate?

Speaker 2

Yes, Steve. Good afternoon. Listen, as it relates to Alpha and looking forward, certainly they have The headwinds associated with commodity pricing, it's really the decline in their gross margins related directly to that in direct material side And also on a customer mix perspective. And I would expect that to continue into Q4. But looking outward, I would expect I don't think anything structurally has changed.

I think it will go back to more normalized margins in the future. There's not any concern on that front.

Speaker 4

Thank you. Best of luck.

Speaker 3

Our next question comes from the line of Kate McShane with Goldman Sachs, you may proceed with your question.

Speaker 5

Hi, thanks. Good afternoon. My first question was just about The competitive environment, I wondered if you were seeing anyone entering more of that general merchandise organizational category or exiting it In the last quarter, and just when it came to the closet business, I imagine that's extremely fragmented. Just what's the share opportunity there? And how do you plan to scale the Custom Closets acquisition?

Speaker 1

Yes. Hi, Kate. Look, thank you for the question. So the first part of it is, look, we are seeing other competitors enter into the organizational and I actually think it's indicative of the fact that there are so many people out there that are just overwhelmed with clutter And quite frankly, they just don't know how to start. Now thankfully, we have 10,000 SKUs dedicated to organization and storage, Including the 1600 SKUs I mentioned around sustainability, coupled with our specialists that are highly trained to help people navigate How best to utilize the items that they would go purchase.

So I think we're extremely well positioned to be able to cater to any new customers coming Through any channel for that matter, because we are that safe haven for them. When it comes to the Custom Closet Business, you're absolutely right. I mean, it is an extremely fragmented business. And as you know, the addressable market out there is about $6,000,000,000 And I can tell you from even the due diligence work that we did with ClosetWorks, a regional player in Chicago, they were doing about 13 times The volume in wood based custom closets than what we were doing at TCS in our 5 stores combined. So clearly, we are leaving money on the table and I think that bodes well for us as we think about how we deeper Our penetration in these regional markets now offering a much superior assortment coupled with Alpha's modular system, including with our custom wood Business.

And we've been working extremely hard during this foundational year to really ensure that, 1, we're comfortable selling premium spaces. We now have dedicated designers in our stores, almost 90 plus designers, of which about a third of them quite frankly are doing over $1,000,000 in to date and coupled with this great assortment that we now have, thanks to the ClosetWorks acquisition, I think we really are off to the races, so to speak, To go after that regional market that's highly fragmented and to offer our customers product a variety of product offerings Yes, with our quality that we're known for and our warranty that backs that those purchases as well.

Speaker 5

Thank you. And if I could just ask one, follow unrelated follow-up question. I know you mentioned, the loyalty Program that's launching later. Could you just give us a few more details about what that's going to entail? Maybe what some of the benefits Are going to be for those that sign up for the loyalty program and any thoughts around comp lift and what it could mean for customer retention?

Speaker 1

Yes. We're not at this stage providing a lot of details around it. Unfortunately, you have to wait, like Our 10,800,000 POP members that are out there today who are equally excited to learn more about this new program, it is a Tier based program as we mentioned earlier in our remarks. But look, the intent of it is really not only attract new customers with our that we can improve the active rate of our POP members, improve the frequency of their visits, including their spend. And I think the program that will be unveiled by the end of fiscal 2021 will satisfy our objectives on that.

So super excited about our ability to bring this to the forefront of our consumers. Amazingly with the program that we have today, There is quite a lot of stickiness around it, but I think we can do so much more as we start to layer on some additional benefits to that program.

Speaker 3

Thank you. Our last question comes from the line of Chris Hovars with JPMorgan, you may proceed with your question.

Speaker 6

Thanks. Good evening. So following up on Kate's question, As you think about the Custom Closets market,

Speaker 1

is this sort

Speaker 6

of like historically like a GDP plus maybe like a 4% plus kind of Growth business, does it tend to move with something like repair and remodel or home improvement spending? And As you think about the increase in rates, is there anything in sort of what you've seen in terms of your geographic footprint That would suggest that this is pretty correlated to the overall housing market. Any sense on what the Custom Closets business has done in different parts of the housing cycle?

Speaker 1

Yes. Hi, Chris. What I would tell you is like, look, we're not necessarily correlated it to any particular index. What I would tell will tell you is quite frankly, our results are predicated on the fact that we the awareness factor. There's a lot of individuals out They're just not aware that they are able to transform their spaces and fully benefit from those spaces.

And so if you look at our performance over the last 3 quarters where we've been able to Really hit anywhere from 20% growth over 2019. It is our ability to get in front of our customers and And getting comfortable what we're able to offer. And for them to really see the Custom Closets business as an investment in their home That will pay dividends because they not only get to utilize it, while they're in their space, in their home, but also get the return when And should they ever want to sell their homes. And we definitely hear that from the real estate community at large as well. And so we're not necessarily looking at External indicators depending on that, I think ultimately it's really for us to be able to educate customers Because they're not necessarily aware of these improvements and these benefits that we offer.

And not only in the space, but quite frankly, how it actually impacts They're life and how it can really be a transformational moment for them as they start to enjoy the spaces and the completion products that we offer And the additional kind of boost of motivation that they see or energy, All of those great well-being benefits that come across within organized space. So that's our objective. That's quite frankly we're launching our campaign as well in 2022, 2022 There's a huge opportunity to just help people understand the benefits of organization and how we can be that safe haven place for them.

Speaker 6

Got it. And clearly, during the pandemic, home organization really took up a lot of importance. We certainly went through every single closet in our home. So as you look beyond the 4th Quarter, we're on like the 2 year anniversary of the pandemic. Do you expect the business to start to grow on a year over year basis?

And as you think about not just the opportunity with the marketing and the hiring customer closets, but also just in terms of getting away from sort of this that difficult compare period, we're all sort of locked down?

Speaker 1

I mean, listen, when we think about fiscal 2022, which we obviously haven't provided any details on yet, we'll do that in our next quarterly call. What I can tell you is what I mentioned earlier, and that is 2021 was our foundational year for us And we're very poised to now fully annualize a lot of that work that happened throughout the year. And now with the acquisition of ClosetWorks, We're in a much better position to really double down on Custom Closets. If 2021 was Kind of the year of our foundational year, 2022 is the year of Custom Closets for us. As we look to fully capitalize on this acquisition And also get ready to bring about awareness around what we have to offer and feel comfortable about doing it.

So it's really much It's essentially us to execute on the foundational pillars that we put in place And to get out there in a much bigger way than we have in 2021.

Speaker 6

Got it. Thanks very much.

Speaker 3

Ladies and gentlemen, we have reached the end of today's question and answer session. I would like to turn this call back over to Satish for closing remarks.

Speaker 1

Great. Well, look, thank you again for joining us today and for continuing to follow The Container Store growth story. I look forward to when we discuss our Q4 results and review our full fiscal year. Until then, thank you and good night.

Speaker 3

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and enjoy the rest