Greetings, and welcome to The Container Store First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Caitlin Churchill. Thank you. You may begin. Good afternoon, everyone, and thanks for joining us today for The Container Store's First Quarter Fiscal Year 2023 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 are 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-K, filed with the SEC on May 26, 2023, 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. 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 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 containerstore.com. I will now turn the call over to Satish. Thank you, Caitlin, thank you all for joining our call today. I will begin today's discussion by reviewing highlights from our first quarter performance. Jeff will discuss the details of our first quarter financial results, followed by our outlook, after which we'll open up the call to questions. As we discussed on our year-end call in May, we entered fiscal 2023 with the expectation that the macro environment would remain challenging. While we cannot control the impact it has on our customers and their spending, we can control our focus, our focus remains steadfast on our strategic priorities of deepening our relationship with customers, expanding our reach, and strengthening our capabilities. We believe this relentless focus and disciplined cost management will enable us to advance our long-term goal of $2 billion in annual sales. While we implemented the cost-cutting action plan shared on our year-end call, our cost actions have not kept us from delivering an exceptional customer experience. In Q1, we delivered a record-high store NPS of 81. For the first quarter, we delivered top-line sales performance in line with our expectations, although fueled by increased promotional activity from our test and learn approach as we continue to focus on deepening our relationship with customers. These tests unlocked key learnings that will inform our go-forward promotional plans and better position us to deliver on our objective for this year. We believe when we provide customers with a reason to shop with us, they will. Therefore, we tested promotions in the first quarter with various durations and offer types. We saw better results when we created a sense of urgency for the customer. For example, we ran a six-day, buy one, get one, 50% off offer that performed better on a per-day basis than a 14-day offer. Another example of giving our customers a reason to shop is the ongoing effort we have put into infusing newness and innovation across our assortment. In light of our customers traveling this summer, we gave new life to our travel and on-the-go category with brands like CALPAK, Rains, and Thule. These products are both functional with a fresh aesthetic and include carry-on luggage, duffel bags, laptop backpacks, and belt bags, all of which are exceeding expectations. To note, we are pleased to see that new products are bringing new customers. In Q1, new customers to The Container Store accounted for 24% of new product sales. We will continue to focus on categories like travel with potential for growth. College was another area we identified with growth potential. Our annual college campaign kicked off in stores and online in Q1 with a reimagined and expanded product assortment, alongside our partnership with online dorm decor destination, Dormify. While still early in the back-to-school season, college sales are off to a strong start as a result of the enhancements we have made this year. We also launched our online dropship program with Dormify and several other vendor partners, which is exceeding expectations. In Q2, we expect to introduce sought-after brands that will enhance our core assortment, like socially conscious home goods company, The Citizenry. Through Artisan's crafty products, are part of the anticipated 1,000 new SKUs coming to The Container Store throughout fiscal 2023. We plan to embark on a bold evergreen campaign this fall to showcase our product innovation and newness, and drive awareness of how our curated, innovative, and solution-oriented products can help transform lives. While we are pleased with the results we are seeing in response to the newness we are delivering, incremental sales are more than offset by greater than expected declines in The Home Edit and Marie Kondo collections. To a lesser extent, declines in the closet storage category, driven by drop front shoebox and jewelry. We believe these greater than expected declines in our more traditional categories are symptomatic of the current macro environment. With respect to expanding our reach, while we have seen softness in our non-premium spaces, we continue to be pleased with our premium space results within custom spaces. Given the strengths we continue to see in the Preston line, we are looking forward to introducing more innovation in the assortment by offering superior European lighting compatible with smart home, as well as diamond weave mesh door inserts that pair beautifully with new Preston colors. We believe these innovative enhancements will elevate the Preston line even further. Regarding custom space services, we have 133 in-home design specialists who have successfully completed a multi-day in-person technical design training to enhance their skills and product knowledge. These design specialists are primarily focused on selling Avera and Preston premium spaces, which, as a reminder, represents a significant majority of the $6 billion custom space market. In Q1, premium spaces sold by in-home design specialists accounted for 80% of all Avera and Preston sales, compared to 71% in the same quarter last year, and 75% in the previous quarter. As we previously shared, our custom garage offering is an area of opportunity we identified to expand. We are rolling out our premium Preston Garage solutions to stores. We're excited to announce the all-new Garage+ by Elfa, which we plan to launch later this year. Informed by customer feedback on our current Elfa Classic Garage, Garage options, we developed new features and enhancements, including closed cabinet, lighting, full extension and soft close deep drawers, and a freestanding workbench. These enhancements will truly elevate our overall garage offering. New online tools continue to elevate and differentiate our custom space experience. We soft launched the My Custom Spaces portal to give customers a centralized spot to review their design, sign their purchase agreement, manage their payment, and track the status of the custom space life cycle from inspiration to installation. This portal will provide our customers with a smooth and intuitive experience. We recently launched an enhanced online scheduler for customers to easily make in-store, in-home, or virtual design appointments on our website when they're ready to get started on a space design. As it relates to customer satisfaction of our custom spaces category, our Net Promoter Score increased by nine points from Q4 of 2022 to 79. This gives us confidence that our continued focus on innovation and service is making an impact. Turning next to our new store plan. We remain on track to open six new small format stores in fiscal 2023, still see a pathway to significantly increase our store count over the coming years. This year's new stores will open in existing key markets where we see white space. This fall, we expect to open in San Mateo, California, Woodland Hills, California, and Princeton, New Jersey, followed by Gaithersburg, Maryland, this winter, and Miami, Florida, and Huntington, New York, in spring of 2024. Finally, as we continue to strengthen our capabilities, I'm proud of the publication of our second annual sustainability report in Q1, which outlines the progress we have continued to make against our environmental, social, and governance strategy throughout fiscal 2022. One highlight I want to note is being recognized by the United States Environmental Protection Agency for our company's use of wind green power. Our teams are also hard at work with a new partner that will help us measure our Scope 3 emissions, which include indirect greenhouse gas emissions of our supply chain. We are one of the first retailers to embark on this assessment, and we look forward to learning the ways in which we can further reduce our carbon footprint. To summarize, as we anticipated, it was a difficult start to a challenging year. We have revised our outlook to reflect current trends in the business that we are seeing in Q2. The backdrop notwithstanding, we remain focused, yet agile on the customer experience and executing against our strategic initiatives to position The Container Store for long-term profitable growth on our path to $2 billion in annual revenue. I want to thank all of our teams for their unrelenting hard work and optimism as we navigate this dynamic environment. I'm confident that the steps we are taking today position us well to capitalize on the recovery and demand when it occurs. I'll now hand it over to Jeff. Jeff? Thank you, Satish, and good afternoon, everyone. As Satish reviewed, our first quarter top-line performance was in line with our expectations. However, our bottom-line results were negatively impacted by our test and learn promotional activity as we continue to experiment with different events to engage with customers in the current environment, and to a lesser extent, a lower-than-expected effective tax rate. Offsetting some of this pressure, however, was an ongoing commitment to disciplined expense management, including the planned actions we discussed on our last call. For the first quarter, consolidated net sales decreased 21.1% year-over-year to $207.1 million. By segment, net sales for The Container Store retail business were $195.1 million, a 20.9% decrease compared to $246.8 million last year. The decrease is inclusive of a comparable store sales decrease of 19.9%, driven primarily by the 20.5% decline in our general merchandise categories, which negatively impacted comparable store sales by 1,360 basis points. Custom Spaces comparable store sales declined 18.6% compared to last year and negatively impacted comparable store sales by 630 basis points. The discontinuation of C Studio third-party sales year-over-year, partially offset by the sales from new stores, made up the remaining 100 basis points to the total 20.9% TCS net sales decline year-over-year. For the first quarter, fiscal 2023, our online channel decreased 15.8% year-over-year, and our website-generated sales, which includes curbside pickup, decreased 10.5% compared to last year. Website-generated sales represented a total of 24.1% of TCS net sales in Q1, compared to 21.3% in Q1 last year. Unearned revenue decreased to $17 million in Q1 this year versus $24.7 million last year, driven by the pullback in customer spending that we are experiencing. Elfa third-party net sales of $12 million decreased 24.4% compared to the first quarter of fiscal 2022. Excluding the impact of foreign currency translation, Elfa third-party net sales decreased 19.2% year-over-year, primarily due to a decline in sales in the Nordic markets. The decline in Elfa third-party sales reflects the continued challenging macroeconomic environment in the Nordic and other regions due to high inflation and increasing interest rates. From a profitability standpoint, our consolidated gross margin for Q1 decreased 180 basis points to 55.3%, compared to 57.1% last year. By segment, TCS gross margin decreased 230 basis points compared to last year, primarily due to more promotional discounting, driven by the test-and-learn activity previously discussed, higher mix of online sales and associated shipping costs, and an unfavorable shift in product and services mix, all of which were partially offset by decreased freight costs. Elfa gross margin decreased 420 basis points compared to last year, primarily due to higher direct material costs. Consolidated SG&A dollars decreased $10.5 million, or 8.6%, to $111.4 million, compared to $121.9 million in Q1 last year. As a percentage of net sales, SG&A increased 740 basis points year-over-year to 53.8%. The increase is primarily due to the deleverage of occupancy, compensation and benefits, and other fixed costs on lower sales, partially offset by decreased marketing costs. We recorded $2.5 million of severance expense in Q1 this year, associated with the previously announced reduction in force at our support center, store, and distribution center operations. Our net interest expense in the first quarter of fiscal 2023 increased to $5 million, compared to $3.2 million last year. The year-over-year increase is primarily due to a higher interest rate on our term loan. The effective tax rate for the quarter was 23.3%, compared to 28.8% in the first quarter last year. The decrease in the effective tax rate was primarily related to the impact of discrete items on a pre-tax loss in the first quarter of fiscal 2023, as compared to pre-tax income in the first quarter of fiscal 2022. Net loss for the quarter on a GAAP basis was $11.8 million, or $0.24 per share, as compared to a GAAP net income of $10.5 million, or $0.21 per diluted share in the first quarter last year. Adjusted net loss was $10.1 million, or $0.21 per share, as compared to last year's adjusted net income of $10.5 million, or $0.21 per diluted share. Our adjusted EBITDA decreased to $2.9 million in the first quarter this year, compared to $28.2 million in Q1 last year. Turning to our balance sheet, we ended the quarter with $12.2 million in cash, $185.4 million in total debt and total liquidity, including availability on our revolving credit facilities of $94.2 million. Our current leverage ratio is 1.9x. We ended the quarter with consolidated inventory down 10.6% compared to the first quarter last year. The decline is the result of lower freight costs and inventory year-over-year, as well as prudent actions to reduce inventory purchases, given the pullback in the customer spending we are experiencing and expect to continue to see, given the challenging macro environment. Capital expenditures were $8.9 million in the first quarter of fiscal 2023, versus $17.6 million in Q1 of fiscal 2022, which reflects the planned pullback of capital spending in fiscal 2023. We are continuing to invest primarily in our stores and technology. Free cash flow in the first quarter this year was a use of $11.8 million, versus a use of $14.4 million in Q1 last year. For our outlook. For the second quarter of fiscal 2023, we expect consolidated net sales to be approximately $205 million-$215 million, driven primarily by a comparable store sales decline in the low to mid 20% range. The expected decline in comparable store sales is reflective of a slower than expected start to the second quarter in terms of customer traffic and average ticket. The expected consolidated revenue declines are also inclusive of a 180 basis points impact for the strategic discontinuation of our C Studio third-party sales and continued Elfa third-party sales headwinds. New store sales are expected to partially offset the impact of these headwinds. We expect adjusted net loss per share in the second quarter to be in the range of $0.10-$0.00. The implied year-over-year operating margin decline for the second quarter is expected to be more than entirely driven by SG&A, due to fixed cost deleverage on lower sales. From a gross margin perspective, favorable product mix and freight are expected to be moderate tailwinds to gross margin in the second quarter. Interest expense for the second quarter is expected to be approximately $5.1 million, driven by higher interest rates. We expect income tax expense in the range of $1 million- $500,000, primarily driven by discrete tax items in the second quarter. As a result of these discrete items, our effective tax rate is expected to be in the range of -20%- +75%. With respect to fiscal 2023, given our first quarter performance and expectation for the second quarter, we now expect consolidated net sales in the range of $875 million-$890 million, driven primarily by comparable store sales declines in the high teen% range. We continue to expect less significant declines in the comparable store sales in the second half of the fiscal year, driven by our planned cadence of new product introductions, planned campaign cadence, and the easing comp comparisons from the prior year. This outlook also assumes a 70 basis point benefit related to the impact of new stores, inclusive of a partial offset due to the strategic discontinuation of our C Studio third-party sales and continued Elfa third-party sales headwinds. From a gross margin perspective, favorable product mix and freight are expected to be moderate tailwinds to gross margin in fiscal 2023, partially offset by increased promotional activity. Our outlook therefore assumes a gross profit range of $515 million-$525 million. As a result of the payroll-related workforce reduction actions we took in the first quarter, along with a proactive effort to reduce marketing and other costs, our goal is to keep our SG&A expense as a percent of sales at approximately 50% for the full fiscal year. These actions are expected to reduce overall SG&A expense by approximately $10 million per quarter compared to last year, with the fourth quarter total dollar savings being slightly higher. For the full fiscal year, total SG&A reductions are expected to be almost $45 million when compared to last year. Our outlook assumes operating margins of approximately 2.5%-3.1% or $22 million-$28 million in operating profit. Interest expense for fiscal 2023 is expected to be approximately $20 million, driven by higher interest rates. Our effective tax rate is expected to be in the range of 300%-115%, due to an approximate $5.6 million of discrete income tax expense expected to be recorded in the third quarter of fiscal 2023. This discrete tax expense is related to the expiration of certain stock options granted in connection with our initial public offering in 2013. We expect net loss per share in fiscal 2023 to be in the range of $0.10- $0.00. After adjusting for the estimated $2.5 million of severance expense previously mentioned, as well as the aforementioned $5.6 million discrete tax income expense, we expect adjusted net income per diluted share to be in the range of $0.05-$0.15. Capital expenditures are still expected to be approximately $45 million-$50 million, and with this outlook, we still aim to be free cash flow positive in fiscal 2023. Almost half of our planned capital expenditures are related to new stores planned to be open in fiscal 2023 or in fiscal 2024. We are planning to open six new stores, primarily in the second half of fiscal 2023, and three stores in fiscal 2024. The remaining capital is related to investment in e-commerce, technology infrastructure, and software projects, and to a lesser extent, maintenance. This concludes our prepared remarks. I'll now turn it over to the operator to begin the Q&A session. Thank you. We will now be conducting a question- and- answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from Steven Forbes with Guggenheim Securities. Please proceed. Good evening, Satish and Jeff. Hope all is well. I wanted to start with the learnings around promotional activity that you mentioned during the quarter. 'Cause just curious if you may expand on, on what, what you did in terms of breadth and depth during the quarter, and whether you were satisfied or unsatisfied with the customer response? Just trying to get a better understanding of what you're sort of planning for the back half year, 'cause it, it doesn't seem like you're planning to, to experience as, as severe pressure on the gross margin profile of the business in the back half. Yeah. Hey, Steven, this is Satish. Thanks for the question. Look, as I said in our prepared remarks, you know, while we delivered sales in Q1 in line with our expectations, there were definitely some key takeaways for the quarter that's worth pointing out. One is around promotions. We found that the right promotion can drive profitable results. As we stated, we experimented with different promotional levers, both in duration and percentage off, to learn essentially what it would take to engage our customers, given the current economic environment of higher interest rates, while still driving profitable results. We had much better sales and more profitable success with shorter campaigns that drove a sense of urgency than longer campaigns. BOGOs did much better than a straight percentage off. We learned a great deal that will inform our go-forward promotional plans in terms of what it will take to engage our customers. It's also worth noting that the promotions actually served to help offset any resistance to current pricing and to bring storage and organization top of mind for customers, especially given everything that they're dealing with. I think also worthy to point out is, outside of promotions, that newness is really working for us. As I mentioned before, we're seeing positive results from the introduction of home fragrances and plant-based cleaners, which actually grew 10% collectively this quarter over the prior quarter. Sales from our refreshed travel assortment and reimagined back-to-college assortment and our new dropship program are also all doing very well and bringing in new customers. That was really important learning for us as we look to win with our customers, is what's the right cadence and mix for promotions? What, what are they really engaging with as it relates to newness? I think another big learning that we found in Q1, worthy of pointing out as well, is the additional challenges that we're facing with some of our traditional storage and organization categories. We're definitely seeing more than expected declines with The Home Edit, the Marie Kondo, and to a lesser extent, declines in the closet storage category. I think, again, that's really a function of the current macro environment. Just to conclude with what we kinda learned during Q1, really kind of pleased to see the performance of our premium custom spaces, in particular, Avera and Preston, both doing quite well with operating sales positive over Q1 of last year, which is why we're so excited about the innovation coming out of our Preston line with our new European lighting, compatible with smart homes and our new mesh door inserts. To tee it off, look, you know, really pleased with our ability, even in this environment, to deliver exceptional customer service. When customers do come in, we're able to work hard with them to convert them and also deliver really strong, NPS scores, 81 for stores, 79 for custom spaces. All of that kind of, I think, bodes well in terms of when customers come in, we are able to deliver on our best foot forward. Thank you, Satish. Just a follow-up on that, 'cause I'm just trying to better contextualize and frame the second quarter guidance with the full year or second half guidance. Cause it, it, it almost seems like you're sort of calling for or guiding for an inflection. I know compares get easier, but then you got, you got these sort of learnings right around promotional activity. You have newness, right? You have the holiday time period. So is that the key message, right around sort of the second half outlook, is that the, the inflection is becoming more visible, whether it's both [crosstalk]. Yeah Macro-related but also strategic priority driven? Yes. I, I would believe you categorize it correct, and I'll let Jeff add a little bit more. What I would say is, as we think of, particularly on Q2, you know, we definitely saw some softness in, in July, and primarily probably due to peak travel season, so we thought it was prudent to kind of revise our guidance relative to that. Having said that, we've got a ton of new exciting products coming to fruition, like we talked about with The Citizenry. We also have Be Home that's launching. These are ethically sourced home goods from around the world, that we think will really bode well with our customers. Plus, we have something really special planned for our customers to celebrate the 75th anniversary of Elfa. That, that's one of the reasons we were a bit prudent with respect to our Q2 guide. As it relates to the back half, as you've categorized it quite well, you know, we do have some easier compares, as we think about what happened last year, and then with all the newness and excitement that we have planned. Thank you both. Great. Thank you. Thank you. Our next question is from Ryan Myers with Lake Street Capital. Please proceed. Yeah. Hi, guys. Thanks for taking my question. First one for me, just kind of curious if you could comment on and highlight how some of the newer stores are performing. Yeah. Hi, Ryan. How are you? I am doing well, thank you. Good. Look, relative to our new stores, what I would say is, you know, we continue to attract new customers. The three new stores that we've opened, we see over 60% of customers shopping us are new. We also see a higher degree of penetration as it relates to our custom spaces, almost at 37%. Our NPS score, across all of them, actually are in the, you know, high- or mid-80s, rather, around 83, 84. We are seeing great consumer response to the new doors that we're opening. Now, having said that, you know, they are still dealing or contending with the current macro and climate. They're not immune to that, but we are generally pleased with what we are seeing across those three stores. As you know, we've got six new stores still planned, coming up for fiscal 2023, and some really great locations. Half of them are actually built to suit locations, so that really means it helps us on the CapEx front, and we are still very much committed to new store growth expansion and believe we still have a, a tremendous amount of white space given the current economic climate. However, you know, as we've stated many times before, you know, we will be smart around the doors that we open, in particularly ensuring that we keep to our goal of generating positive free cash flow, and we may moderate plans accordingly based on that. Great. That sounds good. Just one question for me. Thank you. Okay, great. Thank you. Thank you. Our next question is from Kate McShane with Goldman Sachs. Please proceed. Hi. Thanks for taking our question. We wondered, Satish, if you had a view on how much of what you're seeing is macro versus a prioritization of dollars by the consumer as they focus potentially on travel and services. It also seems like premium is maybe holding up better than non-premium, both in the custom spaces and in the store. We wondered if you could talk to that a little bit more as well. Yeah. Hi, Kate. Thank you. It's a great question. Definitely we're seeing, as I stated, some resistance as it relates to our ability to win on premium spaces. We are able to contend with the customer and excite them. They are committed to those purchases. We do well there. Non-premium spaces are seeing a softness, in particular with Elfa. Although I would say the last few days, we've actually seen elements of it starting to improve. You know, still too early to tell. I think largely as we look at our consumers, you know, they are very much distracted, either with travel that's going on right now or with interest rates and are obviously contending with a level of uncertainty right now. The things, those start to normalize, we do expect a return back, and that's what we are getting geared up for and excited about, given all the newness that we are introducing for the back half. Okay. Thank you. Then our follow-up question was just on inventory. I know Jeff noted what it was down in the quarter in the 10% range, but we wondered if you could parse out what it was down on a unit basis or a by store basis, and where you're guiding where inventory should be by the end of the year. Yeah, Kate, this is Jeff. Thanks for the question on inventory. Yes, inventory is down, as I stated in the call, a little over 10%. That's really been driven by freight. From a unit basis perspective, it's relatively flat. You know, as we continue to move through the year, we expect, you know, freight costs to continue to average down. Right now, our current inventory projections are to be down just on a year-over-year basis as a result of the freight cost savings that we're seeing. Okay, thank you. If I could sneak just one more question in, Satish, I don't think you mentioned too much about the loyalty program, in your prepared comments, and we just wondered if maybe you leaned into that this quarter at all with some of the data or anything else to help you with, your sales in line with expectations for Q1? Sure. Hi, Kate. Yes, we did not mention anything in our prepared remarks, but I will tell you that our loyalty program still continues to do well relative to how we have talked about it historically. We see our loyalty baskets still be incredibly higher than our non-loyalty baskets. They're up almost 50%, and we see our experts still spending 4x more than our entry-level enthusiasts. So again, as we've stated on prior calls, you know, it's a great level of data that we're able to get out of our loyalty program. We are then able to mine that data and to really understand how best to bring customers along in the journey to get them from one category, for example, kitchen, into another category, which could be storage, and, and then the third category, which could be into custom spaces. All of that great work is, is commencing here at The Container Store, and still very proud of how our loyalty program is performing. Thank you. Thank you. As there are no further questions, this concludes today's teleconference. Thank you for your participation. You may now disconnect.