The Container Store Group Inc (TCS) Third Quarter 2014 Earnings Call Transcript

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Then just a little bit specific to our top three key initiatives that Kip mentioned. We continue with our rollout of Contained Home and TCS Closets to all stores. and we are happy with the effect they are having on customer excitement as well as our wonderful employees. I mean it is so wonderful to see the pleasure and the great pride our employees take in delivering wonderful service around these programs to our customers.

Then POP! (Perfectly Organized Perks), our customer frequency program. To date, we have over 1.5 million customer enrolments or what we call our ‘POP! Stars’ since launching in all stores last July. Early analysis shows that customers who were part of our pilot of this program in California in July of 2013 and have been in the program for over one year have increased their frequency on average by at least one visit since joining the program.

That is pretty wonderful as the top 30% of our customers give us 83% of our sales and they visit our store on average about four times a year. We know that many of our POP! Stars are in that top 30%. That means you are talking about many customers who visit four times a year increasing their visits by at least one more trip, and I think that is really something that we are all very excited about.

Our POP! program should become even more relevant in 2015 as we continue to surprise and delight our POP! Stars with the deployment of additional technology to support deeper, one-on-one customized connections, offers, and conversations with these loyal omni-channel customers. Then we have Contained Home which is our in-home customized design and organization service that is currently now available in 25 stores with roll out planned next week in our White Plains and Westbury, New York stores, in our Paramus, New Jersey store. Then next month, Contained Home will be offered in our five San Francisco Bay Area stores, and we plan to have the service in all stores by the end of 2015. We do remain encouraged by the services average ticket to date of over $2,000.

TCS Closets, our beautiful new exclusive collection of solid, custom, built-in closet solutions. You will remember we launched TCS Closets in our Dallas-Fort Worth market last November. Early results of the pilot show an average ticket of significantly much more than our Contained Home average ticket of over $2,000. Rollout of TCS Closets will continue in March, next launching in our four Washington DC area stores and our remaining five Texas stores. The collection will be available in all stores by the end of 2015.

Lastly, we have wonderful new stores. We have one more store to open this fiscal year in the Phoenix area in Glendale, Arizona at Arrowhead Towne Center on February 7. Glendale will be our seventh new store in fiscal 2014, plus the one relocation we did in Oak Brook, Illinois. In fiscal year 2015, we plan to open 10 new stores including one relocation, which will have us exceeding our goal of 12% square footage growth. We have secured all of these 2015 store sites, and we will announce the specific grand opening dates in our fourth quarter earnings release in April.

Thank you and I would now like to turn it over to Jodi Taylor, our CFO, for our financial highlights. Jodi?

Jodi Taylor, CFO, The Container Store
Thank you, Melissa. Good afternoon, everyone. Now, I would like to review our third quarter results and then review our outlook for the year. Net sales in the third quarter were $190.9 million, up 1.4% from the third quarter of fiscal 2013. Sales in The Container Store retail business were up 2.9% to $168.5 million. Elfa’s third-party net sales increased by 1.9% in Swedish Krona. However, due to the significant depreciation of the Swedish Krona against the U.S. dollar, which was down almost 12% in third quarter alone, elfa’s third party net sales declined 8.6% in U.S. dollars. The translation of elfa’s net sales from Swedish Krona into U.S. dollars negatively impacted elfa’s third party net sales by approximately $2.6 million in the third quarter of fiscal 2014.

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