The Container Store Group Inc.'s first-quarter loss rose sharply
largely on higher spending tied to a series of initiatives aimed at
revamping sales as well as the impact of the stronger dollar.
Container Store reported a loss of $5.2 million, or 11 cents a
share, for the 13 weeks ended May 30 compared with a year-earlier
loss of $3.6 million, or seven cents a share. The company had
projected a loss of 12 to 14 cents a share, including a penny a
share related to higher freight costs due to West Coast port
delays.
Shares, down 8.5% this year, rallied about 7% to $18.75 in late
trading as results exceeded the company's targets. Container Store
historically makes about 20% of annual profit in its first
quarter.
The Coppell, Texas, company warned in February that it was
approaching 2015 as an investment year, shoring up spending to
offer such things as free shipping on orders above $75 and a
customer-financing program.
Container Store emerged as one of the success stories following
its initial public offering in 2013 as shares, priced at $18,
surged to $36.20. But the discount-driven retail climate along with
increased competition from big-box stores like Wal-Mart Stores Inc.
and IKEA and online retailers like Amazon.com and Wayfair Inc. have
weighed down on the chain's results.
Since fiscal 2009, quarterly sales at established stores have
fluctuated widely, from a decrease of 12% to an increase of
12.9%.
In the latest period, sales at established stores fell 0.9%.
Container Store had projected a loss of 3% to 4%, with about 1%, or
$1.5 million, tied to the West Coast port delays that resulted from
a protracted contract dispute. Adjusting for the West Coast port
delays, company officials said sales at established stores would
have been approximately flat for the quarter.
Overall, sales fell 2% to $169.8 million, missing the consensus
of $173.6 million, according to analysts surveyed by Thomson
Reuters. Gross margin improved to 58.5% from 58.1% a year
earlier.
In local currency, Elfa third-party sales fell 5.8% from the
year earlier, largely as sales fell in Norway and Russia. The Elfa
business unit, which makes the customizable shelving and drawer
systems, is based in Sweden and all purchases are made in Swedish
krona. The conversion of Elfa's net sales into U.S. dollars,
company officials said, lowered net sales by about $5.2
million.
TCS Closets, a high-end closet collection that company officials
are marketing as a complement to the Elfa system, continued to show
promise, company officials said, noting the average sales ticket
exceeded $10,000 since its launch. The line, launched in the
Dallas/Fort Worth area, is now available in 36 stores.
Container Store opened one store in the first quarter and plans
to add eight more by year's end and relocate another as part of a
target of surpassing 300 stores and increasing square footage by at
least 12% a year. Container Store currently operates 71 stores in
the U.S.
The company affirmed its financial projections for the year.
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