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July 9, 2014
11:33 EDTTCSContainer Store drops after quarter hurt by 'retail funk'
Shares of specialty storage and organizational product retailer The Container Store (TCS) are dropping after the company announced a first quarter loss per share that was steeper than expected. WHAT'S NEW: The Container Store reported a loss per share of (7c), compared to analysts' consensus forecast for a loss of (6c) per share. The company's Q1 revenue was $173.4M, which was slightly below a consensus projection of $174.21M. The Container Store cited a "retail funk" as the reason for why it experienced a same-store-sales decline of 0.8% in Q1. Still, the retailer said that the Q1 results will have very little impact on its FY14 earnings results. The Container Store foresees FY14 EPS to be 49c-54c, which came in below analysts' consensus forecast of 57c, and its revenue forecast of $820M-$830M also fell below analysts' consensus of about $831M. The retailer now sees its comparable store sales to be flat to slightly positive in Q2 and Q3 and to increase in the mid-single digit range in Q4. WHAT'S NOTABLE: During the company's earnings conference call, The Container Store said that it is "confident" that customer enthusiasm for its brand and employee morale are at all-time highs. The retailer said that the weather-driven extension of the elfa sale that it spoke to in Q4 also resulted in a shift of approximately $4M in sales at its TCS business into Q1, due to more merchandise deliveries being recorded into Q1. The company said that Q4 is seasonally its most important quarter, and in FY14 it expects to deliver nearly 70% of its FY14 EPS in Q4. ANALYST REACTION: Credit Suisse analyst Gary Balter lowered his price target on the Container Store to $32 from $45 after the company's Q1 report. Balter said that the retailer's weak comps and high valuation are not the ingredients for outperformance and he expects to stock to decline materially today as investors mull slower near-term growth. However, he thinks longer-term investors should use the weakness in the stock as a potential buying opportunity. Balter feels that traffic trends will improve into next year due to the management focusing on upping traffic along with the future roll-out of the POP! program. The firm maintains its Outperform rating on the stock. PRICE ACTION: During morning trading, shares of Container Store fell $2.83, or 10.5%, to $24.24.
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