The Container Store (TCS 4.15), which is a specialty retailer selling a variety of storage and organizational products, went public amid much acclaim on November 1, 2013. Its IPO was priced at $18.00 per share and the stock closed its first day of trading at $36.20. TCS shares ran as high as $47.07 roughly a week later, but it has been pretty much downhill ever since. To wit, TCS closed Tuesday at $4.15.
Today, however, TCS promises to regain a little of its IPO swagger, as its stock is trading 37% higher in pre-market action.
That spike has followed the company's fiscal fourth quarter earnings report, which was better than expected on both the sales and earnings front.
Consolidated net sales for the fourth quarter ended April 1, 2017, increased 5.3% to $221.0 million while consolidated net income per share surged 143% to $0.17, easily topping analysts' average expectation. Comparable sales fell 0.2%, with the Easter timing shift benefiting comparable sales results by approximately 0.6%.
The company's consolidated gross margin slipped 20 basis points to 57.6% as a strong improvement in Elfa gross margin was more than offset by a decline in gross margin at The Container Store retail business, which saw an increased mix of lower-margin product and services sales.
The Container Store's bottom line was helped greatly by a large drop in pre-opening costs versus the same period a year ago and good expense control, which was reflected in SG&A expenses declining to 45.2% of net sales from 47.8% last year.
The company announced a four-part "Optimization Plan" today designed to improve sales and profitability. That plan, among other things, will include the elimination of certain full-time positions. Taking into account the charges associated with that plan and the expected annualized pre-tax savings from it, The Container Store is estimating it will realize a net benefit of approximately $0.03 to $0.05 per share in fiscal 2017.
At this juncture, The Container Store expects fiscal 2017 net income to be between $0.25 and $0.35 per share and consolidated net sales to range from $830 million to $850 million. The low end of those respective guidance ranges is above analysts' average expectation. Comparable sales are projected to decrease in the low-single digit range.
The favorable guidance has provided a nice jolt for the stock, which is undoubtedly being helped along by some short-covering activity as it has been estimated that roughly 20% of the stock's float was sold short.
TCS obviously has a long way to go to recapture its IPO glory, yet the stock price is looking like a blast from the past today as the company's present results are providing a ray of hope that the specialty retailer's future is looking better than previously feared.