Container Store Plunges 13% As Sales Miss View, Sales Outlook Trimmed

(RTTNews) - Shares of Container Store Group, Inc. (TCS) plunged 13 percent in extended trade on Monday after the storage and organization products retailer reported net sales for the second quarter that missed analysts' expectations. The company also slashed net sales outlook for the full-year 2014.

The company reported a profit for the quarter compared to a loss last year, reflecting the absence of hefty distributions for preference shareholders. Adjusted earnings per share matched Street view.

"Our gross margin is strong, our SG&A expense management is strong, and we continued to achieve increased average ticket growth. We're pleased that this, combined with our new store growth, helped drive our earnings performance with a 38.7% increase in adjusted net income, despite sluggish comparable store sales," Chairman and CEO Kip Tindell said in a statement.

Coppell, Texas-based Container Store reported net income of $7.0 million or $0.14 per share for the second quarter, compared to a net loss of $17.74 million or $6.06 per share in the prior-year quarter, which included distributions accumulated to preferred shareholders of $21.9 million.

Excluding items, adjusted net income for the quarter was $5.12 million or $0.11 per share, compared to $3.69 million or $0.08 per share in the year-ago quarter.

On average, 11 analysts polled by Thomson Reuters expected the company to report earnings of $0.11 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter improved 5.2 percent to $193.25 million from $183.77 million in the same quarter last year, and missed nine Wall Street analysts' consensus estimate of $199.24 million.

Comparable store sales for the quarter edged down 0.4 percent.

Gross margin for the quarter improved 40 basis points to 58.8 percent, while selling, general and administrative expenses as a percentage of net sales increased 10 basis points.

The company ended the second quarter with 67 stores in 24 states and the District of Columbia. It opened five new stores in fiscal 2014 (including one store relocation), with three more planned to achieve its targeted 12 percent minimum square footage growth in fiscal 2014.

"As we move into the second half of the year, we are well positioned and well invested in the infrastructure to support our increasing omni-channel customer base. We continue to be encouraged as we move closer to our important fourth quarter where we'll be comping against last year's weather, which impacted traffic and sales more than at any time in our history," Tindell added.

The company noted that more than 60 percent of its net income has historically been derived in the fourth quarter and it expects to derive about 70 percent of its reported net income this year.

Looking ahead to fiscal 2014, the company now expects earnings in a range of $0.52 to $0.57 per share and adjusted earnings in the range of $0.41 to $0.46 per share, on projected net sales between $800 million and $810 million.

Previously, the company forecast earnings in the range of $0.49 to $0.54 per share and net sales between $820 million and $830 million. Street is currently looking for full-year 2014 earnings of $0.49 per share on annual net sales of $821.29 million.

TCS closed Monday's regular trading session at $21.89, down $0.88 or 3.86% on a volume of 1.54 million shares. The stock plunged a further $2.89 or 13.20% in after-hours trading.