What Will The Container Store's Third Quarter Earnings Contain?

Investors will soon find out how The Container Store Group's IPO helped its third quarter earnings.

Jan 7, 2014 at 9:28AM

The first full week of the new year will conclude with The Container Store Group (NYSE:TCS) releasing its third quarter earnings for fiscal 2013 after market closes on Jan. 7. Shareholders and Wall Street analysts alike will get to see the results for the company's first quarter as a publicly traded company. As Foolish investors will remember, the company had its IPO on Nov. 1, 2013, when the company raised $225 million and saw its share price double on the first day of trading.

Jan. 7 marks an important day as it will be the first chance the company's many new shareholders get an updated glimpse of what they own. With this in mind, let's look at how the company is likely to perform in the context of The Container Store's results in recent years, as well as look at analysts' estimates for the company's third quarter results.

Third quarter performance last year
While it is important to look at a company's most recent quarterly performance, it is more important to look at how well it performed in the same quarter a year ago. Thus, since The Container Store is about to report its third quarter earnings for fiscal 2013, we should investigate how well it did in the third quarter of fiscal 2012.

According to the company's IPO prospectus, The Container Store generated $175.4 million in net sales for the third quarter of fiscal 2012, a year-over-year boost of 11.8%. Most impressive was the 149.6% hike in net income from the same period in fiscal 2011.

Unfortunately, comparable-store-sales growth fell 2% from 6.3% in the third quarter of fiscal 2011 to 4.3% in the third quarter of fiscal 2012. The Container Store also opened three new stores in the third quarter of fiscal 2011, whereas it only opened one new store in the third quarter of fiscal 2012. Nonetheless, analysts expect the company to do relatively well in the third quarter of fiscal 2013 on account of new store openings over the past 12 months and the company's recent IPO.

Analyst estimates
On average, Wall Street analysts expect The Container Store to earn $0.08 per share with revenues of $188.9 million.  If these estimates prove accurate, revenues will have increased by 7.6% from the same period a year ago. It is likely that the company's IPO in early November generated more consumer traffic for the retailer, leading to higher sales volume than normal for the quarter. All in all, Foolish investors can likely expect decent growth from the company as well as a small quarterly profit as it continues its nation-wide expansion.


Investors looking for insight into The Container Store's results next week will also have a useful comparison to make, as the company's major competitor Bed Bath & Beyond (NASDAQ:BBBY) is reporting its earnings for the quarter ended November 2013 on Jan. 8, 2014 -- one day after The Container Store.

Company Name

Current Quarter Revenue Estimate

Same Quarter in Fiscal 2012

Potential

YoY Growth

EPS Estimate

The Container Store

$188.89 Million

$175.42 Million

7.7%

$0.08

Bed Bath & Beyond

$2.89 Billion

$2.70 Billion

7%

$1.15

Even though Bed Bath & Beyond is a much bigger company in terms of revenue and store count, analysts expect The Container Store to have year-over-year growth of 7.7%, whereas Bed Bath & Beyond is expected to report year-over-year growth of 7%, which is not a significant difference. This can lead Foolish investors to conclude that neither company has an advantage in acquiring consumers who want to organize their homes.  

Nonetheless, The Container Store is determined to catch up to Bed Bath & Beyond by offering higher-quality products and pricing its items much more competitively. In addition, The Container Store plans to open seven new stores throughout fiscal 2014 and continue this trend until the company reaches 300 stores. All in all, do not focus solely on Bed Bath & Beyond's size and earnings, as the company beat estimates in the same quarter a year ago by only one penny.

Foolish takeaway
The Container Store is likely to report a modest increase in net sales as well as net income for its third quarter of the current fiscal year. Foolish investors should keep their eye on The Container Store as it continues to market its products and gain loyal customers, but know that The Container Store is not likely to pick up momentum anytime soon. It will be particularly telling to compare the results of The Container Store with the quarterly results that Bed Bath & Beyond will report just days later.

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Fool contributor Natalie O'Reilly has no position in any stocks mentioned. The Motley Fool recommends Bed Bath & Beyond and The Container Store Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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