3 Ways The Container Store Can Boost Its Growth

Think the Container Store Group (NYSE: TCS  ) will never become a household name? Think again. The Container Store still has the opportunity to gain greater consumer loyalty, raise traffic through its stores and website, and raise awareness by investing additional resources into three key areas that are sure to generate more sales. Investors interested in the future growth and success of The Container Store should be optimistic. 

Customize your storage
The Container Store has a real advantage over its peers with its Elfa product division. Based in Sweden, Elfa allows consumers to customize their own storage units with drawers, shelves, and compartments that will function in any space within a home or office such as the closets, kitchen, laundry room, or garage.

According to its S-1 filing, The Container Store has been the exclusive distributor of Elfa since 1999, and in fiscal year 2012, Elfa sales represented 13% of the company's total net sales.  Elfa is the crown jewel of The Container Store as no other retailer offers customers the option to personally design their own storage system needs. With the proper tools and strategy in place, The Container Store has the potential to make a huge profit from Elfa products as the public becomes more and more aware of this trendy option.

Increasing marketing efforts
If The Container Store is going to gain a larger consumer base, it needs to market itself more effectively. Because it has the biggest opportunity with Elfa products, The Container Store needs to highlight Elfa's rarity in the industry of organization and storage solutions and note Elfa's customizable features and designs. 

Secondly, The Container Store might want to place an advertisement in the paper that includes a coupon since people love to dig through advertisements to find coupons and the best deals. Almost every week, competitor Bed Bath & Beyond (NASDAQ: BBBY  ) offers a 20% off coupon in the paper to generate store traffic. Despite its generous offer, Bed Bath & Beyond still manages to bring in a much larger profit than The Container Store.

Overall, The Container Store needs to market its products through television commercials, newspaper advertisements with attached coupons, and social media outlets. If it can boost its marketing efforts, The Container Store will attract more customers to its stores and website, and thus strengthen its brand name.

Expanding its geographic footprint
After 35 years in operation, The Container Store has only 63 stores throughout the United States. In 2013, the company opened six new stores, and it plans to open seven stores in 2014. Its executive management team noted in the company's prospectus that they believe the company has the potential to grow to 300 stores, but offered no time frame as to how soon this could happen.  

Its rival Wal-Mart (NYSE: WMT  ) operates in over 26 countries and has over 11,000 stores, while Bed Bath & Beyond has over 1,470 stores under five different brands throughout the United States, Canada, and Mexico. If The Container Store can grow to a small fraction of the size of its competitors, it would be a huge boost for shareholders. Put simply, The Container Store has the opportunity to expand its chain to other locations throughout the United States, and possibly internationally at some point. Its expansion is just getting started.

Foolish takeaway
It is understandable to still remain skeptical about The Container Store's future. However, as one can see The Container Store has not taken full advantage of its Elfa division, marketing resources, and means of expansion. Foolish investors should do additional research into the opportunities that still await The Container Store, as any one of them could be game changers. Once The Container Store acts on these opportunities, investors can get excited, but until then, keep an eye on the company's stock and any improvements the company makes to its business.

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  • Report this Comment On January 14, 2014, at 1:18 PM, MonsterFluff wrote:

    Elfa is not exactly a crown jewel and TCS has written down $253 million worth of impairments on the goodwill since 2009. Write downs are necessary when the business's cash flow and DCF do not meet the expectations that were priced in when acquired. Elfa has not performed well. They are a wholly owned subsidiary

    Goodwill and trade name impairment expense was $15,533 in fiscal 2012 as compared to $47,037 in fiscal 2011. When we were acquired in 2007, a substantial portion of the purchase price was recorded as goodwill and other intangible assets at Elfa. All impairment charges incurred in fiscal 2012 and fiscal 2011 are related to the Elfa segment. Elfa has experienced a challenging economic climate in Europe, which resulted in Elfa not achieving its third party sales and profit forecasts in fiscal 2012 and fiscal 2011. The impairment charge in fiscal 2012 was related to the Elfa trade name and was calculated using a relief from royalty discounted cash flow analysis. Of the $47,037 impairment charge recorded in fiscal 2011, $31,453 was related to goodwill associated with the Elfa segment, calculated using an income approach, and represented a complete impairment of goodwill for the Elfa segment. The remaining $15,584 of the impairment charge in fiscal 2011 was related to the Elfa trade name.

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