After Getting Slammed, Is The Container Store Group, Inc. a Bargain?

After The Container Store posted earnings that exceeded expectations and revenue that fell short of what analysts wanted to see, shares took a dive. Is now a great time to buy the business, or are Restoration Hardware and Lumber Liquidators better prospects?

May 2, 2014 at 5:30PM


Source: The Container Store

After The Container Store Group (NYSE:TCS) reported earnings for the fourth quarter of its 2013 fiscal year on April 28, shares plummeted 8% in after-hours trading. Now, with the company's stock trading at such a steep discount of 42% from its 52-week high, does the business look like a bargain? Or is it time to close the lid on this struggling enterprise and focus on Lumber Liquidators (NYSE:LL) or Restoration Hardware (NYSE:RH) instead?

The Container Store couldn't please investors!
For the quarter, The Container Store reported revenue of $216.8 million. In addition to falling shy of the $221.4 million Mr. Market anticipated, the company's top line barely missed the $217 million management reported in the same quarter last year. While this looks bad, investors need to keep in mind that the $217 million figure from last year took into consideration 14 weeks of operation, while this year's quarter was comprised of only 13 weeks. Excluding this extra week from last year, The Container Store's revenue actually ticked up a modest 6%.


Source: The Container Store

In its earnings release, the company attributed the rise in revenue to a combination of higher comparable-store sales and a higher store count. During the quarter, The Container Store saw comparable-store sales inch up 1.4%, while its store count increased to 63, up from the 58 locations the business operated in the same period a year earlier.

From an earnings perspective, the company did far better. For the quarter, management reported earnings per share of $0.38. In addition to beating its performance last year, the business' results exceeded the $0.27 analysts hoped to see. As well as benefiting from higher sales, The Container Store saw a reduction in interest expenses and reported a $2 million tax benefit. However, the company's results were negatively affected by its cost of goods sold and selling, general, and administrative expenses rising.

Over the past year, the retailer's cost of goods sold increased from 40.9% of sales to 41.8%, which was driven largely by an appreciation of the Swedish krona in relation to the U.S. dollar as well as the company's move to discount winter merchandise. Meanwhile its selling, general, and administrative expenses rose from 43.3% of sales to 44.5%, which management chalked up to expenses associated with going public and the effects of expense leveraging that stemmed from the absence of a 53rd week this year.

But how does The Container Store stack up to other specialty retailers?
Over the past four years, The Container Store has done pretty well for itself. Between 2010 and 2013, the business saw its revenue climb 32% from $568.8 million to $748.5 million. The main driver behind this increase in sales has been the retailer's rising store count, which jumped 29% over this period. The company's performance was also improved by an aggregate 25% increase in comparable-store sales over this time frame, but the year-over-year increase in this metric has been on the decline since at least 2010.

  2013 2012 2011 2010
Comparable-Store Sales Growth 2.9% 4.4% 7.6% 8.1%

Source: The Container Store

In contrast, rivals like Restoration Hardware and Lumber Liquidators have fared significantly better. Over the past four years, Restoration Hardware's revenue has increased by an impressive 101% from $772.8 million to almost $1.6 billion. This rise in sales was the result of a 142% aggregate jump in comparable-store sales that management attributed to the company's comparable brand revenue rising 166% between 2010 and 2013. This was, however, partially offset by the number of retail locations falling by 23% from 91 to 70.

(millions) 2013 2012 2011 2010 Aggregate Increase
The Container Store $748.5 $706.8 $633.6 $568.8 32%
Restoration Hardware $1,551.0 $1,193.0 $958.1 $772.8 101%
Lumber Liquidators $1,000.2 $813.3 $681.6 $620.3 61%

Source: The Container Store, Restoration Hardware, and Lumber Liquidators

Another strong performer over the past four years has been Lumber Liquidators. Between 2010 and 2013, the specialty retailer saw its revenue climb 61% from $620.3 million to $1 billion. In its most recent annual report, the company showed that its rise in revenue came from a 29% aggregate increase in comparable-store sales; but, unlike Restoration Hardware, its store count rose instead of fell. During the past four year, the business increased its number of locations in operation by 43% from 223 to 318.

Foolish takeaway
Based on the data provided, it looks like The Container Store has done pretty well for itself. But the fact that its growth rate is slowing down while it's still so small suggests either corporate mismanagement or market saturation. Moving forward, it will be interesting to see how the business performs; but for investors looking for strong and stable growth, companies like Restoration Hardware and Lumber Liquidators might make for better prospects.

Top dividend stocks for the next decade
Right now, smaller, less-established businesses like The Container Store are taking a big hit. Fortunately, when shares do drop, having hefty dividends tends to cushion the fall.  

The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Daniel Jones has no position in any stocks mentioned. The Motley Fool recommends Lumber Liquidators and The Container Store Group. The Motley Fool owns shares of Lumber Liquidators 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers