What to Expect When The Container Store Reports

Heading into earnings, investors are right to wonder about how well The Container Store will fare. With shares trading near a 52-week low, it's possible the company's stock could be sent skyrocketing, but for the long run, is Michael's a better play for the Foolish investor?

Jul 6, 2014 at 10:00AM


Source: The Container Store

With The Container Store (NYSE:TCS) set to report revenue and earnings for the first quarter of its 2014 fiscal year on July 8, investors are probably trying to decide what to do with the retailer's shares. At current prices, The Container Store's shares can be picked up at just 10% above their 52-week low and a whopping 41% discount from their 52-week high; this could incentivize shareholders to get in on the cheap. Given the company's earnings history, though, might now be a better time to go with The Michaels Companies (NASDAQ:MIK) instead?

Investors have modest but positive expectations
Heading into earnings, analysts believe that The Container Store will post better results on both the top and bottom lines than it did in the first quarter of 2013. That outlook isn't necessarily something to be envious about, however. For the quarter, Mr. Market expects the retailer to report revenue of $174.2 million, up 9% from the $159.6 million management reported in last year's quarter. If this forecast comes to fruition, it will likely be because of the company's 5% jump in store count from 60 locations last year to 63 now, combined with a low-to-mid increase in comparable store sales.

  Forecasted Last Year's
Revenue $174.2 million $159.6 million
Earnings Per Share -$0.06 -$0.10

Source: Yahoo! Finance and The Container Store

From a profitability perspective, the picture isn't quite as impressive. For the quarter, analysts anticipate that The Container Store will report a loss per share of $0.06. Although this may seem bad, it represents an improvement over the $0.10 loss per share the business reported last year (assuming its current number of shares since the retailer was not publicly traded during the first quarter of 2013.) This narrowing of losses will likely be attributable to an increase in revenue, combined with lower costs in relation to sales.

Is The Container Store a slam dunk?
Over the past four years, The Container Store has had some pretty nice growth. Between 2010 and 2013, the company saw its revenue climb 32% from $568.8 million to $748.5 million. A good portion of this growth appears to have come from the company's aggregate comparable store sales growth of 25% during this timeframe, but investors must also attribute the retailer's performance to a 29% jump in store count from 49 locations to 63.

TCS Revenue (Annual) Chart

TCS Revenue (Annual) data by YCharts

As a result of reduced impairments, partially offset by increase in the company's cost of goods sold, management reported that The Container Store's net loss of $45.1 million turned into a gain of $8.2 million.


Source: The Container Store

During a similar four-year period, specialty retailer Michael's saw its top line rise a more modest 13% from $4 billion to $4.6 billion. Although Michael benefited from an aggregate comparable store sales increase of 10%, the big area where management fell short in was adding stores. Between 2010 and 2013, the retailer saw its store count rise just 6% from 1,182 locations to 1,257.

TCS Net Income (Annual) Chart

TCS Net Income (Annual) data by YCharts

From a profit standpoint, however, the company did great. This was due in part to rising revenue, but was also because of a reduction in interest expense and a falloff in its selling, general, and administrative expenses from 61.2% of sales to 60.1%. As a result, the company's net income grew 156% from $103 million to $264 million.

Foolish takeaway
Based on analyst estimates, the outlook for The Container Store is better than the results management posted last year. It's still not something that shareholders should become terribly excited about, however. This is especially true when you consider that the company's long-term results have been good on the top line but nothing too special on the bottom line after removing the impact of impairments earlier on. In all fairness, Michael's, with its slow growth, doesn't appear to be a top growth play, but the increase in profits that the company has shown indicates that it could make for a very interesting business to analyze in more detail before discarding it.

Are there more excited things out there than The Container Store?
Imagine the multi-billion dollar sales potential behind a product that can revolutionize the way the world shops and interacts with its favorite brands every day. Now picture one small, under-the radar company at the epicenter of this revolution that makes this all possible. And its stock price has nearly an unlimited runway ahead for early, in-the-know investors, unlike what is likely the case with The Container Store or Michael's. To be one of them and hop aboard this stock before it takes off, just click here.  

Daniel Jones has no position in any stocks mentioned. The Motley Fool recommends The Container Store Group. The Motley Fool owns shares of 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 www.fool.com/podcasts.

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 www.fool.com/podcasts, 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