Just a day after jumping more than 10% on an analyst upgrade, shares of The Container Store Group (TCS -1.50%) rallied 16% in the first few minutes of trading on Feb. 3. The big news this time, fiscal third-quarter 2020 earnings, actually happened after the close on Feb. 2. So today's early move was the reaction.
The home goods retailer reported revenue of $275.5 million, up 20.5% year over year. Strong results in custom closets (up 19.5%) and online (sales nearly doubled) drove the top-line advance. Adjusted earnings came in at $0.42 per share versus just $0.05 in the same fiscal quarter of 2019.
The Container Store has been benefiting from the social distancing and work-from-home trends that have kept people stuck in their houses. And, apparently, while home, they are looking to reorganize their living space, which is basically The Container Store's speciality. The trend here is not terribly shocking, but the big news is that the company beat even its own projections -- in a "meaningful" way. Analysts had been expecting $0.33 per share. When a company announces that it trounced Wall Street's call and its own projections, it makes sense the investors would be in an upbeat mood the next morning.
The Container Store's shares have risen over 680% since April 1, 2020. That's a massive move and suggests there's a lot of positives priced into the stock. So far the retailer appears to be living up to expectations, which likely relate back to an expectation of a pandemic-driven increase in sales. However, if that turns out to be a temporary bump, the stock could fall back down to earth. Yes, fiscal third-quarter earnings were good reading, but there's a reason to be cautious here just the same. In fact, it's worth noting that an hour into the trading day the shares had pulled back to a roughly 7% gain.