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Why Shares of The Container Store Group Jumped Today

By Jeremy Bowman - May 21, 2021 at 3:37PM

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Shares of the organization-themed retailer gained after the CEO said he was buying the stock.

What happened

Shares of The Container Store Group, Inc. (TCS 1.53%) were rallying today after the home-organization retailer reported in a filing this morning that CEO Satish Malhotra bought 20,500 shares at a price of $12.25. The news comes after the stock had sold off on its earnings report two days earlier.

As of 2:54 p.m. EDT, the stock was up 8.9%.

A lineup of employees at The Container Store

Image source: The Container Store.

So what

While there are many reasons for insider selling, such as using the proceeds for other purposes, insider buying almost always happens because the insider believes the stock will go up -- so it's not a surprise that investors are taking its as a bullish sign that Malhotra is investing roughly $250,000 in the company.

Container Store shares fell 11% on Wednesday after the company said profitability would decline in its current fiscal year, even as it beat estimates in its fourth-quarter earnings report. The retailer saw profits surge last year; it was one of several home-goods retailers to benefit from the pandemic, as earnings per share quadrupled last year.

Now what

The post-earnings sell-off in the stock was a bit puzzling, but shares have tripled since the beginning of 2020 so investors had already priced in much of the recovery. Also, the warning about margin compression shows that the company will face difficult comparisons this year, especially toward the back half. Analysts see earnings per share declining modestly this year.

Nonetheless, it's certainly a positive for the retail stock that the CEO thinks shares are worth buying here. Malhotra may think the sell-off earlier this week was overdone.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends The Container Store Group. The Motley Fool has a disclosure policy.

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