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Why The Container Store Stock Rallied 25% in Early Trading Today

By Reuben Brewer – Nov 3, 2021 at 1:42PM

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The company reported record sales and earnings, and investors liked what they saw.

What happened

Shares of home goods retailer The Container Store (TCS -0.97%) took off at the open, gaining as much as 25% as trading got underway on Wednesday. At roughly 11 a.m. EDT, the stock was still holding on to a nearly 20% advance. The big news was the company's fiscal second-quarter 2021 earnings release, which hit the market after the close on Tuesday.

So what

The Container Store posted sales of $276 million in Q2, up 11% from the same period of 2020. The current tally was nearly 17% above the 2019 figure as well, showing consistent growth despite the impact of the coronavirus pandemic. Adjusted earnings of $0.54 per share, meanwhile, were up from $0.43 in 2020. The sales and earnings numbers both marked records for the company.

A person looking at a red line jaggedly rising.

Image source: Getty Images.

In addition to the record-setting quarterly results, The Container Store also managed to outdistance Wall Street's consensus estimates. On the sales side, the company only beat by a couple of percentage points. However, analysts had pegged earnings to come in at $0.32 per share. Beating earnings expectations by $0.22 per share is a pretty big deal, so it's no wonder investors were excited by the company's earnings update.

Now what

The Container Store is guiding for a $0.05-per-share drop in year-over-year earnings for its fiscal third quarter. So today's good news was nice, but the business isn't suddenly massively different than it was a day ago. That said, the quarterly update also noted that the company has 94 stores, up one from the year-ago period. And this, perhaps, is an even more important takeaway from today's earnings -- The Container Store has been able to grow its business, despite a terrible time for retailers in 2020, and it still has a fairly modest store count. There's likely to be a long runway for growth ahead.

Reuben Gregg Brewer 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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