Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What's happening: Shares of The Container Store Group (NYSE:TCS) plunged as much as 24.5% early Tuesday, and were trading down around 17.6% as of 11 a.m. after the company announced disappointing fiscal-fourth-quarter results.
Quarterly net sales rose 3.5% year over year to $224.3 million, which translated to a 10.3% increase in adjusted net income to $11.8 million, or $0.24 per diluted share. Analysts, on average, were looking for adjusted earnings of $0.31 per share on sales of $233.6 million.
Why it's happening: "Our fourth quarter did not conclude according to early in-the-quarter trends," explained Container Store CEO Kip Tindell. To blame, Tindell elaborated, was a combination of foreign currency headwinds, as well as severe winter storms in February "during the vitally important last 4 days of our 50-day Annual elfa Sale and during the last week of our 19-day Sale's extension."
Historically around 20% of The Container Store's elfa Sale revenue happens in those final four days, and roughly 60% of the Sale extension comes in the final week. But even then, Tindel admitted "Weather and foreign exchange headwinds aside, our sales performance fell short of our expectations in the fourth quarter and in fiscal 2014. We can and will do better."
To do so, The Container Store also outlined plans to use fiscal 2015 as "an investment year" for its three major strategic initiatives: TCS Closets, Contained Home, and its loyalty program, POP!. In addition, the company outlined several shorter-term initiatives centering around more frequent and effective communication with its "best customers," and the use of technology and training to increase focus on solutions-based selling. Finally, The Container Store is rolling out several new buyer-centric programs including free shipping on orders over $75, new delivery options, enhanced mobile features, and a customer financing program.
For now, however, and if today's drop is any indication, it's evident the market hates being told to hurry up and wait as these new initiatives will take time to yield results.