Tcs Garage
Image: Container Store.

The retail industry has had its share of winners and losers lately, with strong companies cashing in on popular trends while weaker players miss the boat. The Container Store Group (NYSE:TCS) has been squarely in the latter category lately, with its share price having stumbled almost out of the starting gate following its late 2013 initial public offering to approach new all-time lows in the past couple of months. With the company set to release its fiscal-first-quarter results on July 7, investors want to see whether the organizational-goods retailer can find a way to turn itself around, and extremely low expectations for the traditionally slow quarter for the company could give Container Store a golden opportunity to build some positive momentum. Let's take an early look at how Container Store has fared lately and whether it can start getting itself back into shape when it makes its financial report next week.

Stats on Container Store Group

Analyst EPS Estimate

($0.13)

Year-Ago EPS

($0.07)

Revenue Estimate

$173.56 million

Change From Year-Ago Revenue

0.1%

Earnings Beats in Past 4 Quarters

0

Source: Yahoo! Finance.

Will Container Store finally surpass earnings expectations?
Investors have dramatically lowered the bar on their projections for Container Store earnings, more than doubling their loss projections for the first quarter and cutting their full-year forecasts for the current and next fiscal year by around 40% each. The stock has declined another 13% since late March, showing few signs of stabilizing from its long downturn.

Container Store's earnings report in April was the primary factor pulling down the share price. The retailer managed to produce revenue growth of 3.4% in its fiscal fourth quarter, but all of those gains came from store expansion, as same-store sales fell 0.8%. For the full fiscal year, comps were down 1.4%, showing the difficulty that Container Store has had in keeping its customers coming in the door. Falling gross margins continued to weigh on the company's performance, and Container Store issued negative guidance for the current fiscal year that was substantially below what investors had expected to see. The report spurred a 14% plunge in the share price.

A number of factors have combined to hurt Container Store's results. On one hand, the retailer has tried to avoid offering promotional discounts, even as competing retailers have been willing to cut prices in an effort to win market share. On the other hand, unexpected events like poor weather ate into results from its annual Elfa sale, which hurt traffic numbers at a key moment for the company. A strong dollar has also caused problems for Container Store, and put together, the organizational-products retailer doesn't seem to be benefiting from the consumer strength that more successful retailers have seen lately.

The big question Container Store has to answer is whether it can build excitement at a time of year during which it has traditionally had trouble being profitable. Just last week, Container Store announced that it would launch a new lifestyle blog dubbed "Container Stories," seeking to cash in on social media by giving anecdotes about how its customers and employees actually use the organizational products that they buy at the stores and offering sneak peeks at potential new product solutions. In addition, offering in-home consultants to create custom-designed solutions, along with making financing available and seeking to improve its online and mobile experience, should help Container Store keep up with advances in retail technology.

In the Container Store earnings report, it'll be essential for the organizational specialist to do at least somewhat better than the extremely poor consensus projections that most investors following the stock currently have. With shareholders already expecting a sizable loss, Container Store has a great opportunity to give them at least some hint of a light at the end of the tunnel. If the company can make it clear that its efforts to boost traffic and sales will pay off in the long run, then Container Store could at long last finally start to post a long-awaited turnaround.

Dan Caplinger 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.