Is Container Store Finally Ready to Turn the Corner?

Among story stocks, Container Store Group (TCS -2.24%) has been a huge disappointment to investors, with the retailer of organizational goods having proven unable to deliver the growth that so many had expected. As a result, its share price has languished, and coming into the company's fiscal second-quarter report on Monday, most investors don't have particularly high hopes that Container Store will show them anything overly encouraging.

Nevertheless, with the stock having bounced on Thursday, at least some people think that Container Store could finally be cleaning up its act. Let's take an early look at the latest from Container Store and whether it can deliver the breakout quarter that so many investors have longed for during the retailer's short tenure as a publicly traded company.

Stats on Container Store Group

Source: Yahoo! Finance.

Container Store still has work to do
It might not seem like much solace to discover that investors have generally kept their estimates for Container Store earnings relatively stable, but compared to past quarters, that's actually somewhat of a positive move. A slight boost in fiscal 2016 earnings projections was partially offset by a decline in fiscal 2017 estimates, yet that still hasn't kept the stock from losing about a sixth of its value since late June.

The fiscal first quarter wasn't particularly kind to Container Store, although the one good thing you can say about the results was that they were slightly better than most of those following the stock had expected. The retailer lost $0.11 per share, and comparable sales were down 0.9%, but fears that the results could have been worse actually spurred some short-term excitement for the stock immediately after the report.

The challenge that Container Store has faced is trying to make good on a whole host of strategic ideas that look promising. For instance, offering premium services through the new TCS Closets and Contained Home initiatives has started out beautifully, bringing in customers who are willing to spend relatively large amounts of money at one fell swoop. Yet as CEO Kip Tindall said in July, "We're getting better and better at it, and we're still not very good. ... We're going to be a whole lot better at it in the future." If Container Store can maintain investors' confidence long enough for those new core concepts to pan out, then it could make a huge difference in the stock's future direction.

Container Store is also still making efforts to try to reach out to potential new customers with innovative ideas. The company said last month it would work with Kikkerland Design and the Rhode Island School of Design on a design challenge project aimed at developing new products in categories like the connected home, healthy food, and what Kikkerland called the celebrity effect of trends toward greater use of makeup, jewelry, and nail polish. The idea in part is to develop new storage and organizational products that will appeal to a broader audience, and with winners to be announced in early December, the contest could potentially spur interest in Container Store during the key holiday season.

When Container Store reports its earnings, be sure to look beyond the inevitable one-time items that seem to hold back the company's results on a regular basis and instead try to focus on how much progress it has made on some of its core strategies. In the big picture for Container Store, it's far less important whether the retailer posts improved comps this quarter than that it set itself up for the best possible success in the holiday season and for the remainder of the fiscal year. If it can finally nail down a workable path toward consistent and aggressive growth, then Container Store could convince shareholders that the stock has hit bottom and has the upside potential that they've waited so long to see emerge.