What: Shares of Container Store Group Inc. (NYSE:TCS) were stacking higher today following a strong earnings report. As of 11:48 a.m. ET, the stock was up 19%.
So what: With yesterday's report, Container Store reversed a trend of post-earnings slides. Expectations have fallen as the company's performance has disappointed, but investors cheered a positive same-store result this time around. Comparable sales ticked up 0.2% in the quarter, much better than management's guidance of a 3% to 5% decline. Adjusted earnings per share came in at $0.20, in line with analyst estimates.
CEO Kip Tindell touted the performance of the company's new TCS closets initiative, which was a "key driver of performance," adding 140 basis points to same-store sales.
Now what: Investors were also pleased with the company's guidance for the current year. Management projected $830 million-$845 million in revenue, below expectations of $859.4 million, and comparable-sales growth between -1.5% and +0.5%. However, cost-cutting measures will help boost earnings to $0.20-$0.30, above the $0.11 posted for fiscal 2016. Tindell said the company would heighten efforts to lower SG&A spending in the coming year.
The stock's jump today may be justified by the better-than-expected same-store sales results, but Container Store still has a lot of work to do to live up the original promise of the IPO two years ago. With flat same-store sales growth expected, tough times may still be ahead for the stock. The next time the company reports earnings, the bar won't be set this low.
Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends 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.