Container Store encouraged by new store growth
Despite sluggish comparable store sales in the second quarter, Container Store chairman and CEO Kip Tindell is pleased with the company’s overall earnings performance, driven in part by increased average ticket growth as well as new store growth.
The company reported a 38.7% increase in adjusted net income of $5.1 million or $0.11 per adjusted diluted common share compared to $3.7 million or $0.08 per adjusted diluted common share for the second quarter of fiscal 2013. Net sales were $193.2 million, up 5.2% as compared to the second quarter of fiscal 2013. Comparable store sales for the second quarter were down 0.4%.
“We are very excited about our new store growth, with three more openings ahead of us this year. Our targeted annual 12% minimum square footage growth is among the fastest growth rates in the retail industry,” said Tindell. “We are encouraged by the prospects of our three major initiatives to help drive deeper engagement with our omnichannel customer and to increase traffic and average ticket — POP! TM, Contained Home TM and TCS Closets TM. TCS Closets is without a doubt the most significant merchandising initiative in our history, leveraging our core competency of high service sales of exclusive, solutions-based products and systems.”
The company is preparing for the pilot launch of TCS Closets — its new, exclusive collection of solid, custom-built storage options for shoes, jewelry and handbags. Container Store plans to launch TCS Closets in seven stores in the Dallas/Fort Worth market beginning in November and includes services in its stores from the retailer’s salespeople, and in the home from the Contained Home Organizers and Installation Service professionals. TCS Closets is planned to roll out to the remaining stores by the end of 2015. The company stated that it believes the average ticket on an average master TCS Closet will greatly exceed its day-to-day, $60 average ticket and be much more than the $2,000 average ticket its Contained Home service has experienced to date. Therefore, the company believes TCS Closets will contribute meaningfully to comparable store sales increases in the longer term.
The company also reported that its POP! Perfectly Organized Perks program has reached almost 1 million customer enrollments since launching in all stores in July. Approximately 50% of store sales are now coming from “POP! Stars.”
The company’s in-home, customized design and organization service — Contained Home — is currently available in Dallas, Houston, Austin, Manhattan and Los Angeles, with plans to rollout in Washington DC this month and in Denver and San Antonio in November. The service is expected to be available in all stores by the end of 2015. The company is encouraged by the service’s average ticket to date of $2,000.
The company has opened five new stores this fiscal year (including one store relocation), with three more planned to achieve its targeted 12% minimum square footage growth in fiscal 2014.
“As we move into the second half of the year, we are well positioned and well invested in the infrastructure to support our increasing omnichannel customer base. We continue to be encouraged as we move closer to our important fourth quarter where we’ll be comping against last year’s weather, which impacted traffic and sales more than at any time in our history,” Tindell added. “Historically, more than 60% of our net income has been derived in the fourth quarter and we expect it to derive approximately 70$ of our reported net income this year. We’ll continue to maximize every customer interaction while also focusing on the long-term health and growth opportunities of our business, as well as on our beloved employees and culture.”
Looking ahead, the company expects full fiscal 2014 consolidated net sales to be between $800 and $810 million based on announced store openings and an estimated increase in comparable store sales of flat to slightly positive. Net income is expected to be $0.52 to $0.57 per diluted common share based on estimated diluted common shares outstanding of 49 million.