Is the Container Store still really on track for growth?

The CEO of The Container Store says the company is still on track to maximize profitability despite a disappointing second quarter that produced little sales and revenue growth.



The Texas-based chain reported that for the second quarter ended Aug. 29, revenue edged up 1.2% to $195.5 million. Net income fell by more than 60% to $2.67 million, with earnings of $0.06 per share, a penny less than the consensus forecast and down by more than half from last year's $0.14 per share showing.



Same-store sales managed to reverse last quarter's declines but only with a tiny 0.1% gain.



“Our sales performance in the second quarter exceeded our expectations with positive comparable store sales, a result of even more strategic customer engagement and service initiatives, coupled with the ‘snowballing effect’ of our major initiatives,” said Kip Tindell, chairman and CEO, Container Store. “The benefit from TCS Closets to our comparable store sales more than doubled from the first quarter to second quarter of fiscal 2015.”



The company says it is on track to achieve its targeted 12% square footage growth by opening a total of 10 stores for the 2015 fiscal year. It opened two new stores and relocated one store in the second quarter of fiscal 2015, to end the quarter with 73 stores.



Tindell added: “I am proud of the solid execution across our entire organization during the ongoing rollout of our major strategic initiatives, including TCS Closets and Contained Home. With initiatives of this magnitude and complexity, we believe it is vitally important to make the appropriate investments in order to ensure their future success. We remain on track for the full rollout of our initiatives by the end of fiscal 2015, and with each market’s launch we continue to improve our visual displays, training and selling processes, allowing us to further leverage our investments to date.”



In addition to its major strategic initiatives, the company says it continues to focus on shorter term, sales-growth opportunities. It just announced an agreement to partner with Synchrony Financial to implement a new customer financing program, with a planned launch in spring 2016.



The retailer continues to focus on enhancements to its mobile and multichannel shopping experience with improved search engine optimization, video content and community question and answer functionality, while also using its website to grow the brand with initiatives like the June 2015 launch of Container Stories, its lifestyle blog.



For fiscal 2015, the company continues to expect consolidated net sales to be $800 million to $815 million. However, it is narrowing its outlook for change in same store sales for fiscal 2015 to -1% to 0% from the previously provided -2% to 0%. Net income is still expected to be $0.30 to $0.38 per diluted share.