Should Your Portfolio Contain The Container Store Following Its IPO?
Since inception, The Container Store, (NYSE: TCS) has been a socially responsible retailer remaining largely owned by its founder. However, as anyone following today's market news knows, the company is now a publicly traded entity after an IPO of $200 million dollars worth of shares. With this new investment opportunity available to investors, the question of course then becomes if this is a profitable opportunity for Foolish investors?
How well do you know The Container Store?
The Container Store was founded by Kip (William) Tindell, Garrett Boone, and John Mullen in 1978. That year, the first store opened on July 1 in Dallas, Texas. The Container Store, which specializes in selling shelving systems, storage units from bags to boxes, and home organization products, has since grown to a unique organization with 61 locations in over 20 states, and revenues of $700 million as of its most recently concluded fiscal year. The company has claimed it owes all of its growth success and sales to its dedicated, skilled workforce, whose goals are to lead by the company's foundation principles and help The Container Store become the best retailer in America. Interestingly enough, The Container Store has made Fortune's "100 Best Companies to work for in America" for the past 14 years straight, which is definitely something for senior management team to be proud of.
Not staying contained
The Container Store started out opening stores in large metropolitan areas such as New York, California, Illinois, and Texas. Later, it started opening locations in the South, Midwest, and West, in Georgia, Arkansas, Arizona, Minnesota, Ohio, Colorado, and Indiana. It has opened on average 1.75 stores each of the past 35 years to be exact (see chart below for store growth in the past 3 years). The company plans on opening at least 300 stores within the United States before reaching market capacity and plans on expanding overseas at some point, but has no specific timeframe in mind as to when and how long this venture could take . By the end of fiscal 2013, the company expects to open six stores, with five of those already operating, and plans to open seven stores in fiscal 2014. Depending on economic factors, the rate of future store openings is also up in the air. The Container Store has high hopes for its expansion projects based on its unbeatable selection, service, and price for value.
Who's threatening who?
Among The Container Store's many competitors, Bed, Bath, & Beyond (NASDAQ: BBBY) and Williams-Sonoma (NYSE: WSM) are the two to watch out for. All three retail companies provide goods for the home, specifically for the bedroom, bathroom, and kitchen. Like The Container Store, Bed, Bath, & Beyond and Williams-Sonoma feature shelving and storage containers to make living in one's home more relaxing, less cluttered, and hassle-free. Based on the figures below, The Container Store has a steep road ahead if it plans on competing with Bed, Bath, & Beyond, which brought in a net profit of $1.04 billion for FY2013 and whose return on equity was 25.4%. Williams Sonoma also had a high return on equity for FY2013 at 19.6%.
The Container Store Group
Net Loss: -$115 Mil.
Revenue: $569 Mil.
Net Loss: -$109 Mil.
Revenue: $634 Mil.
Net Loss: -$90 Mil.
Revenue: $707 Mil.
Bed, Bath & Beyond
Net Income: $791 Mil.
Revenue: $8.8 Bil.
Net Income: $990 Mil.
Revenue: $9.5 Bil.
Net Income: $1.038 Bil.
Revenue: $10.9 Bil.
Net Income: $200 Mil.
Revenue: $3.50 Bil.
Net Income: $237 Mil.
Revenue: $3.72 Bil.
Net Income: $257 Mil.
Revenue: $4.04 Bil.
Don't be fooled by containers
The Container Store Group's IPO nearly doubled the first day going public, but don't be fooled by this meteoric rise. While The Container Store fills a niche in the market for selling organization solutions, packing supplies, and shelving systems for closets and other cluttered spaces as well as containers, Bed, Bath, & Beyond and Williams-Sonoma are doing remarkably better at filling that niche through their similar products, and are making a tidy profit while doing it. So, don't be fooled by The Container's Store initial performance and go jumping on board the bandwagon before doing your own research.
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The article Should Your Portfolio Contain The Container Store Following Its IPO? originally appeared on Fool.com.
Fool contributor Natalie O'Reilly has no position in any stocks mentioned. The Motley Fool recommends Bed Bath & Beyond and Williams-Sonoma. 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.
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