Why The Container Store Group Stock Shattered Today
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of The Container Store Group were getting dropped like a hot potato today, falling as much as 15% after the company issued another underwhelming earnings report last night.
So what: The storage-specialty retailer missed estimates once again in its second quarterly report as a public company, as CEO Kip Tindell blamed a wide-reaching retail "funk" for the company's struggles. Same-store sales dipped 0.8%, while overall revenue climbed 8.6%, to $173.4 million, short of expectations at $174.2 million. On the bottom line, the company missed estimates by $0.01, posting a loss per share of $0.07, even with its results a year ago.
Now what: While Tindell was careful to note that the first quarter is the company's weakest, and has little bearing on full-year results, The Container Store still lowered its guidance for the fiscal year, which seemed to be the biggest reason for the stock's tumble today. Management now sees full-year EPS of $0.49-$0.54, down from a previous range of $0.56-$0.61, and expects comparable-sales growth of 1.5%-2.5%, down from the 3%-4% it predicted earlier. For a high-flying recent IPO like The Container Store, reduced guidance is often a warning sign for investors, and will almost always send them fleeing. The company has ambitious expansion plans, hoping to grow to 300 locations from just more than 60 today, but its organic growth is only modest, and the concept is far from groundbreaking. I'd expect to see further multiple compression as the stock still carries a P/E above 40 based on this year's earnings, even after today's slide.
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The article Why The Container Store Group Stock Shattered Today originally appeared on Fool.com.Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends and owns shares of 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.
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