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TCS Q2 Earnings Miss Estimates, New Partnership With Beyond
The Container Store Group, Inc. TCS posted second-quarter fiscal 2024 results, wherein the top line missed the Zacks Consensus Estimate and declined year over year. The company posted a wider-than-expected loss per share and declined year over year.
However, TCS witnessed sequential improvement in the second quarter of fiscal 2024, with Custom Spaces outperforming based on the customer demand and orders placed. Nonetheless, the company still reported year-over-year growth in undelivered orders to customers.
On Oct. 15, 2024, TCS and Beyond, Inc. announced a strategic partnership aimed at enhancing customer experience through the Bed Bath & Beyond and The Container Store brands. Despite a challenging environment, the company is optimistic about the long-term potential of a new partnership with Beyond.
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Container Store (The) Price, Consensus and EPS Surprise
Container Store (The) Price, Consensus and EPS Surprise
Container Store (The) price-consensus-eps-surprise-chart | Container Store (The) Quote
Analyzing TCS’ Quarterly Performance
Container Store reported an adjusted loss of $3.23 per share, wider than the Zacks Consensus Estimate loss of 5 cents per share. Moreover, the figure declined 30.4% from earnings of 11 cents per share in the year-ago quarter.
Net sales of $196.6 million decreased drastically by 10.5% from $219.7 million reported in the prior-year quarter, including a positive 20-basis-point impact of foreign exchange. The metric missed the Zacks Consensus Estimate of $198 million. The company’s comparable store sales (comps) fell 12.5%. Comps for the general merchandise categories declined 18.7%, contributing 1,200 basis points (bps) impact on comps. Meanwhile, comps for Custom Spaces declined 1.5%, impacting comps by 50 bps. Online sales also declined 13.7% on a year-over-year basis.
Segment-wise, net sales in the Container Store retail unit came in at $186.8 million, down 10.4% year over year.
Elfa International AB's third-party (“Elfa”) net sales declined by 12.9% to $9.8 million, with a more substantial 16.2% decrease when excluding the impact of foreign currency translation. This decline was attributable to a decrease in sales within the Nordic markets.
Adjusted EBITDA totaled $3.9 million compared with $17 million reported a year ago.
As of Sept. 28, 2024, the TCS store count was 103 compared with 98 in the prior-year quarter. In the second quarter of fiscal 2024, the company opened one new store and closed another. It envisions opening two more new stores and expects to close one store for the rest of the fiscal year.
TCS’ Margin & Costs Details
The company’s gross profit decreased 13.9% year over year to $109 million. The gross margin contracted 210 bps to 55.5% in the fiscal second quarter. The Container Store retail business’ gross margin declined 260 bps to 54.3%, driven by higher promotional activity and adverse product and service mix, partially offset by lower freight costs. The gross margin at Elfa’s business expanded by 250 bps due to higher prices to customers.
Selling, general, and administrative (“SG&A”) expenses fell 3.7% to $105.2 million. SG&A, as a percentage of net sales, increased 380 bps to 53.5% due to the deleveraging of fixed costs related to the lower sales and increased marketing spending in this reported quarter.
TCS’ Financial Snapshot
The company ended the quarter with cash equivalents of $66.1 million, long-term debt of $229.8 million, and shareholders’ equity of $132.8 million. In the first six months of fiscal 2024, Container Store Group provided $4.7 million in cash for operating activities. It did not repurchase shares during the fiscal second quarter.
Shares of this Zacks Rank #5 (Strong Sell) company have declined 52.8% in the past three months compared with the industry’s growth of 14%.
Zacks Investment Research
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Three Stocks Looking Good
Some better-ranked stocks from the Consumer Discretionary sector are iPower Inc. IPW, Funko, Inc. FNKO and Parfums, Inc. IPAR.
iPower, an online retailer and supplier of consumer home, pet, garden, outdoor and consumer electronics products, sports a Zacks Rank #1 (Strong Buy) at present. IPW has a trailing four-quarter earnings surprise of 99.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for iPower’s current financial-year sales indicates growth of 7.2% from the year-ago corresponding figure.
Funko, a pop culture consumer products company, currently sports a Zacks Rank #1. FNKO has a trailing four-quarter earnings surprise of 87.6%, on average.
The Zacks Consensus Estimate for Funko’s current financial-year sales indicates a decline of 1.7% from the year-ago reported figures.
Inter Parfums is engaged in manufacturing, distributing and marketing a wide range of fragrances and related products. The company currently carries a Zacks Rank #1. IPAR has a trailing four-quarter earnings surprise of 2.5%, on average.
The Zacks Consensus Estimate for Inter Parfums’ current financial year’s sales and EPS suggest growth of 10.5% and 8.8%, respectively, from the year-ago reported numbers.
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