The Container Store Group Inc.’s stock soared 40% Wednesday, putting it on track for its biggest-ever one-day gain, after the retailer posted better-than-expected earnings for its fiscal first quarter and raised guidance.
The company TCS, +42.73% which specializes in products to help consumers store and organize their belongings and save space, said it narrowed its net loss to $6.8 million, or 14 cents a share, from $7.7 million, and 16 cents a share, in the year-earlier period. The adjusted per-share loss came to 8 cents, narrower than the 13 cents loss consensus of FactSet analysts. Sales rose 6.9% to $195.8 million, also ahead of the FactSet consensus of $191 million. Same-store sales rose 4.7% to blow past the consensus of 1.5%.
The company is now expecting full-year sales of $890 million to $900 million, as same-store sales rise by 1.5% to 2.5%. That is expected to yield EPS of 30 cents to 40 cents and adjusted EPS of 38 cents to 48 cents. The FactSet consensus is for sales of $885 million and adjusted EPS of 45 cents.
JPMorgan analysts said the quarter was the strongest in memorable history and showed that merchandising and marketing initiatives are working. Margins expanded by 200 basis points, well ahead of their forecast of 40 basis points, as the company benefited from a rise in discretionary spending.
There are “multiple strategic initiatives afoot to drive top-line and margin leverage,” they wrote in a note, including owning the custom closet category through targeted campaigns, product introductions and improved visual merchandising.
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On the company’s earnings call, Chief Executive Melissa Meyer Reiff said the custom closet business drove the same-store sales rise and was helped by deferred sales from the fourth quarter.
“Beginning in April and into May, we had a very strong closet sale, as we’ve moved from a blanket category promotion last year to a more deliberate and targeted approach this year, and customer response to our free Elfa installation promotion in May and June was also positively received,” she said, according to a FactSet transcript.
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The company is selling to customers at a range of price points and marketing via local TV and social media in certain markets. It is focusing on omnichannel growth by leveraging digital and data insights and taking other measures to improve pricing perception and maximize gross profit dollars.
JPMorgan raised its estimates for fiscal 2018 to 43 cents on same-store sales growth of 2%. Analysts rate the stock as neutral. Shares have gained 92% in 2018, while the S&P 500 SPX, -0.32% has gained 5.6%.