Doctor, look at my Jan 8 post. When SP was in mid-forties, I commented on that same metric. Market Cap/# of stores. I don't profess a lot of retailing knowledge, but that struck me as pretty amusing. I am able to comp this retailer against other specialty retailers on a few price metrics, and by those measures it's pretty obvious we have an overpriced market valuation. I am not smart enought to pick a price target $10? $12 $24? Whatever? I think this will be slow erosion over time. Let's watch the lockups as they expire, because management and insiders hold most. Until then the float is pretty thin.
What I want to comment on is bashing the business itself. Wrong. I don't see this business as a flame-out, or mis-managed, or wrong industry, or simply a fad. No, this company is pretty solid. Housing will resume it's inexorable climb, and tidy X-Gen'ers will ring up purchases at TCS. Did the company come out of nowhere in last 3-5 years like some fly-by-night internet firm driven by red-hot-at-the-moment intellectual property? No. Far from it, they have been consistently growing for over thirty years. So, bashing the in-store salespeople, or the products seems off-target.
Rather, the worry here is simply an expectations overreach. The IPO put up a huge, rapid-expansion-leads-to-massive-profits promise, and I think the buyers got way ahead of the rest of us. The valuation ballooned. Priced like a go-go 40%/yr high growth high tech rocket stock. Leonard Green & Company elected the high PR campaign and got it. Insiders were well comped. I think TCS stores will be around for several decades. They will just leave a bunch of angry bag-holders who thought great store = great stock price on day one.
Just about to the 30% off mark. What to expect from here? Short term rally IMHO. Stores were crowded this weekend and register sales up as weather turned warmer, and everyone made it out to their messy garage for first time in months! Lenten resolutions coming? We'll probably see some fantastic warm, fuzzy PR in coming weeks about store openings. These guys do PR and do it well. So. Like an early spring crocus Pop! I'm back in for a few, but going to watch it like a hawk. Maybe only until quarterly report? Don't know about ever seeing north side of 40 again. I'd say if you love this store, put a few shelves up and be happy. Don't bet kid's tuition on it. I'm with Tao long term.
What do you do when you've not sold enough premium product during big 6 week sale period? Extend sale. Guess what? Soon, bargains on price per share, too. 30% off?
I give you credit, Tao. You were first on this board to point out the ridiculum. A valuation of $2+ Billion? Over 62 stores? Nice stores, but worth $35million apiece? Not sure I'd be willing to buy one at that price, especially since Elfa running outa gas. Burning cash, nothing in our pockets to go do the build out? Hmmmm. Lawyers, bankers, PR folks have spent their easily earned fees, Leonard Green & friends had a happy holiday, employees getting "happy talk" letters from "Love Kip, Mrs. Kip & Melissa"? Watchout below!
*8% growth but priced like a go-go 40% hi-tech growth stock. Price to Earnings Growth way outa whack.
*ELFA sales sliding
*Lowering expectations? Uncle Kip?
These guys have a gold-plated IR team that sold this IPO extremely well. Too well.
I agree BigIdea...not touching until $30 level broached.
Don't think that Tao is suggesting The Container Store will fail. Rather, that it is highly overpriced on the street today. I just ran a screen of specialty retailers with EV $2.2B. How many come up? About 50. Okay, what do PEG ratios* look like? Of the 50 retailers, almost everybody in the 0.5 - 2.0 range. Two stocks, Staples and Guess, weigh in at 3.75 and 3.93 respectively. The Container Store? Off the charts at 8.67. Higher than 87% of all stocks in any industry. Simply put, this retailer is overpriced currently. Doesn't mean it is not a swell place to shop. I like it very much, too. I think shareprice will hit low 30s before mid 50s. I don't think the company will fail. GLTA
*(PEG Ratio is used to measure how much investors are paying for a stock relative to how quickly the stock is expected to grow. Many analysts favor PEG Ratio over Price/Earnings (P/E) Ratio because PEG Ratio accounts for growth. A value less than 1.0 indicates that a stock is trading at a discount to its growth. A value greater than 1.0 indicates a premium. Averages vary sharply by industry, so searching relative to peers makes sense.)