Container Store Group (TCS) Q2 Earnings & Sales Top Estimates
The Container Store Group, Inc. TCS posted second-quarter fiscal 2023 results, wherein both the top and bottom lines surpassed the Zacks Consensus Estimate. However, both metrics declined year over year.
Q2 in Detail
The company reported adjusted earnings of 1 penny per share in the second quarter, outpacing the Zacks Consensus Estimate of a loss of 4 cents. However, the figure declined 96.3% from 27 cents in the year-ago quarter.
Revenues declined 19.4% year over year to $219.7 million in the quarter, including a 10-basis-point adverse impact of foreign exchange headwinds. The metric beat the Zacks Consensus Estimate of $208 million. The company’s comparable store sales fell 20%, with general merchandise categories declining 20.4%. Online sales also declined 21.7% on a year-over-year basis.
Segment-wise, net sales in the Container Store retail unit came in at $208.5 million, down 19.8% year-over-year. Also, Elfa International AB's third-party (“Elfa”) net sales declined by 12.5% to $11.2 million.
Container Store (The) Price, Consensus and EPS Surprise
Container Store (The) price-consensus-eps-surprise-chart | Container Store (The) Quote
Margin & Costs
The gross profit decreased 17.9% year over year to $126.7 million. Meanwhile, the gross margin increased 100 basis points (“bps”) to 57.6% in the quarter under review. The Container Store retail business’ gross margin expanded 10 bps to 56.9%, driven by lower freight costs, partially offset by unfavorable product and services mix and high promotional activity. The gross margin at Elfa business increased by 500 bps, primarily due to price increases.
In the quarter, the company’s cost of sales came in at $93.1 million, down 21.2% year-over-year. Selling, general, and administrative (“SG&A”) expenses fell 7.9% to $109.3 million. SG&A as a percentage of net sales increased 620 bps to 49.7% due to the deleveraging of fixed costs related to the lower sales in this reported quarter.
Container Store Group reported a net loss of $23.7 million in second-quarter fiscal 2023 compared with a net income of $15.7 million in the year-ago quarter. In the quarter, it incurred a net interest expense of $5.2 million, higher than $3.8 million in the prior-year quarter.
Other Financials
This Zacks Rank #2 (Buy) company ended the quarter with cash equivalents of $10.2 million, long-term debt of $168.3 million and shareholders’ equity of $224.4 million. In the first six months of fiscal 2023, Container Store Group provided $20.7 million in cash for operating activities. It did not repurchase shares during the fiscal second quarter.
Outlook
For fiscal 2023, management targets to accomplish sales between $870 million and $885 million compared with the earlier view of $875-$890 million. It expects comparable store sales to decline in the high teens range, in line with its earlier projection. It now envisions an adjusted net loss of 13-24 cents per share versus the prior expectation of adjusted earnings of 5-15 cents. It expects to incur capital expenditures of $45-$50 million.
For the third quarter of fiscal 2023, the company expects to achieve sales between $220-$225 million, reflecting a comparable store sales decline in the mid to low teens range. For the quarter, it envisions an adjusted net loss of 4-8 cents per share.
3 Other Top-Ranked Picks
Some other top-ranked stocks in the broader Consumer Discretionary sector are GIII Apparel Group GIII, Guess? Inc. GES and lululemon athletica LULU.
GIII Apparel has a significant trailing four-quarter earnings surprise of 526.6%, on average. GIII currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GIII Apparel’s current financial-year sales and earnings suggests growth of 2.4% and 14.7%, respectively, from the year-ago quarter’s reported numbers.
Guess? currently sports a Zacks Rank #1. GES has a trailing four-quarter earnings surprise of 43.4%, on average. The Zacks Consensus Estimate for Guess?’ current financial-year sales and earnings suggests growth of 3.4% and 9.9%, respectively, from the year-ago quarter’s reported figures.
lululemon currently carries a Zacks Rank #2. LULU has a trailing four-quarter earnings surprise of 6.8%, on average. The Zacks Consensus Estimate for lululemon’s current financial-year sales and earnings suggests growth of 18.1% and 20.5%, respectively, from the prior-year quarter’s reported numbers.
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Container Store (The) (TCS) : Free Stock Analysis Report
