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Wednesday, July 9, 2014

The Container Store (TCS) : 8-month performance + earnings

Shares of the storage and organization products seller TCS  tumbled today, after the company reported late Tuesday fiscal first-quarter earnings and revenue that missed analyst expectations.

For the quarter ending May 31, CEO Kip Tindell said he was wrong in thinking recent “sluggish” sales trends were all about weather and a shortened-holiday shopping season. Instead, he said consumers in general are in a spending “funk.”

It’s not the company’s fault, because Tindell said he was confident consumers are as enthusiastic about Container Stores’s brand as they have ever been. Tindell said he was pleased that the company didn’t succumb to consumers’ insistence on deeper discounts.

And yet the stock is down 48% so far this year, and is headed for the lowest close since it went public on Nov. 1, 2013.

Wall Street analysts seem to believe the company is just fine. Credit Suisse analyst Gary Balter said long-term investors should use the stock’s weakness as a buying opportunity,  while J.P. Morgan’s Christopher Horvers said he still believes investors will continue to pay a premium, relative to its peers, for the shares.

Among high-growth retailers that have gone public recently, that Horvers pegged as Container Store’s peers, Fairway Group FWM  has plunged 64% this year, Potbelly (PBPB)  has lost 39% and Sprouts Farmers Market (SFM)  has dropped 17%.

Container Store is the second seller of discretionary items to blame stingy consumers for disappointing results. Bed Bath & Beyond BBBY  said on June 25 that one of the reasons it missed earnings estimates, and provided a disappointing outlook, was because consumers bumped up the use of coupons. Raymond James analyst Budd Bugatch followed by saying while it might seem “Pollyanna-ish,” investors should be “patient.” Bed Bath & Beyond’s stocks is down 27% this year.

Meanwhile, Wal-Mart Stores, which Wall Street considers a seller of what people always need, said its sluggish sales weren’t all the consumers’ fault. U.S. CEO Bill Simon said Tuesday the company needed to adjust to changes in the economy and spending habits. Investors seem to agree, as the stock is headed for a sixth-straight gain, and is down just 1.8% this year.

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