Why Container Store Group Inc Stock Soared Today

What happened

Shares of Container Store Group Inc (NYSE: TCS) were flying higher today after the retailer showed progress in its turnaround efforts and posted solid comparable sales growth in its first-quarter earnings report. As a result, the stock was up 36.1% as of 12:13 p.m. EDT.

Image source: Container Store.

So what

Overall revenue increased 6.9% in the period to $195.8 million, easily beating estimates of $190.6 million. That growth was driven by a 4.7% increase in comparable sales, which included an 190-basis-point benefit from the recognition of Custom Closets orders that were placed in the fourth quarter, but installed in the first quarter. Gross margin improved 200 basis points to 58.6%, and its adjusted loss per share narrowed from -$0.11 to -$0.08, which beat expectations of -$0.13 per share.

CEO Melissa Reiff summed up the performance, saying:

We are very pleased that our strong fiscal fourth quarter momentum carried through the first quarter of fiscal 2018 with improving trends in our Custom Closets business as well as ongoing positive comparable store sales contribution from our other product categories, as our sales revitalization and optimization initiatives continued to deliver positive results.

Now what

Responding to the momentum in the quarter, management raised its guidance for the full year, calling for revenue of $890 million to $900 million, representing growth of 4.4% at the midpoint, up from a previous range of $880 million to $890 million. On the bottom line, it now sees adjusted earnings per share of $0.38 to $0.48, up from its previous forecast of $0.35 to $0.45, and up from $0.28 a year ago.

The Container Store is clearly moving in the right direction, with the help of Custom Closets, as the stock is up 94% year to date. However, the easy gains may have already come for the former busted IPO as the stock’s valuation is now higher than those of many of its peers. Keep your eye on comparable sales growth, as that should be a key determinant in the stock’s future growth.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of The Container Store Group. The Motley Fool has a disclosure policy.

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