Image source: The Container Store.
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Shares ofThe Container Store Group, Inc.(NYSE: TCS) were getting bottled up last year, falling 23%, according to data from S&P Global Market Intelligence. As the chart below shows, that drop was essentially due to the dramatic sell-off at the beginning of the year after the company posted a terrible report in January for the third quarter of its 2016 fiscal year.
The Container Store had its worst single-day drop following the report as shares tumbled 41% on Jan. 8 after the company posted a surprise loss and lowered its full-year guidance. The organization-themed retailer reported a per-share loss of $0.04, down from a per-share profit of $0.07 in the year-ago quarter. Analysts, meanwhile, had expected a profit of $0.05 a share.
Management said that fiscal 2015 was an investment year and that its key initiatives were performing well, but Wall Street didn't seem to buy it as the company also lowered its guidance. It cut its full-year revenue estimate by $15 million to $20 million, to $785 million to $800 million and said comparable sales would turn negative in the key holiday quarter.
Shares of The Container Store are actually up since that initial sell-off, but the verdict seems to be in for a stock that more than doubled in its 2013 IPO and traded over $40 in its early days as a public company. Now trading around $5 per share, The Container Store has failed to deliver meaningful profit growth, and considering the company has been around nearly 40 years, it seems unlikely to deliver it anytime soon, especially with the changing retail landscape.
While the dramatically reduced expectations give the stock a chance to recover some of its lost value, the company still has its back against the wall with competition from Ikea,Amazon.com, and others. I see little competitive advantage or a reason to expect its long-term success.
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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon.com. The Motley Fool owns shares of The Container Store Group. The Motley Fool has a disclosure policy.