Dear Container Store: It’s not the weather or the retail funk. It’s you.
After a hard winter gave retailers a convenient excuse for their poor results, retailers have found a new version of “the dog ate my homework”: U.S. consumers who just aren’t in the mood.
Container Store (TCS) on Tuesday night lowered its fiscal 2015 sales and profit estimates and reported a 0.8% decline in comparable sales, and CEO Kip Tindell shifted the blame for his company’s problems from the snowstorms that slammed the U.S. last winter to un-cooperative shoppers.
“Now we’ve come to realize it’s more than just weather and calendar. Consistent with so many of our fellow retailers, we’re experiencing a retail funk,” Tindell told analysts Tuesday night on a call. (He also claimed that the first quarter contributes “less than 0% of our annual earnings,” a mathematical impossibility.)
His comments echo those this week of Walmart U.S. CEO Bill Simon, who said that the job market’s recovery is not helping its shoppers yet. (Wal-Mart (WMT) blamed the winter for poor holiday season sales, though its streak of quarterly sales declines began well before last winter.)
But in the case of Container Store, few seem to be buying his excuse: shares are now down almost 50% from a 52-week high, a big comedown for a company whose IPO shares priced at the top of their estimated range before doubling in their first day of trading in November in one of the hottest stock market debuts of 2013. (Many on Wall Street were also wearing rose-tinted glasses; only two of 10 analysts had a sell rating on the stock yesterday, according to Bloomberg data.)
Wells Fargo said in a note that Container Store’s weak results stood in “stark contrast” to strong results from other high-end home goods retailers like Williams-Sonoma (WSM) and Restoration Hardware (RH), which suggests marketing, assortment, or other company specific issues, according to Fly on the Wall.
And Tiburon Research Group Rob Wilson lambasted the tone of Container Store’s communications, tweeting: “This qualifies as one of the more ridiculous press releases I’ve seen in my career.”
It’s not exactly clear why it took so long for Tindell to reach his epiphany about the tough retail environment: despite admittedly impressive sales growth, Container Store has posted big net losses in each of its last five fiscal years.
This strange excerpt from a letter the folksy Tindell sent to prospective investors (it’s on page 85 of the prospectus) last fall should have been a wake-up call for more scrutiny:
“I would have to say that first and foremost we’re an employee-first, yummy company. ‘What does it mean to be yummy?’ might be your next question. Well, it’s the opposite of yucky.” He then went on to explain why It’s a Wonderful Life is his favorite movie.
Tindell also told investors in that prospectus that the 63-store chain, which has been around since 1978, could grow to 300 locations, a five-fold increase, without fleshing out where such a sudden surge in demand for his storage products would come from.
Looking ahead, Tindell evoked his old favorite excuse—the weather—as something that could finally be a source of solace next holiday season:
“Chances are very, very, very high that we won’t have the worst weather in our 36-year history again this fourth quarter. And it was darn unfortunate to have it right after we went public.”