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Container Store Cites ‘Retail Funk’ For Q1 Sluggish Sales

The Container Store Group, Inc. today announced financial results for the first quarter ended May 31. Kip Tindell, chairman and CEO, noted that a “retail funk” was the cause of the company’s 0.8% decline in comparable store sales, not the Polar Vortex, as previously assumed. 

“We thought our sluggish sales were all because of weather and calendar shifts that began last November and continued into the spring, but now we’ve come to realize it’s more than weather and calendar. Consistent with so many of our fellow retailers, we are experiencing a retail ‘funk,’” Tindell said.

Historically the first quarter is the lowest from both a sales and profitability standpoint for the company, Tindell continued, and the first quarter results often have very little impact on the company’s full year results. In the past, over 60% of the company’s profitability has been derived in the fourth quarter. However, first quarter 2014 experienced slight traffic declines, and the company reported that gross margin decreased 30 basis points compared to last year.

Despite sluggish sales, the company did report that net sales for the first quarter were $173.4 million, an increase of 8.6% over first quarter of fiscal 2013 due to the impact of new store sales and an extension of the annual elfa promotion in the fourth quarter of fiscal 2013, leading to an increase in merchandise delivered during the first quarter of the new year. SGA expenses increased by 9.3% primarily due to ongoing costs incurred when the company filed its IPO, as well as preparation for future growth and strategic initiatives.

“While consumers are buying homes and automobiles and even high ticket furniture, most segments of retail are, like us, seeing more challenging sales than we had hoped early in 2014, so we’re not alone in this,” Tindell said.

The company also reported that average ticket price gained 5.6%, and that it will continue its promotional services, such as its POP! loyalty program, to drive traffic.

We believe these initiatives, along with our everyday focus on solutions-based selling, will help us turn a slight traffic decline into slight traffic increases…We believe we’ll have a slight improvement in the second and third quarters.” Tindell said.