Hit by poor holiday department results, the Container Store Group reported a mixed performance in the third quarter, with comparable store sales down.
The retailer posted consolidated net income of $9.3 million, or 19 cents per share, versus $28.4 million, or 59 cents per share in the year-prior period. Adjusted net income per share, excluding one-time charges, came in at seven cents versus 11 cents in the 2017 quarter.
Comparable store sales decreased 0.8% in the quarter year over year, with holiday departments’ sales down 15.8%, contributing to a 3% decline, and Custom Closets sales up 4.5%, contributing to a 1.8% gain.
Consolidated net sales were $221.6 million, down 0.6% from the year-earlier quarter. Container Store retail business sales were $204.9 million, up 0.5%. Elfa International AB third-party net sales slipped 12.6% to $16.7 million, primarily due to foreign currency translation. Income from operations was $11.4 million versus $13.9 million in the quarter a year previous.
“We had mixed performance in the third quarter,” said Melissa Reiff, Container Store CEO. “We were very pleased with our Custom Closets business which once again delivered strong results, generating 180 basis points of positive comparable store sales, and our other product categories outside of holiday also generated positive comparable store sales growth. However, our three holiday departments, which represent a disproportionate amount of our sales in this quarter, but only a small portion of our annual sales, underperformed resulting in our comparable store sales decline for the third quarter. We continue to test and learn in a disciplined manner across the business, especially in support of our number one strategic priority which is to own custom closets. In light of the success we continue to see around Custom Closets and the learnings from our Dallas flagship store redesign, we are planning to remodel two existing stores this summer with more focus and space allocated to Custom Closets and related solutions to help our customers accomplish their projects. We also have an exciting new product roadmap for our Custom Closets business that we look forward to unveiling next month. In addition, we are making strides with more targeted marketing campaigns that better leverage the growing insights we have generated with our seven million POP! Stars.”
Pop! is a Container Store loyalty program.