The Container Store saw same-store sales in the first quarter slip 0.8%, putting an end to a 16-quarter streak.
“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,’” said chairman and CEO Kip Tindell.
Net sales in the company’s retail business for the quarter increased 8.9% to $149.7 million, driven primarily by new store sales. Total net sales climbed 8.6% to $173.4 million compared to last year. Tepid retail environment notwithstanding, Tindall expressed confidence in the brand saying that both customer enthusiasm and employee morale are at all-time highs.
“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,” Tindall said. “Last quarter we announced we're accelerating our annual square footage growth from 10% to 12% and we’re excited we’re able to add an eighth new store to achieve that 12% minimum square footage growth even in this fiscal year. Our average first year, four wall adjusted EBITDA margin on new stores has averaged 23% and our invested capital has seen a payback of about 2.5 years.”
Looking ahead, Tindall predicted a slight improvement in the second and third quarters.
“But we are very much looking forward to the fourth quarter as we comp against the worst weather we had in our history last year and believe we will see marked improvement in our sales trends. Looking ahead, historically over 60% of our profitability has been derived in the fourth quarter, so from a profitability perspective fourth quarter is very important for us,” he said.