Dive Brief:
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The Container Store on Tuesday reported that consolidated Q4 net sales fell 20.7% year over year to $206 million, with the company’s retail business, TCS, net sales down 20.4% to $195.3 million. E-commerce was down 30.8% and store comps fell 21.8%.
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Consolidated gross margin expanded by 50 basis points to 59.4%, with TCS gross margin expanding 60 basis points to 58.1%, mostly thanks to lower freight costs, though that was partially offset by promotional activity and unfavorable product and services mix. Net loss narrowed 67.6% to $61.4 million.
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The New York Stock Exchange has notified the home goods retailer that it’s out of compliance with average closing price rules, with its common stock under $1.00 for more than 30 consecutive trading days. The company said it’s working to return to compliance, and has six months to accomplish that. The stock remains listed and will continue to trade in the meantime while the company considers a reverse stock split.
Dive Insight:
As The Container Store faces sales declines and a potential delisting, the home organization retailer is also initiating a formal review of strategic alternatives. The company did not provide many details on the move, but said it has formed a transaction committee to evaluate options and is suspending financial guidance in the meantime.
The Container Store’s troubles come mostly from its general merchandise assortment, and Chief Executive Officer Satish Malhotra said the company expects that to continue.
There’s “relative strength in our premium Custom Space offering,” however, and the company is working to enhance and strengthen that, he said in a statement.
For the quarter, sales of general merchandise categories fell 26.7%, and Custom Spaces+ fell 14.2%, per the company’s press release. Elfa third-party net sales fell 24.6% to $10.7 million, mostly due to declines in Nordic markets.
For the year, consolidated net sales fell 19% year over year to $847.8 million, with TCS net sales down 19.2% to $801.4 million. E-commerce fell 23.7% and store comps declined 19.7%. General merchandise comps fell 21.9%, while Custom Spaces+ fell 15.4%, the company said.
“We plan to push forward on all of our market share driving initiatives to ensure we are poised to capitalize on the significant opportunities for the business and the brand when the backdrop normalizes,” Malhotra said.
Despite its troubles, The Container Store is expanding, if only a little. Since April 1, 2023, the company expanded its fleet by five stores and plans four more new stores this fiscal year, citing “attractive growth opportunities in key markets.”
