Ahead of presenting at the ICR conference, The Container Store on Monday lowered its third-quarter guidance.
In a statement, the home decor retailer said it now expects third-quarter consolidated net sales to reach approximately $214 million versus prior guidance of $220 million to $225 million. Comp sales were previously expected to decline in the mid to low teens. The Texas-based company also expects third-quarter profitability to be negatively affected by the sales shortfall.
“The challenging business trends we experienced in the second quarter continued,” CEO and President Satish Malhotra said in a statement. “General merchandise categories underperformed compared to our expectations and were relatively consistent with our second quarter performance. While our Custom Spaces business showed sequential topline improvement compared to our second quarter performance, the magnitude of improvement fell short of our expectations.”
In the second quarter, net sales fell 19.4% year over year to $219.7 million, while store comps for the quarter fell 20%. The company also posted a $23.7 million loss for Q2, versus a $15.7 million net income the prior year. However, lower freight costs helped raise the quarter’s gross margin to nearly 57%. Despite those challenges, Malhotra said that Preston — the company’s premium, wood-based Custom Spaces line — performed well in Q3.
“We continue to believe there is significant opportunity for growth in the custom spaces business,” Malhotra said. “We remain focused on maximizing the potential of custom spaces as we manage the challenges in our general merchandise business. Our teams are dedicated to delivering exceptional customer experience across our channels and we are committed to positioning The Container Store for improved sales and profitability.”
The company plans to report its Q3 earnings in early February.
