Container Store reports record sales in Q4 earnings

Yahoo Finance Live anchors discuss fourth-quarter earnings for Container Store.

Video transcript

JULIE HYMAN: Container Store did see profit decline year over year, but that profit did beat estimates. Net sales fell almost 3%, but again, came in above estimates here. And those shares are also higher by 8%. And it's interesting here as I look through the conference call for Container Store, and it talked about that it is going to be doubling its US stores, but also talked about strength here. Now I think Container Store traditionally caters to a higher ticket customer, and indeed, they talked about, if I'm not mistaken on the call, the number of higher ticket items that they did-- that they did sell, that a lot of the tickets here coming at $2,000, if I'm not mistaken, when they were talking about this.

Let's see, our spend did a 33% increase in average base values, approximately 60% of event sales coming from average tickets that were over $2,000. And I think a lot of that has to do with closets, like people building out their entire closets, which is an expensive item that the Container Store does. And so it's just kind of amazing, Sozz, to see that part of the market hold up well. Again, perhaps it's because it's the higher end of the market.

BRIAN SOZZI: In a perfect world, Julie, my entire place is remodeled to fit the Container Store's various offerings. I mean, that place is great. You get lost in there for hours. Admittedly, I have to really go back and do a little more homework on this Container Store quarter, because it is an outlier to the surprise-- to the positive side here in retail. It's not to say they didn't get hit on margins in sales, because they did year over year, and of course, going back to 2019. But still, an interesting quarter.

And you may not be completely off the mark here, Julie, with some consumer resilience. High end consumers from what we've heard this week from the likes of even a Walmart, high income people are also looking to save a couple of bucks in this environment. And newsflash, they, of course, go to Walmart, too, to do that. That high income consumer appears to be holding up well for right now. It's that middle income and lower income consumer that are really being hit hard by inflation and either trading down to goods or cheaper alternatives like private label or just leaving the store with nothing.

BRAD SMITH: Look, I think when we look across the margins here with this business, too, there was a ton of compression that actually took place. And they cited higher direct material costs multiple times within this report, and that having one of the kind of outsized impacts on the margins that we were seeing.

They said that their gross margin even of 58.2%, compared to fiscal 2020, and we're looking kind of two-year stack here on a couple of the companies in the retail landscape, it's going to be interesting to see, especially within the home right now, where consumers are continuing to buy in and do some of those renovations. Perhaps they take on the same mindset as Sozzi and decide to, at least, start on their way of renovating their entire place with some Container Store items.

But I think as of right now, the mix of online sales, offset by freight and commodity costs that they were mentioning in this most recent fiscal quarter, that particularly is something that investors are going to continue to look at going forward from here to understand exactly where some of the supply chain concerns that we've heard time and time again from retail companies this quarter, where that starts to subside and where, for some of them, that may even persist further into future quarters coming up in this fiscal year as well.

JULIE HYMAN: One more important piece of context to mention when we talk about the Container Store.

BRAD SMITH: Yeah.

JULIE HYMAN: The company had been taken private by Leonard Green Partners in 2007, then IPO'ed again in 2013 at $18 a share. The stock right now is a little over $7. I mean, it's going to rise and, you know, seeing it's rising in pre-market, but still, a far cry from $18, if you go back in that six-year period or so since it came to the public markets again. So that is pretty-- it's not great performance, in other words. And the stock is also down about 45% over the past year. So just to put the move that we are seeing today in context, it has been a longtime underperformer.

BRAD SMITH: Absolutely. Taking a look at shares here on the screen, year to date for the Container Store, down 22%.