July 23, 2024
Container Store plans layoffs, sales expected to decline further despite Bed Bath & Beyond closures

Container Store plans layoffs, sales expected to decline further despite Bed Bath & Beyond closures

Even with rival Bed Bath and Beyond Inc. closing its doors, Container Store Group Inc. expects a sales decline to worsen, sending shares toward their lowest prices since 2020 on Tuesday afternoon.

In its fiscal fourth-quarter earnings report, Container Store TCS, -6.64% reported Tuesday that annual revenue declined 4.3% to $1.05 billion, and executives surprisingly predicted a much larger decline in the new fiscal year, guiding for annual sales of $885 million to $900 million. Analysts on average had expected slight sales growth in the new fiscal year, forecasting $1.07 billion on average, according to FactSet.

Shares plunged more than 16% in after-hours trading following the release of the results. Container Store’s stock closed at its lowest price since May 2020 Tuesday, and has declined 37.1% so far in 2023, as the S&P 500 index SPX, +1.19% has gained 7.7%.

In a statement, Chief Executive Satish Malhotra referred to the annual guidance as “cautious,” and influenced by a rough start to the first quarter, while suggesting cost cuts were on the way.

“We are taking a cautious approach given the ongoing macro uncertainty and pressure on our business in the first fiscal quarter to-date,” he said in a statement. “We plan to execute cost management actions across the organization while remaining committed to our investments in our long-term strategic initiatives.”

In a conference call later Tuesday, Malhotra was more specific about the cuts, announcing layoffs of employees in call centers, stores and warehouses.

“We made the very difficult decision to take immediate cost-management action, including elimination of open roles and a reduction of force of approximately 15% at our support center and less than 3% at our store and distribution center operations,” he said in prepared remarks.

The home-goods retailer had been seen as a potential beneficiary of the death of Bed Bath & Beyond Inc. BBBYQ, +6.52%, which is shuttering its stores after bankruptcy. The Container Store openly offered to accept the ubiquitous coupons from its former rival, without actually mentioning the chain’s name.

For more: The Container Store will take your expired Bed Bath & Beyond coupons

Container Store executives are looking to expand despite the apparent issues in the home-goods retail sector, adding three net stores in the recently completed fiscal year and promising six new locations by the end of this fiscal year. But comparable same-store sales decreased 13.1% in the fiscal fourth quarter, and executives guided for an annual decline in that important metric of mid- to high-teens for the full year.

For the fourth quarter, executives reported that net sales dove to $259.7 million from $305.6 million a year ago. The retailer reported a loss of $189.3 million, or $3.85 a share; after accounting for an impairment charge of nearly $200 million and other costs, the company reported earnings of 18 cents a share, down from adjusted earnings of 46 cents a share in the fiscal fourth quarter a year ago. Analysts on average were expecting adjusted earnings of 16 cents a share on sales of $265.7 million.


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