In the first quarter, The Container Store went from profits to a loss year over year under pressure from macroeconomic conditions that reduced sales and prompted the company to launch promotional initiatives.
Net loss was $11.8 million, or 24 cents per diluted share, compared to net income of $10.5 million, or 21 cents per diluted share, in the year-before quarter, the company noted. Adjusted for one-time events, net loss was $10.1 million, or 21 cents per diluted share, versus adjusted net income of $10.5 million, or 21 cents per diluted share, in the fiscal 2022 period.
The Container Store missed a Zacks Investment Research analyst consensus estimate that looked for a loss of eight cents per share. The company’s revenues came in below Zacks’ estimate by 10%.
Consolidated net sales were $207.1 million, down 21.1% in the quarter year over year, including a 30 basis point negative impact from foreign currency effects versus the year-earlier period. Net sales in The Container Store operation were $195.1 million, slipping 20.9% versus the period in the year past. Loss from operations was $10.5 million versus income from operations of $17.9 million, in the year-previous quarter.
Comparable sales declined 19.9%, with general merchandise categories down 20.5%, contributing 1,360 basis points of the comp decrease versus the year-prior quarter, Container Store stated. Custom Spaces+ comps declined 18.6% year over year in the period, negatively impacting comparable store sales by 630 basis points.
Online sales decreased 15.8% year over year in the quarter, while Elfa third-party net sales were $12 million, down 24.4% versus the 2022 quarter. With the impact of foreign currency translation excluded, Elfa third-party net sales were down 19.2% year over year in the period primarily due to a decline in Nordic market sales.
In introducing the financial results, Satish Malhotra, Container Store president and CE, said, “Our first quarter topline performance was in line with our expectations and reflects the impact of the ongoing challenging macro environment. During the quarter, we continued our focus on bringing merchandise newness and innovation to our customers and delivering an engaging in-store experience demonstrated by a net promoter score of 81. We also tested a number of different promotional events to entice our customers. While these tests pressured margins in the quarter, they unlocked key learnings that we are incorporating into our go-forward promotional plans. We also successfully executed against our cost-cutting action plan that did not jeopardize our focus on customer experience. We are updating our outlook to reflect current trends in the business. Even as we continue to navigate the challenges of the current environment, we are relentlessly focused on executing against the initiatives that will further solidify our category leadership position and drive our growth when market conditions normalize.”
The revised outlook included a comparable store sales decline in the high teens versus mid- to high-teens guidance earlier. It also included a shift to a loss of 10 cents per share to flat year over year versus net income of from seven cents to 17 cents per diluted share in the prior guidance.
