COPPELL, TX -- Home storage and organization giant The Container Store, on the heels of a successful IPO in Nov. 2013 that saw its stock doubling on the first day, reported a net loss of $9.5 million in its first financial report since becoming a publicly traded company.
Shares dipped on news of the loss, which was heavily impacted by costs associated with the IPO, even with other fundamentals holding strong and in some instances beating analysts' expectations, as investors had additional concerns over a decrease in store traffic.
Third-party European sales of Elfa, a Swedish-based designer and manufacturer of component shelving and drawer systems for the closet, kitchen, offices and garages, declined 11.3% to $24.6 million. The sharp decline was due to the sell of an unprofitable German subsidiary in the fourth quarter of last year as well as the continuing, weak macro environment in Europe, according to The Container Store CFO Jodi Taylor.
However, the company sees the Elfa brand as a key part of its overall product lineup with Melissa Reif, president of The Container Store, calling it the company's highest volume as well as highest gross margin brand.
"The power of Elfa to consolidated results is the very high consolidated growth margin with this exclusive product achieved at The Container Store retail," says Taylor. Elfa accounts for approximately 24% of direct sales at The Container Store annually.
On the strength of Elfa brand sales, The Container Store has identified installation services as an additional growth area. Fifty-two percent of install-able Efla sales included installation services -- up from low, single-digits a few years ago, notes Reiff.
When customers use The Container Store's installation services, it is "much faster and as Kip [Tindell, Chairman and CEO] says, they are dancing in their closets more quickly and they are increasing their propensity to return and purchase another space," Reiff adds. "Just what we want. It's that potato chip theory that we've been talking about for years with Elfa -- you can't just have one Elfa space."
The Container Store opened its first store in 1978 and currently has 63 locations across the country but expects to eventually expand to 300+ stores.