What happened
Shares of The container store (NYSE:TCS) fell sharply on Thursday, losing as much as 15% earlier in the session, ultimately ending the day down 14.6%.
There doesn’t appear to be any company-specific news bringing down the organization and storage products retailer, but evidence suggests comments made by the executive of another housewares retailer also brought down The Container Store.
So what
Bed bath and beyond (NASDAQ:BBBY) released its second-quarter financial results after the market closed on Wednesday, and the results were dismal. The company missed analysts’ consensus estimates on both earnings and results. While that was bad enough, the furniture retailer also cut its full-year profit forecast.
Image source: Getty Images.
On the second quarter earnings conference call, management cited “unprecedented supply chain challenges” caused by “external disruptive forces.” Bed Bath & Beyond also blamed an increase in COVID-19 cases in three key states – Florida, Texas and California – for negatively impacting revenue. “It got a lot tougher over the last two months, towards the end of the quarter,” CEO Mark Triton said.
So what does all of this have to do with The Container Store? In a nutshell, the challenges posed by Bed Bath & Beyond could be true for many retailers. The results show that transportation costs are eating away at the company’s profit margins, a paradigm that is likely to trickle down to other retailers in the same situation.
The Container Store has not yet released its second quarter results, after ending its fiscal first quarter on July 3. If the timeline Triton quotes is accurate, it suggests The Container Store could experience the same issues reported by Bed Bath & Beyond, but investors won’t know for sure until it reports in early November.
Now what
The all-important holiday season is just months away and retailers are already feeling the pinch. We’ve been hearing about freight costs and supply chain issues for quite some time. Investors fear The Container Store will be overtaken by the same challenges.
That said, for investors with a long enough horizon, disappointing results in a single quarter — if they materialize – shouldn’t change the investment thesis for The Container Store.
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Danny Vena has no position in the stocks mentioned. The Motley Fool owns shares and recommends The Container Store Group. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
