What happened
Just a day after jumping more than 10% on an analyst upgrade, shares of The container store group ( CDS 2.97% ) was up 16% in the first few minutes of trading on Feb. 3. The big news this time, the fiscal third quarter 2020 results, actually happened after the February 2 close. So today’s early reaction was the reaction.
So what
The home goods retailer reported revenue of $275.5 million, up 20.5% year-over-year. Strong results in custom closets (up 19.5%) and online (sales nearly doubled) drove top line growth. Adjusted earnings were $0.42 per share compared to just $0.05 in the same fiscal quarter of 2019.
Image source: Getty Images.
The Container Store has taken advantage of social distancing and work-from-home trends that have kept people stuck in their homes. And, apparently, from home, they’re looking to revamp their living space, which is essentially The Container Store’s specialty. The trend here isn’t terribly shocking, but the big news is that the company even beat its own projections – in a “significant” way. Analysts were expecting $0.33 per share. When a company announces that it has exceeded Wall Street’s call and its own projections, it makes sense that investors will be in a bullish mood the next morning.
Now what
Container Store shares are up over 680% since April 1, 2020. That’s a massive move and suggests there’s a lot of positives in the price of the stock. So far, the retailer appears to be living up to expectations, which are likely tied to the expectation of increased sales due to the pandemic. However, if this turns out to be a temporary bump, the stock could fall back to earth. Yes, the fiscal third quarter results were good reading, but there is still a reason to be cautious here. In fact, it’s worth noting that within an hour of the start of the trading day, stocks were down to a gain of around 7%.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.
