The Container Store 1Q15 Earnings Call Notes

Comps better than expected but negative
As you saw in our press release, our comparable store sales for the first quarter of fiscal 2015 were down 0.9% compared to the first quarter of fiscal 2014, exceeding our outlook for the first quarter of down 3% to 4%.
Customer service first
We have a laser like focus on our customer experience, which begins with ensuring that our employees are well trained, informed, happy and productive. We’ve sustained very high ranks on both Fortune and Forbs Magazine’s Best Employers list for many, many years as well as on many, many local market media top work price list.
People customer shareholder
Herb Kelleher Southwest Airlines always said we take great care of our people, they take great care of our customers and our customers take great care of our shareholders and we wholeheartedly agree.
It’s like learning to play the game of golf

We’re evolving each aspect of it as we live with this thing. It really is like learning to play the game of Golf. You’re not very good the first week or month and you learn adjustments to make.

We’re adjusting to displays. We’ve adjusted — we’re adjusting everything that we do with these three big initiatives weekly, really probably almost daily, particularly the training and we’re training, we’re getting better and better at it and we’re still not very good at it is a good news. We’re going to be a whole lot better at it in the future.

Customers over value free shipping

We always kind of joke around here that customers widely overvalue free shipping these days, consistent with what Melissa said, we want to make sure we can give our customers what they want whenever and however they want at their convenience.

$75 order covers cost of free shipping while gaining incremental sales

everyday free shipping status, we intentionally said it is $75 in order to drive incremental spend. We had that in mind thinking that if we set it at that level based on test we had done that we could cover the cost of free shipping and gain incremental sales.

The Container Store FY 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

70% of our net income should be in 4Q this year

“Historically over 60% of our net income has been derived in the fourth quarter but this year because of last year’s weather we expected to derive approximately 70% of our reported net income for this year.”

It’s like a basketball game. You don’t have to pay attention until the fourth quarter

“We are little bit like a basketball game, how basketball game you don’t really pay attention to the fourth quarter. It’s always been that way we are the only retailer I know that gears up for its two peak seasons simultaneously. We have to gear up for the holiday season and the office sale in the fourth quarter. That’s why last year’s weather had more of an impact on The Container Store than it does most people because I mean let’s face it, January and February are the two worst months of most retailers’ business and January and February are even bigger for us than December and that’s the differential between the 60% and 70% this year. What would you add to that, Jodi?”

Loyalty programs can be a double edged sword

” the reason that we waited 35 years to introduce our frequency program was really because we felt like most people give away too much gross margin needlessly in their affinity program. So this is more as Melissa talks about surprise and delight, we are kind of giving them hugs, we are kind of giving them more information, tips of my favorite restaurants in the world, big food guy, I want to be able talk to the chef. I don’t want a discount. The stores I don’t care much about, I just want a discount.”

Our loyalty program is designed to be more respectful of GM

“So this POP! program is more respectful of gross margin than most of them and we feel like we are getting movement, good mobility without needlessly giving away gross margin and I actually think that the best way, the very best way to increase traffic is to get your best customers, certainly something as broad as that 30% of your customers, who are your best 30% of your customers to shop — who are already shopping at least twice as frequently as the entire customer base to get them to shop even more frequently and that’s what POP! is exactly designed to do.”

The Container Store 1Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings.

It’s clear this is about more than weather and calendar shifts

“We thought our sluggish sales were all because of weather and calendar shifts in the fourth quarter. Going into this first quarter, we had what everybody have weather and calendar shifts for Christmas that began last November and continued into the spring, but now we’ve come to realize it’s more than just weather and calendar consistent with so many of our fellow retailers we’re experiencing a retail funk. I mean, so many retailers that we talked to are experiencing that. Our comparable store sales declined 0.8% in the first quarter. They declined 0.8% and that’s after 15 consecutive quarters of comp store increases.”

Consumers seem to be buying other things, but not shopping at retail

“consumer seem to be buying homes and automobiles and even high ticket furniture which has kind of been in the doldrums since the great recession. But most segments of retail are a little like us, seeing more challenging sales certainly than we had hoped for early in 2014.”

This retail funk is hitting the high end too

“Well you know what we know from our involvement in national retail federation and all of that is that over the past several months, this funk, this retail funk seems to be not just limited to sort of lower end retail, it’s also hitting the higher end retailers and certainly as to a surprising extent all of a sudden, we don’t see any geographical differences between it, it seems to be all over the place. We have a pretty robust database.”

It’s across the board

“for a long time it was the lower end retailers were suffering in the higher end were doing better and we were doing better. Now it seems to be more democratic, it seems to be kind of across the board.”

Internet sales are not that great either

“we don’t really believe that people are going to quit going to bricks and mortar and its all about Internet. Internet sales aren’t that great across the retail sector either”

We’re going to be up against some easy comps next year because of the weather

“there’s a 7% comp store sales differential between stores that had a lot of weather and stores that had some weather in the fourth quarter. And so, we’re just up against the easiest comps in our entire history. Go ahead.”

Most promotional environment ever

” we do some promotions. What we’re trying to emphasize is we did not do more promotions this period than we did a year ago. We are beginning to feel like our consumer — everybody is reacting more to – retailers are just training — is the most promotional environment I’ve ever seen in my career I think. And so, we’re not stubborn, we’re not overly proud.”

Our customers and employees love us more than ever

“We are very mindful of our employee morale and our customer morale. People haven’t stopped loving us. I mean they seem to love us more than they ever have. We’re very confident of that.”

The retail funk is real

“Well, I think this retail funk is real. Yeah, we’re little surprised by it, but they were not immune to it.”