The Container Store Group, Inc. (NYSE: TCS) reported Q1 EPS of ($0.11), $0.02 better than the analyst estimate of ($0.13). Revenue for the quarter came in at $169.8 million versus the consensus estimate of $173.56 million.

Company comparable store sales for the first quarter of fiscal 2015 were down 0.9% compared to first quarter of fiscal 2014, exceeding the Company’s stated outlook for the first quarter of down 3% to 4%.

“Our first quarter financial performance exceeded our expectations, as we delivered better than forecasted comparable store sales and improved gross margin,” said Kip Tindell, Chairman and Chief Executive Officer. “The implementation of our three major strategic initiatives – TCS Closets, Contained Home and POP! – remains on track, as planned, and we’re encouraged by the start of the ‘snowballing effect’ on their results. As we expected, we’ve seen that, in general, our stores with the strongest comparable store sales increases are the ones that have had TCS Closets and Contained Home the longest. In fact, if we isolate our seven Dallas-area stores, TCS Closets alone added three percentage points of incremental comparable store sales to those stores in the first quarter of fiscal 2015. We remain confident in, and are maintaining, our previously stated sales and EPS outlook for the fiscal year.”

• TCS Closets: The Company is pleased with the rollout of its new custom closet collection, with the average ticket continuing to exceed $10,000 since launch – greatly exceeding the Company’s day-to-day average ticket of approximately $60. With each store’s TCS Closets rollout, the Company is experiencing more rapid acceptance and action by customers and employees alike. The Company believes this shorter timeframe between launch and a store’s first sales is a result of the refinements and enhancements in training support, in-store displays, the selling process and overall customer experience. In addition, more than 90% of TCS Closets customers have made a subsequent purchase since buying a TCS Closet. The Company is encouraged by the synergistic relationship between TCS Closets and The Container Store’s best-selling product elfa® shelving and drawer system, both of which are located in the Company’s custom closet section of its stores. As the Company expected, there is a positive sales trend in both elfa® sales and elfa® average ticket in the stores that have had TCS Closets the longest.TCS Closets was available in the planned 36 stores at the end of the first quarter and is on track to roll out to all current and new stores by the end of fiscal 2015:Q2 23 stores in Southern CA, Denver, Florida, Phoenix, San Francisco/Bay Area, Las Vegas, Salt Lake City, St Louis, Indianapolis, Cincinnati and ColumbusQ3 9 stores in Philadelphia, Atlanta, Charlotte, Raleigh, Nashville, Little Rock and MinneapolisQ4 3 stores in Seattle and PortlandThe Company has launched a national marketing campaign to support TCS Closets, which includes advertising in home design magazines, direct mail, online presence, social media, special events and public relations.

• Contained Home: The Company’s in-home organization service was available in the planned 47 stores at the end of the first quarter and is also on track to roll out to all current and new stores by the end of fiscal 2015. Average ticket is approximately $2,500 program-to-date.Q2 12 stores in Florida, Phoenix, Las Vegas, St Louis, Indianapolis, Cincinnati and ColumbusQ3 9 stores in Philadelphia, Atlanta, Charlotte, Raleigh, Nashville, Little Rock and MinneapolisQ4 3 stores in Seattle and PortlandThe Company is rapidly contracting with additional Contained Home organizers and is now up to approximately 130 organizers to date. Satisfaction with Contained Home is high, with over 90% of customers giving the service a 4 or 5 out of 5 stars on the Company’s follow up survey. Contained Home will also be supported by a national marketing campaign, which includes advertising in home design magazines, direct mail, online presence, social media and public relations.

• POP! Perfectly Organized Perks: The Container Store’s new customer engagement program has reached over 2 million members (POP! Stars) since launching in July 2014 and is adding about 25,000 members each week. As the Company enters the next phase of the program, it will further capitalize on its consumer data in order to create deeper, one-on-one, customized connections, offers and conversations with its customers.

Outlook

For fiscal 2015, consolidated net sales are expected to be $800 to $815 million, based on the Company’s expected store openings and a comparable store sales change of -2% to 0%. Net income is expected to be $0.30 to $0.38 per diluted common share based on estimated diluted common shares outstanding of 49 million. This assumes a tax rate of approximately 39% for the full year. Adjusted EBITDA is expected to be between $85 and $91 million.

This outlook incorporates approximately $4.5 million of expenses, or $0.06 per diluted common share, associated with the implementation of the key strategic initiatives.

*** The Street sees FY15 EPS of $0.32 on revenue of $815.78 million.

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