Despite a surge today in a number of penny stocks and companies with financial difficulties, The Container Store (NYSE:TCS) isn’t feeling the same love from the market. Now, TCS stock is up marginally, trading around 88 cents per share at the time of writing. But it’s worth noting that this stock is down more than 70% year-to-date alone and is trending in the wrong direction.
Recent reports certainly highlight the fact that at this price level (below $1 per share), there’s the risk of delisting. Of course, companies like The Container Store can always engineer a reverse split to kick the can down the road. But given the price action around this stock, it’s clear the market lacks faith in the home goods retailer.
This negative sentiment is being furthered by the company’s most recent fourth-quarter earnings release. Let’s dive into what the company reported and why so many investors are simply looking elsewhere right now.
TCS Stock Flat on Disappointing Q4 Earnings
Overall, The Container Store’s recent earnings report was dismal. The company reported a revenue decline of more than 20% year-over-year, with e-commerce sales dropping more than 30% and same-store sales declining 21.8%. But that’s not the worst part of the report — the company also withdrew its guidance for the rest of the year. In other words, we now don’t have any sort of insider estimate on how bad things may be moving forward.
If a company has nothing nice to say, removing guidance is usually the path forward. Unfortunately for investors, that means any narrative around a turnaround story may be put on hold.
Now, the company has six months to regain compliance with listing standards or face delisting. Many anticipate a reverse split could be in the cards, or perhaps some help from retail investors could get this company back in line with requirements.
Too Many Meme Stocks, Too Little Time
But right now, there are simply too many other meme stocks generating attention (arguably with better fundamentals) that could detract from this potential catalyst. We’ll have to see how things play out for the company. There were some bright spots from this earnings report (margins did expand, and freight costs did come down).
However, the company is being forced to discount its merchandise and is seeing less foot traffic. That’s not a recipe for success long-term, and many investors appear to be looking elsewhere for speculative opportunities right now. That’s not great for investors in this name.
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On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
