Dive Brief:
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Home goods and home organization retailer the Container Store said Monday it would move to cut costs, including reducing its payroll and freezing wages, even as it celebrated a surprise increase in sales and a better-than-expected earnings outlook. Same-store sales rose 0.2% in the fiscal fourth quarter, well above the Container Store's own estimate of a 3% to 5% decline.
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The payroll freeze is notable considering that Container Store Chairman/CEO Kip Tindell literally wrote the book on “conscious capitalism,” which maintains that higher hourly wages are good for business and has meant higher-than-average wages for Container Store employees.
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For the fiscal year ending April 1, 2017, the retailer said it expects profit to land between 20 cents to 30 cents per share, up from 11 cents in its most recent fiscal year and above Thomson Reuters reported expectations of 18 cents per share, as reported by the Wall Street Journal.
Dive Insight:
The Container Store has been hit hard in past quarters, finding it difficult to emerge from the recession. Just a couple of years ago Tindell maintained that retail was in a “funk,” attributing the company's sales woes to a "tepid retail environment" affecting most segments of the sector nationwide.
Since then, though, the Container Store has invested heavily in improvements on a variety of fronts, which Tindell detailed Monday. The company unveiled custom services it calls TCS Closets and Contained Home, which are now available through any location, introduced free shipping on minimum orders of $75, boosted its loyalty program, streamlined its logistics, and stepped up omnichannel marketing and sales efforts though improved messaging and search capabilities.
In the company's Q4 earnings report and prepared remarks ahead of its conference call with analysts, Container Store executives expressed confidence in the retailer’s turnaround but seem intent on maintaining momentum.
“As we have consistently said, fiscal 2015 was an investment year for our company as we strategically, and importantly, put extremely focused and significant financial, human and operational resources into key initiatives designed to transform our business in order to address the changing retail landscape and set the stage for long-term growth,” Tindell said in a statement.
While the wage freeze is noteworthy, it doesn’t necessarily mean that the Container Store will lose its place as a better-paying retailer. It can’t really afford to, considering that an improved economy, new wage increases in several localities nationwide, and unilateral wage increases by other retailers are all pushing wages higher, calling into question how long the retailer will keep the freeze in place.