July 9, 2014 / 4:15 PM / 3 years ago

Container Store's shares dive after weak results, lowered forecast

July 9 (Reuters) - Container Store Group Inc’s shares fell as much as 15 percent after the maker of Elfa wine racks reported a bigger-than-expected quarterly loss and cut its full-year forecast, hit by weak spending and its refusal to offer bigger discounts.

The storage products retailer’s stock fell to $22.91 - its lowest since the company went public in November - and at least five brokerages cut their price target on the stock citing falling traffic at the company’s stores.

Container Store has to not only contend with U.S. consumers shying away from spending, but also faces growing competition from Wal-Mart Stores Inc, Bed Bath & Beyond and premium private companies such as California Closets.

Still, Container Store did not step up its discounting in the quarter ended May 31, despite a “surprisingly tepid” retail environment, saying it wanted to protect its gross margins .

“ ... Higher end (retail) seems to be in better shape while home furnishings trends have been solid. Thus, TCS’ negative traffic and (comparable store sales) are at odds with this dynamic,” Morgan Stanley analysts wrote in a note.

Container Store has two division - TCS, which includes retail stores, a website and a call center; and Elfa, a Swedish maker of component-based shelving and drawer systems that it acquired in 1999.

Analysts expect the company’s traffic and sales to get a boost next year from the roll out of its customer loyalty program, in-home personal organization service and premium custom closets.

The company’s stock was down 8.7 percent at $24.72 in midday trading on the New York Stock Exchange. (Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Savio D‘Souza)

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