Wrapping paper and package trimmings have been a mainstay for Container Store shoppers for decades, but the category is losing its customers.
The Texas-based chain of organization stores said Tuesday its holiday departments, including post-holiday storage and stocking stuffers, declined 15.8 percent in the three-month period ending in December.
It's the second year in a row that holiday merchandise disappointed, CEO Melissa Reiff said during a conference call with analysts to review results released after the market closed. The company is planning to de-emphasize the holidays this year, she said.
The retailer's silver lining is custom closets, where Reiff has a "goal of domination." Custom closet sales were strong in the holiday quarter, climbing 4.5 percent.
In January, same-store sales jumped up 9.4 percent, with half of that gain coming from custom closets. The company usually doesn't report current quarter partial sales, but did so because of the strong turnaround, said CFO Jodi Taylor.
The Dallas flagship store, remodeled last year with a large area devoted to custom closets, provides the company with valuable research, Reiff said. This summer, it plans to expand the large custom closets department to two more stores and offer more new space solutions.
The Container Store's marketing campaign is "where space comes from," and Reiff said the new Marie Kondo show, "Tidying Up" on Netflix, has "certainly inspired" customers.
"We love Marie Kondo," Reiff said. The show debuted in early January.
"We hope all consumers get organized," she said. "And we're going to leverage that all we can."
Container Store stock, which closed at $7.78 a share Tuesday, was trading lower in after hours. The market reaction likely included Taylor's guidance for full-year earnings of 44 cents to 54 cents a share to be on the low end, while same-store sales are forecast to be on the high-end range of $885 million to $995 million.
The company reported a fiscal third-quarter profit of $9.32 million, or 19 cents a share, versus a profit of $28.38 million, or 59 cents a share, a year ago. Total sales declined 0.6 percent to $221.64 million. Same-store sales declined 0.8 percent, pulled down 3 percentage points by the poor holiday merchandise results.
