Investing.com -- Shares in Container Store Group Inc surged more than 20% in after-hours trading after the Dallas-based specialty retail chain company announced plans to freeze wages and slash its payroll following continual declines in net profits over the last year.
Although The Container Store (NYSE:TCS) did not specify the extent of the wage freeze or provide a timetable for the payroll cuts, the company indicated that it is enacting the measures in its latest effort to reduce prohibitive expenses. Over the last year, profits at the storage and organization solutions chain store have fallen sharply by more than 75%
"We are focused on cutting costs in a comprehensive manner, but in a way that does not compromise the success of our custom closet focus or harm our company culture, through a combination of actions, including a company-wide salary and wage freeze and a 401k match freeze, a reduction in payroll, plus extensive efforts to drive costs out of the business," The Container Store CEO Kip Tindell said in a statement.
"In combination with a prudent plan for comparable store sales, and moderating new store growth, these expense initiatives are expected to contribute to our projected earnings per share for fiscal 2016 at nearly double or triple the levels of fiscal 2015.”
In addition, The Container Store reported profits of $9.4 million or earnings per share of 0.20 over the fourth quarter of 2015, below quarterly earnings of $13 million or 0.27 during the same period a year ago. The company also finished with revenues of $232.1 million on the quarter, up 3% on a year-over-year basis. Analysts expected to see per share earnings of 0.20 on sales of $230.5 million.
"We exceeded our stated expectations on total consolidated fourth quarter sales and delivered earnings in line with our previously provided outlook," Tindell added. “From a comparable store sales standpoint we performed much better than we projected for the fourth quarter and importantly, saw improved and positive comparable store sales across non-TCS Closets and non-elfa areas of the store during the last two months of the fiscal quarter."
Shares in The Container Store soared 1.23 or 21.06% to 7.07 in after-hours trading.