A stronger housing market has pushed sales from furniture and home furnishings stores nearly 6 percent higher over the 11 months ended in November, easily outpacing overall retail sales.
But as rising home values encourage consumers to shell out more cash on their residences, two retailers that should be benefiting from the trend have failed to latch on.
After the market close on Thursday, The Container Store reported a third-quarter loss of 4 cents a share, when analysts had been calling for a profit of 5 cents a share. The storage retailer simultaneously lowered its full-year guidance to between 10 cents and 13 cents a share, down from its previous 30-to-38-cent range.
Meanwhile, Bed Bath & Beyond reported its first quarterly comparable sales decline since 2009, and posted its 16th-straight quarter of gross margin contraction, according to Citi.
So what went wrong?
"For Bed Bath & Beyond, you are facing a lot more competition from online-only competitors, the most notable obviously being Amazon," said Anthony Chukumba, senior research analyst at BB&T Capital Markets. "For The Container Store ... I'm not convinced that a great housing market ever helped."
Bed Bath & Beyond is facing competition from Amazon in more ways than one, Chukumba said. Not only does it sell home furnishings on its namesake website, but through its 2011 purchase of Quidsi, it also owns Casa.com. Further exacerbating the problem is that for years, Bed Bath & Beyond underinvested in its own digital presence.
"Quite frankly, Casa.com is what Bedbathandbeyond.com should be but isn't," Chukumba said.
Though Bed Bath & Beyond grew its digital sales 25 percent in the third quarter, online only accounts for a small percentage of its overall revenues, Chukumba said. What's more, shipping and other incremental costs are a "real headwind" to profitability.
Bed Bath & Beyond has also struggled to generate full-price sales, thanks to its ubiquitous 20 percent off coupons. In the third quarter, higher coupon redemptions and an increase in their value contributed to further gross margin contraction.
Despite this pressure, Cantor Fitzgerald analyst Laura Champine said she does not expect the company to pull back from these coupons anytime soon, as the retailer "appears to be losing market share at a greater clip."
Using Census Bureau data, she estimates its market share declined 1.41 percent during the quarter, compared to a loss of 0.56 percent the prior three months.
"It is hard to get excited when the company's market share losses are accelerating and there is no visible catalyst in our view to reverse gross margin declines," she told investors.
The problems at The Container Store are much direr, Chukumba said. For one, the nature of its business will always make it difficult to generate store traffic, he said. Whereas contractors will skip a trip to its stores and opt to buy direct, there are only so many times a consumer will redo their master closet.
"It's kind of a one-time purchase," he said.
Like Bed Bath & Beyond, The Container Store is also up against competition from online players, as well as the likes of Wal-Mart and Target. And while their nationally branded products are priced competitively with its peers, they pride themselves on the fact that 50 percent of their units are exclusive, Chukumba said. The prices on those items are much higher.
"The Container Store never should have gone public," he said, adding that it needs to do a "holistic restructuring" of its business. He said the company's marketing and merchandising needs to change, and it should reconsider how much it's paying its store employees.
Since The Container Store went public in 2013, its share price has been slashed from $18 to near $4.