Strong gains in same-store sales, a key retail metric, pushed The Tile Shop’s 2016 annual revenue up to $324.2 million, a more than 10 percent increase year-over-year, the company said Tuesday.
 
However, shares of the Plymouth-based retailer sank 13.5 percent on Tuesday after its fourth quarter profits came in well below analyst expectations.
 
A nearly 20 percent rise in selling and administrative costs, primarily related to legal costs and higher-than-normal employee benefit claims, pushed The Tile Shop’s profits down to $273,000 during the last three months of 2016, or earnings per share of one penny. Analysts surveyed by Zacks Investment Research predicted earnings of 9 cents a share.
 
The company posted sales of $76.6 million for the quarter, compared to $71.9 million for the same period last year. In that year, profits totaled $3.8 million or 7 cents per share.
 
Nevertheless, The Tile Shop’s profit grew by nearly 18 percent overall in fiscal 2016, amounting to 36 cents per share.
 
The outcome matched some of the early predictions made by Peter Keith, a senior research analyst at Minneapolis-based Piper Jaffray, when he picked The Tile Shop as one of TCB’s Companies To Watch in 2016. Noting the rise in home prices as a driving factor in home upgrade, Keith anticipated revenue growth of 10 to 15 percent and earnings growth of 30 to 50 percent in 2016, assuming the company’s margins improved.
 
“2016 was an outstanding year of growth and achievement across all of our key initiatives,” said Chris Homeister, CEO of The Tile Shop, in a statement. “We are eager to build upon our continued success from 2016 as we work to deliver another year of significant growth in sales, operating margins and earnings per share in 2017.”
 
After opening nine new stores last year, The Tile Shop said it would aim for 12 to 15 new stores in 2017. The company expects its annual revenue to improve by more than $25 million to $45 million in its current fiscal year, with earnings per share in the range of 49 cents to 56 cents.

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