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Analyst: Off Price Gets Last Laugh in Bed Bath, Tuesday Morning Meltdown

The hard-hit home sector paints a feast-or-famine picture pitting the failure of Tuesday Morning and Bed Bath & Beyond against hungry off-price chains ready to pounce on their remains.

Bankrupt Tuesday Morning’s shutdown only adds to the woes plaguing home. A Texas bankruptcy court on Friday approved the off-price home retailer’s plan to sell its assets to Hilco Merchant Resources for nearly $32.1 million after an auction failed to deliver any better bids, according to court documents submitted in the company’s Chapter 11 case.

The Dallas discounter’s April 29 going out of business announcement comes after Bed Bath & Beyond filed for bankruptcy a week earlier. The BuyBuy Baby owner is trying to find a buyer to keep it going while also forging ahead with shutdown plans. Hilco is helping Bed Bath & Beyond to liquidate.

Tuesday Morning found itself in the unlucky position of going bankrupt twice in three years. It closed one-third of its 687 stores as part of its first Chapter 11 bankruptcy in May 2020. Though it came out of bankruptcy early in 2021, last year’s battle with inflation left many consumers without much to spend on what Tuesday Morning had to offer, sending the merchant into bankruptcy again earlier this year.

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Many companies don’t survive two bankruptcies because the second failure suggests their problems aren’t easily patched-up financial fixes but deeper operational distress.

Last month David’s Bridal collapsed into bankruptcy for a second time after it first filed in November 2018, and emerged in January 2019. In April the bridal retailer filed its second Chapter 11 petition, terminated 90 percent of its workforce, started closing stores and will liquidate if it can’t dig up a buyer.

Bankrupt Tuesday Morning's assets were sold to Hilco for nearly $32.1 million, and Hilco is now conducting going out of business sales.
Tuesday Morning on April 29 posted on Facebook that it is closing all its stores. Tuesday Morning/Facebook

The demise of these big boxes could benefit off-price brands, making quality retail real estate and inventory available, not to mention market share, according to Lorraine Hutchinson, equity analyst at Bank of America Securities. She expects the off-price channel to “capitalize on additional vacancies and closeout merchandise.”

Burlington Stores in particular could gain from new real estate opportunities, while Ross Stores could pick up some available locations to gain a foothold in new markets. And the owner of TJ Maxx, Marshalls and HomeGoods is always looking to snatch up desirable closeout product, the analyst noted.

“While one bankruptcy is not thesis-changing, competitors going out of business is one of the tenets of the off-price market share story that has been missing over the past few years. We expect off-price to be ready to take advantage of this and any others,” Hutchinson wrote in a research note Tuesday.