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Comp Store Sales Up 3.2% at Tuesday Morning

Low store inventories due to supply chain disruptions didn’t hinder off-price home goods retailer Tuesday Morning from posting a comp store sales increase of 3.2 percent for the first fiscal quarter of 2022, further fueling its resurgence from Chapter 11 bankruptcy.

According to Tuesday Morning’s earnings call this week, the chain logged that sales increase over Q1 2020 despite store inventories being down by 42 percent.

“I am pleased with our first quarter performance, as we exceeded both our sales and financial plan and successfully completed the bankruptcy process in line with our expectations,” said Fred Hand, CEO of Tuesday Morning. “Despite the ongoing global supply chain dislocation, we believe the quality and level of our inventories has us properly positioned as we enter the holiday season.”

Tuesday Morning filed Chapter 11 bankruptcy in 2020 after pandemic shutdowns crippled the already struggling retailer. After closing more than 100 stores, the retailer exited bankruptcy earlier this year and got permission to begin trading again on the Nasdaq in May. As of the end of the first quarter of fiscal 2022, the company operated 489 stores compared to 490 stores at the end of the first quarter of fiscal 2021, and 707 stores at the end of the first quarter fiscal 2020.

Gross profit was $51 million compared to $51.1 million for the first quarter of fiscal 2021, and gross margin in the first quarter of fiscal 2022 declined to 28.8 percent compared to 31.6 percent in the first quarter of fiscal 2021.

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“The decrease in gross margin was primarily driven by higher supply chain and transportation costs, which also contributed to lower merchandise margins,” said Jennifer Robinson, chief financial officer for Tuesday Morning. “Looking ahead, we expect the headwinds associated with inbound and outbound freight costs will remain elevated until the end of calendar 2022, with some easing expected in the second quarter of the calendar year.”

Operating loss for the first quarter of fiscal 2022 was $11.7 million compared to $16.5 million in the first quarter of fiscal 2021. The company reported a net loss of $14.6 million, or $0.17 per share, for the first quarter of fiscal 2022. Net income for the first quarter of fiscal 2021 was $18.6 million, or $0.41 per share.

EBITDA, a non-GAAP measure, was negative $9.5 million for the first quarter of fiscal 2022, compared to $25.5 million for the first quarter of 2021. Adjusted EBITDA, a non-GAAP measure, was negative $5.7 million and negative $6.0 million for the first quarter of fiscal 2022 and 2021, respectively.

Tuesday Morning ended the first quarter of fiscal 2022 with $4.6 million in cash and cash equivalents and $22.4 million outstanding under its line of credit with availability on the line of $39.7 million compared to $61.9 million in cash and cash equivalents and $0.1 million outstanding under its line of credit in the same period of fiscal 2021.

As of the end of the quarter, the company has resolved all claims associated with the bankruptcy filing and has received approximately $14 million of cash, which was previously held in escrow. Robinson said the company plans to maintain $40 million in liquidity over the next 12 months, which will allow it to react quickly to supply chain changes that will benefit the company long-term.

“Given the continued global supply chain dislocation, we believe there will be a large pack-and-hold opportunity at the end of the holiday season,” Robinson said. “In order to be able to capitalize on that opportunity, we have increased our forecasted inventory purchases to have the liquidity available to meet that demand. Obviously, if the pack-and-hold opportunity is less than we think, we will not spend the open-to-buy.”

Net Sales: Net sales were $176.9 million in the first quarter of fiscal 2022 compared to $161.5 million for the first quarter of fiscal 2021, representing an increase of 3.2 percent.

Selling, general, and administrative expense (SG&A) was $60.3 million in the first quarter of fiscal 2022. As a percentage of net sales, SG&A was 34.1 percent for the first quarter of fiscal 2022. In the first quarter of fiscal 2021, SG&A was $62.1 million, and as a percentage of sales SG&A was 38.4 percent for the period.

“The decrease in SG&A was primarily due to lower store expenses, including a significant decrease in store rents for both closed stores and renegotiated rents for the ongoing store base,” Robinson said.

CEO’s Take: While Hand says Tuesday Morning isn’t immune to shipping delays and cost increases, he’s confident the company will have a successful holiday season, further advancing its recovery from bankruptcy.

“While we’re still very much in the early days of our transformation, I believe we’re focused on the right areas,” he said. “In our experience, we’ve seen these opportunities before and have confidence in our ability to transform Tuesday Morning into a world-class, off-price, home goods retailer. It will take time and a great deal of effort, which is why we’re so focused on execution.”