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Tuesday Morning Hoping For Better Days
Tuesday Morning (Nasdaq:TUES) is not enjoying the prosperity that most ultra discount retailers have experienced in this economic environment. As a closeout retailer of upscale, decorative home accessories, housewares and famous-maker gifts in the United States, consumers have not been drawn to its cheap wares like they have other deep discount chains. While the company returned to profitability in the fourth quarter, it's been a difficult year.
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Where are All the Customers?
In describing itself, Tuesday Morning says, it "is nationally known for bringing its more than 9.0 million loyal customers a unique treasure hunt of high-end, first quality, brand name merchandise - never seconds or irregulars - at prices well-below those of department and specialty stores and catalogues." Yet, it appears that those loyal customers abandoned the company and are slowly starting to come back. Net sales for the fourth quarter of fiscal 2010 were $200.8 million, compared to $188.7 million for the year ago quarter, an increase of 6.4%. Comparable store sales for the quarter increased 6.0% and were comprised of a 5.7% increase in traffic and a 0.3% increase in average ticket. Net income for the quarter was $1.3 million, or 3 cents per diluted share, compared to a net loss of $1.6 million, or a 4 cent loss per diluted share, for the same period last year.
To be fair, selling high-end quality merchandise at a discount is not the same as selling dollar items. Tuesday Morning's target audience are likely different from those who shop at Dollar General (NYSE:DG) or 99 Cents Only Stores (NYSE:NDN). Over the past couple of years as the recession took firm hold over the economy, these "dollar stores" have benefited immensely from a rising demand in frugality as a result of high unemployment. On the other hand, discounters such as Big Lots (NYSE:BIG), which sells items like furniture in addition to general dollar merchandise, just reported another estimate-beating quarter and upped full-year EPS estimates.
A Turnaround Opportunity
Yet unlike Big Lots, TJX (NYSE:TJX) and the other discount retailers, Tuesday Morning shares have remained depressed, so much so that if it continues, the momentum of the fiscal fourth quarter, an opportunity, may exist. Tuesday boasts a market cap of $156 million, has no debt and $26 million in cash. The company does over $800 million in sales and trades at 0.63-times book value. By comparison, Big Lots trades for 2.7 book value and 0.5-times its sales. TJX trades for almost six-times book and has a price to sales ratio of 0.8. If Tuesday can continue to improve its operations, it only needs a tiny fraction of that $800 million revenue number to reach to bottom line in order to make a big impact.
The Bottom Line
Tuesday Morning has been in business for decades. It's unlevered balance sheet buys the company time to continue executing a successful turnaround. While a continued weak economy will make those efforts more difficult, it may be a little retailer to watch at this juncture. (For related reading, take a look at Analyzing Retail Stocks.)
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Where are All the Customers?
In describing itself, Tuesday Morning says, it "is nationally known for bringing its more than 9.0 million loyal customers a unique treasure hunt of high-end, first quality, brand name merchandise - never seconds or irregulars - at prices well-below those of department and specialty stores and catalogues." Yet, it appears that those loyal customers abandoned the company and are slowly starting to come back. Net sales for the fourth quarter of fiscal 2010 were $200.8 million, compared to $188.7 million for the year ago quarter, an increase of 6.4%. Comparable store sales for the quarter increased 6.0% and were comprised of a 5.7% increase in traffic and a 0.3% increase in average ticket. Net income for the quarter was $1.3 million, or 3 cents per diluted share, compared to a net loss of $1.6 million, or a 4 cent loss per diluted share, for the same period last year.
A Turnaround Opportunity
Yet unlike Big Lots, TJX (NYSE:TJX) and the other discount retailers, Tuesday Morning shares have remained depressed, so much so that if it continues, the momentum of the fiscal fourth quarter, an opportunity, may exist. Tuesday boasts a market cap of $156 million, has no debt and $26 million in cash. The company does over $800 million in sales and trades at 0.63-times book value. By comparison, Big Lots trades for 2.7 book value and 0.5-times its sales. TJX trades for almost six-times book and has a price to sales ratio of 0.8. If Tuesday can continue to improve its operations, it only needs a tiny fraction of that $800 million revenue number to reach to bottom line in order to make a big impact.
The Bottom Line
Tuesday Morning has been in business for decades. It's unlevered balance sheet buys the company time to continue executing a successful turnaround. While a continued weak economy will make those efforts more difficult, it may be a little retailer to watch at this juncture. (For related reading, take a look at Analyzing Retail Stocks.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Sham Gad
Sham Gad is the Managing Partner of Gad Partners Fund's, value inspired investment partnerships modeled after the Buffett Partnerships of the 1950's. Previously, Gad ran the Gad Investment Group and delivered annualized returns of 22% from 2002 to 2005. Gad is also the author of "The Business of Value Investing" which will be out in the fall of 2009. Gad earned his MBA at the University of Georgia in May of 2007. Gad runs a value investing blog. He can also be reached by visiting the Gad Partners Funds site. When not writing or analyzing businesses, Gad enjoys hanging out with his wife Maggie, reading, golf, and yoga
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