Off-price retailer Tuesday Morning plans to close a hometown store as it reports a big financial loss for its first quarter of the 2023 fiscal year, reflecting what the company's new CEO calls a "challenging consumer environment."
The Dallas-based home goods and decor store reported its results for the quarter that ended Oct. 1 after a delay of filing its quarterly report, putting it at odds with regulators, which the company's leaders blamed on turnover within its financial services team leaving it unable to timely account for its strategic investment by Retail Ecommerce Ventures, according to filings with the Securities and Exchange Commission.
The first quarter 2023 results reported by Tuesday Morning prior to the Thanksgiving holiday shows a retailer in decline with a "drop in sales that was quite sharp," said Neil Saunders, managing director of GlobalData and a retail analyst who tracks the industry. Saunders is not affiliated with Tuesday Morning.
The quarterly results were expected to some degree, Saunders said, with last year being a boom year and this year being "a year of correction" for the retail industry. However, with sales shrinking by a third compared to 2019, the severity of it shows just how much Tuesday Morning has apparently fallen out of favor with the consumer, Saunders said.
The retailer reported its same-store sales decreased 10.4% in the quarter compared with the same period last fiscal year. Tuesday Morning's net sales were $157.1 million in the quarter, down from $176.9 million in the quarter last year — and taking a significant hit when compared to the company's net sales of $227.3 million from the same quarter in 2019.
"The business has really shrunk quite dramatically," Saunders told CoStar News, adding some losses are expected given the company is restructuring its business, but this is a big one. "This is not only a loss, but a huge loss. The company lost $28 million for this quarter. That nearly half of what Tuesday Morning lost the whole of last year's fiscal year. The business isn't working."
The retailer reported a first-quarter loss of $28.16 million. Tuesday Morning, which reported a loss of $59 million in fiscal year 2022, is seeking to reinvent itself with the help of some well-known investors with a history of buying and revamping discount retail brands, including Stein Mart, Dress Barn and Modell's Sporting and Outdoors. For Tuesday Morning, one of the original treasure hunting-style retailers dating back to the mid-1970s, the company's leadership team has plans to drive traffic and profitability, CEO Andrew Berger said in a statement.
“Our first quarter sales performance was in line with our expectations as our teams navigated a challenging consumer environment as well as the previously discussed disruption in receipt flow due to the timing of the finalization of our strategic investment late in the quarter," he said, in the statement. Berger has turnaround experience and took on the leadership of the company earlier this month from retiring leader Fred Hand. Hand and other exiting executives are expected to help in the transition process.
Tuesday Morning did not return an emailed request to comment from CoStar News.
At the close of the first quarter, Tuesday Morning operated a total of 487 stores across the United States, with plans to close at least one of those stores since unveiling its belated earnings report. Last Wednesday, the retailer told its customers it was "marking down our entire inventory and everything must go" at its Preston Center store at 6122 Luther Lane in Dallas.
Tuesday Morning, which has been leasing its space at the retail center on a month-to-month basis for nearly a year, decided to exit that short-term lease arrangement, making way for a new retail tenant, according to the broker leasing the property on behalf of the Texas landlord. The leasing broker has told CoStar News the property is generating a lot of interest from retailers and restaurants alike. Preston Center is adjacent to some of Dallas' most affluent neighborhoods and has historically been a sought-after area for office tenants.
The impending departure from Preston Center will leave Tuesday Morning with only one retail store in its hometown city of Dallas, with a store at Hillside Village at 6465 E. Mockingbird Lane. Recently, Sprouts Farmers Market opened a new grocery store converting a former Stein Mart at the East Dallas retail center for the purpose.
If Tuesday Morning continues on the path that led to its most recent financial results, Saunders said they will likely have to close even more of its stores — coming not long after the retailer exited Chapter 11 bankruptcy less than two years ago, closing nearly 200 of its U.S. stores. According to the company's quarterly filing, substantially all of its operations are conducted at leased facilities with terms set to expire in the next 1 to 10 years.
"It's clear a lot of the stores don't work," he added. "They have to have a review of [the real estate portfolio]. They can't keep operating at a loss year in and year out. I expect them to break some leases and continue to shrink. It's clear there's a large group of stores not making money and contributing to the loss."
Saunders said he doesn't expect Tuesday Morning to have as many store closures as it had in the bankruptcy process, but going into next year, which will be "a lot more challenging," he expects the financial results of the retailer to deteriorate even further. Even with the loss, he said he expects the retailer has some runway in which to turn around its business.