Investors Losing Patience with Tuesday Morning Corporation (NASDAQ:TUES) after Q1 Loss

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Tuesday Morning Corporation (NASDAQ:TUES)

Tuesday Morning Corporation (NASDAQ:TUES) continues to take a dip in the market as investor sentiments have taken a hit on weak Q3 2017 financial results. A wider than expected net loss of (-$14.8) million in the quarter, compared to a net loss of (-$5.2) million all but continues to raise questions about the company’s long-term prospects.

Sales Decline

Tuesday Morning Corporation (NASDAQ:TUES)’s Net sales in the quarter took a hit of $8.4 million compared to last year, coming in at $203 million. Comparable store sales were also down by 2.7% leading to an operating loss of (-$14.7) million. The off-price retailer has attributed the decline to lower than expected store level inventories a problem compounded by the fact that the company operated 24 fewer stores in the quarter

“We have now turned our attention to consistent improvement in our supply chain with a focus on driving our costs down. While we have already made progress, we have considerable work to do and efficiencies to be gained,” said CEO, Steve Becker

A decline in sales in the quarter comes on the heels of Tuesday Morning Corporation (NASDAQ:TUES) closing down 23 stores. The retailer was also forced to relocate seven stores as it continues to explore ways of shoring up sales. Its efforts appear to be paying off the company having registered a 47% increase in sales in relocated stores over the past 12 months.

Gross margin in the quarter dropped to 33.1% from 36.7% which was attributed to an increase in costs associated with Tuesday Morning Corporation (NASDAQ:TUES) supply chain operations. Selling general and administrative expenses were down by 1.9% to $81.8 million compared to $83.4 million as of last year.

Waning Investor Confidence

Tuesday Morning Corporation (NASDAQ:TUES) ended the quarter with cash and cash equivalents of $3.7 million in addition to $41 million under its line of credit. Inventories in the quarter soared to $268.3 million from $255 million as of the end of the third quarter last year.

The retailer is planning to invest between $37 million and $40 million in capital in the current quarter. Most of the funds are to be used on the new real estate strategy that focuses on opening new stores relocating and expanding those with the potential of generating more sales.

Investors are slowly losing patience with Tuesday Morning Corporation (NASDAQ:TUES) given that the stock is already down by 60% for the past 12 months. The stock was down yet again in Thursday’s trading session – dropping by 2.7% and ending the day at $1.80 a share.

I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.

About the author: Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading.

 

Author: Steve Clark

Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading. Steve keeps his head in the game by looking for, and writing about, small companies that often get overlooked by the big investment firms.

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