Tuesday Morning Corporation Q4 Earnings: Revenue Up Along With Net Losses

Small cap closeout home decor retailer Tuesday Morning Corporation (NASDAQ: TUES) reported Q4 and fiscal 2017 earnings before the market opened on Thursday. Q4net sales were $223.6 million versus $222.8 million as the Company’s sales comparison to the prior year is impacted by the net closure of 20 stores during the current fiscal year.Comparable store sales increased 1.8% compared to the same period a year ago, and were comprised of a 2.6% increase in customer transactions, partially offset by a 0.8% decrease in average ticket. The Company operated 731 stores at the end of the fiscal year, which is a decrease of 20 stores from the prior year period.The net loss was $17.3 million versusa net loss of $3.9 million.

For the full year,the net saleswas $966.7 million versus $956.4 million for fiscal 2016 as comparable store sales increased 2.2% compared to the same period a year ago, and were comprised of a 3.4% increase in customer transactions, partially offset by a 1.2% decrease in average ticket.The Company’s fiscal 2017 net sales were negatively impacted by lower than plan store level inventories for a portion of the year due to the supply chain challenges experienced during the year, as well as 20 fewer stores.During fiscal 2017, 52 stores were relocated, 21 stores were opened, 13 stores were expanded, and 41 stores were closed, for an ending store count of 731. The net loss was $2.779 million versus net income of $30.299 million.

The CEO commented:

“Our distribution network is currently operating effectively and we believe we are well prepared for peak. This quarter, our comparable sales were up 1.8%, and after adjusting for the Easter timing shift, we estimate the comp increase would have been approximately 2.5%. We also made progress against our strategic priorities we reduced our inventory levels versus last year by $20 million, we reduced our bank line usage by $10 million compared to the prior quarter, we implemented an organizational restructuring, we continued to improve our supply chain efficiency while advancing our real estate strategy and are preparing to launch our new Tuesday Morning brand initiative. It is also important to note that our fourth quarter operating loss was significantly burdened by the non-cash impact of previously incurred and capitalized supply chain costs.”

“Looking to fiscal 2018, we expect to see comparable store sales in the range of 2% to 5%. We currently project that EBITDA will improve significantly year over year in spite of the amortization of the remaining portion of the elevated supply chain costs that we experienced in fiscal 2017. We remain committed to funding our growth through internally generated cash flow and working capital management as we continue to see great prospects for the future of Tuesday Morning.”

In 2012, an activist shareholder (who later became the Chairman of the Board) complained about the Tuesday Morning Corporations performance along with a wider net loss. This lead to the firing of theCEO and further housing cleaning at the top to try and turn things around.

A technical chart shows Tuesday Morning Corporation finally stabilizing over the past three months:

A long term performance chart shows Tuesday Morning Corporationhad surgeduntil the end of 2014 before loosing all of that gain whileretail peers Bed Bath & Beyond Inc (NASDAQ: BBBY)and J C Penney Company Inc (NYSE: JCP), who have also been in turnaround situations,show even worst performances:

Finally, here is a quick recap of Tuesday Morning Corporations recent earnings history along with EPS estimate trends from the Yahoo! Finance analyst estimates page going into the current earnings report:

Earnings History6/29/20169/29/201612/30/20163/30/2017
EPS Est. -0.13 -0.24 0.37 -0.31
EPS Actual -0.09 -0.2 0.19 -0.34
Difference 0.04 0.04 -0.18 -0.03
Surprise % 30.80% 16.70% -48.60% -9.70%
EPS TrendCurrent Qtr. (Jun 2017)Next Qtr. (Sep 2017)Current Year (2017)Next Year (2018)
Current Estimate -0.28 0 -0.63 -0.25
7 Days Ago -0.28 -0.14 -0.63 -0.25
30 Days Ago -0.28 -0.14 -0.63 -0.25
60 Days Ago -0.28 -0.14 -0.63 -0.27
90 Days Ago -0.28 -0.14 -0.63 -0.28

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