Tuesday Morning Corporation Announces Second Quarter Fiscal 2022 Results
Highlights:
* Q2 fiscal 2022 comparable store sales increased 1.0% versus Q2 fiscal 2020
* First six months of fiscal 2022 comparable store sales increased 1.9% versus first six months of fiscal 2020
DALLAS - Tuesday Morning Corporation (NASDAQ: TUEM), a leading off-price retailer of home goods and decor, today announced its results for the second quarter of fiscal 2022 ended December 31, 2021.
Fred Hand, Chief Executive Officer, stated, 'We are pleased with our overall execution during the second quarter and with the fact that we achieved a positive comparable store increase versus fiscal 2020 despite ending with 26% less store inventory and being up against 14 promotional events. We ended the second quarter with minimal seasonal carryover, and are very pleased with the level and currency of our inventories heading into the third quarter. While we are operating in a dynamic macro environment, we continue to be focused on improving our execution of the off price model across all areas of the organization.'
Comparability to prior periods is difficult due to the Company's reorganization under Chapter 11, Covid-19, and the elimination of promotional activity. For comparable store sales and inventory specifically, the second quarter and first six months of fiscal 2020 are the most applicable comparisons due to significant impacts from Covid-19 that occurred in the first six months of fiscal 2021. The other financial statement line items are compared to the respective periods in fiscal 2021 as our store count and associated operational costs have changed significantly since fiscal 2020.
Second Quarter Fiscal 2022 Results
As of the end of the second quarter fiscal 2022, the Company operated 492 stores compared to 705 stores at the end of the second quarter fiscal 2020 and 490 stores at the end of the second quarter of fiscal 2021.
Comparable store sales increased 1.0% for the 486 stores that were open in the second quarter of fiscal 2022 and the second quarter of fiscal 2020, despite store inventory ending down 26% compared to the second quarter of fiscal 2020, which included 14 promotional events.
Net sales were $251.4 million in the second quarter of fiscal 2022 as compared to $198.6 million for the second quarter of fiscal 2021.
Gross margin was $71.5 million and gross margin rate was 28.5% for the second quarter of fiscal 2022. Gross margin was $60.1 million and gross margin rate was 30.2% for the second quarter of fiscal 2021.
SG&A was $67.7 million in the second quarter of fiscal 2022. As a percentage of net sales, SG&A was 26.9% for the second quarter of fiscal 2022. In the second quarter of fiscal 2021, SG&A was $63.3 million, and as a percentage of sales SG&A was 31.9% for the period.
Operating income for the second quarter of fiscal 2022 was $3.4 million compared to an operating loss of $4.3 million in the second quarter of fiscal 2021.
The Company reported net earnings of $1.9 million, or $0.02 per share, for the second quarter of fiscal 2022. Net earnings for the second quarter of fiscal 2021 was $40.3 million, or $0.88 per share, including reorganization gains of $48.1 million.
EBITDA, a non-GAAP measure, was $7.2 million for the second quarter of fiscal 2022. EBITDA was $47.6 million for the second quarter of 2021. Adjusted EBITDA, a non-GAAP measure, was $9.3 million for the second quarter of fiscal 2022. Adjusted EBITDA was $0.8 million for the second quarter of 2021. A reconciliation of GAAP and non-GAAP measures is provided below.
First Six Months Fiscal 2022 Results
Comparable store sales increased 1.9% for the stores that were open in the first six months of fiscal 2022 and the first six months of fiscal 2020, despite average comparable store inventory being down 39% compared to the first six months of fiscal 2020, which included 23 promotional events.
Net sales were $428.3 million in the first six months of fiscal 2022 as compared to $360.2 million for the prior year period.
Gross margin was $122.6 million and gross margin rate was 28.6% for the first six months of fiscal 2022. Gross margin was $111.1 million and gross margin rate was 30.9% for the first six months of fiscal 2021.
SG&A was $127.9 million in first six months of fiscal 2022. As a percentage of net sales, SG&A was 29.9% for the first six months of fiscal 2022. In the first six months of fiscal 2021, SG&A was $125.4 million, and as a percentage of sales SG&A was 34.8% for the period.
Operating loss for the first six months of fiscal 2022 was $8.2 million compared to an operating loss of $20.8 million in the prior year period.
The Company reported a net loss of $12.7 million, or $(0.15) per share, for the first six months of fiscal 2022. Net earnings for the first six months of fiscal 2021 was $59.0 million, or $1.29 per share, including reorganization gains of $85.8 million.
EBITDA, a non-GAAP measure, was a loss of $2.4 million for the first six months of fiscal 2022. EBITDA was $73.1 million for the first six months of 2021. Adjusted EBITDA, a non-GAAP measure, was $3.6 million for the first six months of fiscal 2022. Adjusted EBITDA was a loss of $5.2 million for the first six months of fiscal 2021. A reconciliation of GAAP and non-GAAP measures is provided below.
The Company ended the second quarter of fiscal 2022 with $4.3 million in cash and cash equivalents and $17.9 million outstanding under its line of credit with availability on the line of $58.0 million, compared to $26.2 million in cash and cash equivalents and no borrowings outstanding under its line of credit in the same period of fiscal 2021. Inventories at the end of the second quarter of fiscal 2022 were $157.1 million compared to $114.4 million in the same period of fiscal 2021.
Outlook
The Company expects its third quarter fiscal 2022 comparable store sales to increase in the mid-single digits when compared to the third quarter of fiscal 2021. Comparable stores sales growth for the second half of fiscal 2022 is expected to be in the low to mid-single digits when compared to the second half of fiscal 2021.
Gross margin for the second half of the fiscal year is expected to decline as compared to the first half due to higher supply chain costs.
The Company continues to expect to report an Adjusted EBITDA loss for fiscal 2022, slightly improved from fiscal 2021.
The Company also continues to expect to maintain sufficient liquidity to cover its obligations and operating plans for the fiscal year.
About Tuesday Morning
Tuesday Morning Corporation is one of the original off-price retailers specializing in name-brand, high-quality products for the home, including upscale home textiles, home furnishings, housewares, gourmet food, toys and seasonal decor, at prices generally below those found in boutique, specialty and department stores, catalogs and on-line retailers. Based in Dallas, Texas, the Company opened its first store in 1974 and currently operates 492 stores in 40 states. More information and a list of store locations may be found on the Company's website at www.tuesdaymorning.com.
Conference Call Information
Tuesday Morning Corporation's management will hold a conference call to review second quarter fiscal 2022 financial results on February 3, 2022, at 8:00 am Central Time. A live webcast of the conference call will be available in the Investor Relations section of the Company's website at www.tuesdaymorning.com, or you may dial into the conference call at 877-407-9716 or 201-493-6779 if calling internationally approximately ten minutes prior to the start of the call. A replay of the webcast will be accessible through the Company's website for 90 days. A replay of the conference call will also be available from 11:00 am Central Time, February 3, 2022 through 10:59 pm Central Time, February 10, 2022 by dialing 844-512-2921 or 412-317-6671 and entering conference ID number 13726297.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements, which are based on management's current expectations, estimates and projections. Forward-looking statements typically are identified by the use of terms such as 'may,' 'will,' 'should,' 'expect,' 'anticipate,' 'believe,' 'estimate,' 'intend' and similar words, although some forward-looking statements are expressed differently. Forward-looking statements include statements regarding management's plans and strategies and projections with respect to Adjusted EBITDA, cash flow and liquidity. The forward-looking statements in this press release are subject to risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements.
Reference is hereby made to the Company's filings with the Securities and Exchange Commission, including, but not limited to, 'Item 1A. Risk Factors' of the Company's most Annual Report on Form 10-K for the fiscal year ended June 30, 2021, for examples of risks, uncertainties and events that could cause our actual results to differ materially from the expectations expressed in our forward-looking statements. These risks, uncertainties and events also include, but are not limited to, the following: the effects and length of the COVID-19 pandemic; changes in economic and political conditions which may adversely affect consumer spending; our ability to identify and respond to changes in consumer trends and preferences; our ability to mitigate reductions of customer traffic in shopping centers where our stores are located; increases in the cost or a disruption in the flow of our products, including the extent and duration of the ongoing impacts to domestic and international supply chains from the COVID-19 pandemic; our ability to continuously attract buying opportunities for off-price merchandise and anticipate consumer demand; our ability to obtain merchandise on varying payment terms; our ability to successfully manage our inventory balances profitably; our ability to effectively manage our supply chain operations; loss of, disruption in operations of, or increased costs in the operation of our distribution center facility; unplanned loss or departure of one or more members of our senior management or other key management; increased or new competition; our ability to maintain and protect our information technology systems and technologies and related improvements to support our growth; increases in fuel prices and changes in transportation industry regulations or conditions; changes in federal tax policy including tariffs; the success of our marketing, advertising and promotional efforts; our ability to attract, train and retain quality employees in appropriate numbers, including key employees and management; increased variability due to seasonal and quarterly fluctuations; our ability to protect the security of information about our business and our customers, suppliers, business partners and employees; our ability to comply with existing, changing and new government regulations; our ability to manage risk to our corporate reputation from our customers, employees and other third parties; our ability to manage litigation risks from our customers, employees and other third parties; our ability to manage risks associated with product liability claims and product recalls; the impact of adverse local conditions, natural disasters and other events; our ability to manage the negative effects of inventory shrinkage; our ability to manage exposure to unexpected costs related to our insurance programs; increased costs or exposure to fraud or theft resulting from payment card industry related risk and regulations; and our ability to maintain an effective system of internal controls over financial reporting. The Company's filings with the SEC are available at the SEC's web site at www.sec.gov.
The forward-looking statements made in this press release relate only to events as of the date on which the statements were made. Except as may be required by law, the Company disclaims obligations to update any forward-looking statements to reflect events and circumstances after the date on which the statements were made or to reflect the occurrence of unanticipated events. Investors are cautioned not to place undue reliance on any forward-looking statements.
INVESTOR RELATIONS:
Caitlin Churchill
ICR
203-682-8200
Caitlin.Churchill@icrinc.com
MEDIA:
TuesdayMorning@edelman.com
Adjustment includes charges related to share-based compensation programs, which vary from period to period depending on volume, timing and vesting of awards. We adjust for these charges to facilitate comparisons from period to period.
(2) For the three months ended December 31, 2021, adjustments included restructuring, impairment and abandonment charges related to employee retention cost. For the six months ended December 31, 2021, adjustments related to software impairment charges and employee retention cost. For the three and six months ended December 31, 2020, adjustments include restructuring, impairment and abandonment charges primarily related to our permanent store and Phoenix, Arizona distribution center closing plans as well as severance and employee retention cost. Decisions regarding store closures and the Phoenix distribution center were made in the fourth quarter of fiscal 2020, prior to filing the Chapter 11 Cases; however, the closure of the Phoenix distribution center was not completed until the second quarter of fiscal 2021.
(3)For the three and six months ended December 31, 2021, adjustments included benefit from claims related cost as well as professional and legal fees related to our reorganization. For the three and six months ended December 31, 2020, adjustments included a gain resulting from store lease termination and Phoenix distribution center under our permanent closure plan, sale-leaseback transactions pursuant to the Plan of Reorganization, offset by professional and legal fees related to our reorganization.
(4) For the three and six months ended December 31, 2021, adjustments included non-cash expense (benefit) recognized related to cash settled awards in our long-term incentive plan.
See full release at: https://ir.tuesdaymorning.com/news-releases/news-release-details/tuesday-morning-corporation-announces-second-quarter-fiscal-2022
TUESDAY MORNING CORPORATION 
