Yesterday's semi-annual visit to the dentist was followed by what has become a tradition over the past several years: visits to the Tuesday Morning Corp. (TUES) and Big Lots Inc. (BIG) stores that are both nearby. Unfortunately, Tuesday Morning had other plans; this location is now vacant, the sign removed, one of the 41 stores the company has closed this year. I pondered that very question in a May column -- when will our local Tuesday Morning close? -- and got the answer yesterday.
As the off-price retailer attempts to survive what only can be described as a vicious retail environment, Tuesday Morning also has relocated 52 stores, opened 21 and expanded 13 in an attempt to get into higher traffic areas. Results are mixed so far. While same-store sales were up 1.8% for the most recent quarter, the company missed "consensus" estimates (just one analyst covers the stock) for both revenue ($223.6 million vs. $226.8 million) and earnings (loss of 39 cents a share vs. an expected 28-cent loss).
Not surprisingly, the stock is down 51% year to date, although it has ticked up 30% since late August. Part of that gain is due to a fight that may be brewing after two activist shareholders, Jeereddi II LP and Purple Mountain Capital Partners LLC, which own 2.4% of the company, announced they are seeking two board seats in what could make for an interesting annual shareholder meeting on Nov. 15.
Back in May, Tuesday Morning was a net/net (a company trading below net current asset value), but not a particularly promising one in my view. I owned it several years ago, when it was also a net/net and was overly punished along with many other names in 2008-09, to the point that it traded below $1 in early 2009. By 2014 it was a $22 stock, but it has been all downhill ever since as the brick-and-mortar retail landscape may never be what it once was.
Now trading at 1.4 X net current asset value, Tuesday Morning joins a whole host of other retailers in double-net land (companies trading between 1 and 2 X NCAV). These companies Hibbett Sports Inc. (HIBB) , Shoe Carnival Inc. (SCVL) , Big 5 Sporting Goods Corp. (BGFV) , Finish Line Inc. (FINL) and Cato Corp (CATO) , among others.
Still, I can't get excited about Tuesday Morning's prospects despite the company's efforts to cut costs, close underperforming locations, better manage working capital and change product mix. The activist fight, however, may be very interesting to watch. It may even make investors some money. But the longer-term story remains murky at best, and I'm not sure that changes at the board level can turn this ship around.
As for Big Lots, with few customers as usual in my local store when I've visited, it continues to offer an interesting mix of inventory, and I actually walked out with some purchases, as I often do (twice a year). (I can't recall ever making a purchase at Tuesday Morning). Unlike Tuesday Morning, Big Lots is doing well and trades for about 11 times next year's consensus earnings estimates. However, it would not surprise me to discover this location closed sometime down the line.