CEO: Tuesday Morning to be a "formidable niche player"

Will Atkinson | Jan 29, 2008 2:54pm EST | Comment

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Tuesday Morning Corp. (Nasdaq: TUES) CEO Kathleen Mason said the home furnishings retailer’s strong balance sheet and ability to generate cash flow will allow the company to be a “formidable niche player in a sector recovery.” Mason made the comments during a morning conference call.

“Over the next two quarters, we are focused on driving profitable sales, evaluating expenses and managing our inventories to trend,” the chief executive said.

Before the opening, Tuesday Morning reported second-quarter revenue of $308.7 million, down from $321.3 million during the year-ago period. Analysts, on average, predicted revenue of $316.8 million.

“Traffic was the main reason for the sales decline,” Masons said. “The well-documented drop in toy sales affected our traffic, as well as the toy business itself even though Tuesday Morning had almost none of the recalled merchandise.”

Regionally, she said the largest store declines came from areas most affected by the housing downturn such as Florida, California, Nevada and Arizona.

The firm’s net income totaled $20.5 million, or $0.50 per share, compared with $23.8 million, or $0.57 per share, a year earlier. Tuesday Morning met Wall Street’s consensus estimate of earning $0.50 per share.

Going forward, Tuesday Morning projects net sales in the range of $920 million to $940 million for fiscal 2008, which ends June 30. Earnings are expected to be in the range of $0.55 to $0.62 per share. Comparable store sales, which measures sales growth at stores that have been open for over a year, are estimated to be in the negative low single digits.

“Our oldest stores are some of our worst stores in terms of [comparable store sales] performance, but they’re some of our most profitable stores because of the way the company has been very opportunistic about real estate,” Mason said.

As of Dec. 31, Tuesday Morning operated 831 stores in 47 states. During the quarter, the company opened 15 new stores, relocated five stores, expanded two locations and closed no outlets.

“We have previously said that relocating and expanding stores in our existing store base benefits the company by maximizing the operating results of our existing store base,” Mason said.

In response to an analyst’s question, Mason said reports that Madison Dearborn Partners is selling its controlling stake in the company are “all speculation.”

“Madison Dearborn has stated that they have no immediate plans or pressure to sell their shares,” she said. “They have filed a shelf, which gives them the flexibility to do what they want, when they want. At this point, because of the environment, I feel that nothing’s going to change,” she said.

In midday trading, TUES shares are up 7.10%, or $0.38, at $5.73. Over the last 52 weeks, shares have ranged from $4.04 to $17.87.