Tuesday Morning Corporation

Third-quarter fiscal 2022 net sales were $159.6 million, up from $153.3 million in the third quarter of fiscal 2021. Comparable store sales increased 0.6%, but March slowed materially; the quarter also included two additional days versus Q3 2021 due to the fiscal calendar change. Gross margin was $38.9 million, or 24.4%, versus $48.2 million, or 31.4%, last year; management said roughly 390 basis points, or $6 million, of the decline came from capitalized supply chain and freight costs. SG&A was $55.6 million versus $59.2 million, and the company reported an operating loss of $16.4 million, net loss of $18.2 million, or $0.21 per share, and adjusted EBITDA loss of $11.9 million. For the first nine months, adjusted EBITDA was negative $8.2 million. Inventory ended at $176.6 million, up 29% year over year, and total liquidity was $35 million, including $26.6 million of ABL availability. Guidance: Q4 comparable sales are expected to decline 3% to 5%, and full-year adjusted EBITDA loss is expected to be between $26 million and $29 million.

Fred Hand framed the quarter as one where macro pressures overwhelmed an otherwise in-line start, especially in March, but said the business improved in April and May. He highlighted progress on three strategic priorities: a DC network study pointing toward a potential two-DC model, a data-driven real estate strategy that suggests long-term growth to about 700 U.S. stores, and a successful merchandising/financial calendar alignment. His tone was constructive and resilient, repeatedly stressing that Tuesday Morning is focused on execution, expense control, and taking advantage of an abundant off-price buying environment.

Jennifer Robinson focused on the financial impact of the quarter and the balance sheet. She noted the company’s margin compression, including the 24.4% gross margin rate and the approximately 390-basis-point, or $6 million, headwind from supply chain and freight costs, while SG&A improved to 34.8% of sales from 38.6% due to leveraging store occupancy costs. She also detailed liquidity improvement from the debt transaction, saying the new ABL/FILO structure lowered borrowing costs by about 100 basis points, reduced the term loan by $5 million, forgave roughly $1 million of interest, and generated about $7 million of incremental liquidity, with a $10 million FILO at about 7% interest versus 14% on the term loan. She added that inventory was higher than planned because of weaker March sales and earlier receipts, and that the company expects above-planned markdowns in Q4 to exit the year clean.

Analysts focused on what changed in March, whether the sales weakness was demand-driven, and how current trends compare. Management said the drop was mostly macro-related, citing Ukraine-related disruption, inflation, gas prices, and slower traffic beginning in week two of March; they said business improved afterward and was tracking toward the favorable side of guidance. They also clarified that there were no promotions, only increased traffic and better execution, and that Q4 markdowns are permanent clearances rather than promotional events. On the debt facility, management explained the new ABL/FILO structure, its roughly $7 million of incremental liquidity, the springing maturity mechanics, and how the new covenant timing aligns with the planned term-loan refinancing window.