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Tuesday Morning Corporation Message Board

  • longtimefollower longtimefollower Aug 21, 2013 2:23 PM Flag

    Rouleau does have an impressive record at Michael's Stores.

    Turned the company around, and, within the first few years of his tenure, had them making roughly 3-3.5% net income, as a percent of sales. If he did similarly at TUES, the company could make roughly $25-30 million, or about 60-75 cents in EPS. The question is, if the company has such a turnaround, and it takes 2 years to get there, are we fully discounting that, with the stock selling at, say, 20x the earnings that we may achieve in the year ended June 2015? While I AM short the stock, I would like to see this company returned to its former glory, and hope Rouleau is successful, over the longer term. That having been said, peak net profit margins for TUES in the mid 2000's were 6-7%. Keeping in mind that that was in a once in a lifetime housing boom, if Rouleau can get the company gack there (incidentally, those were the net margins he eventually got Michael's Stores to, in the later years of his 10 year tenure), then, in theory TUES could get back to its historical previous peak earnings of $1.50 EPS. I personally think that is a tall order, that would be 3-5 years out from now. So, the question is, if TUES earns $1.50 in EPS, say, 4 years from now, and the stock sells at even 20x earnings, so it is selling at $30 then....just how much do you want to "discount back" to the present value...considing Rouleau's execution risk here? Too, I don't think TUES will EVER get back to previous peak net margins of 6-7%. I think those days are over, and 5% may be the more reasonable target.....which only gets you to $1 in EPS, based on the current sales level.

    Bottom line is the stock is discounting a full-fledged, full-bodied turnaround, at $14. And has overdone it, in the short run. I'll "average up" my short, on any further rally. (Sold more at $13.90, in fact.)

    If Rouleau is successful, by all reasonable standards, and the stk is trading at, say, $12-18, 3 years from now, is this the place you really want to be now?? That's poor risk/reward.

    Sentiment: Sell

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    • Cant compare net margins at Michaels. And forget the housing bubble. TUES was poorly run even then.

      I think they can get back to nice earnings sooner than 4 years, maybe 2 years.

      And we should see some evidence after the Xmas quarter.

      Bottom line is this accomplished 75 year old executive lying when he talks about the potential for tuesday mornings "value retail" concept ?

      Is he a pump & dumper ? At 75-76 years old ?

      At this point, results dont matter,Its momentum & canslimmers in charge and its FUN to be long.

      Like I said, I want to see some kind of evidence of what is possible after the xmas quarter.

      But I still believe that TUES could be sold for higher than $14 if they give up & go that route.

      • 1 Reply to smaycs4
      • Bottom line is this accomplished 75 year old executive lying when he talks about the potential for tuesday mornings "value retail" concept ?

        He HAS to be enthusiastic. He's the CEO. Do you buy a stock merely because a CEO is goo-gooing about the "potential," and believes in the concept??

        Is he a pump & dumper ? At 75-76 years old ?

        Irrelevant and nonsensical. The proof will be in the pudding. And the pudding hasn't been mixed together yet. He sounded much better in person, on the call, than in reading the transcript, I admit. And he does have a lot of ideas. But ultimately, it's going to be a question of whether they have better buying, and whether the broader assortment pays off in less discounting, and a faster turnover in the store. If it was easy, I tend to think Mason would have done it. But then again, she got complacent and lazy, so maybe he will be able to do what she wasn't.

        It comes down, simply put and at bottom, to better merchandise, and better merchandising.

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