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Tuesday Morning Corporation Message Board

  • longtimefollower longtimefollower Aug 28, 2013 8:24 PM Flag

    It's really puzzling to me how they could have taken a $42 M inventory charge....

    ....in the December 2012 quarter, which is HUGE by any standards, and NOT have reached a point, by the June 2013 quarter just reported, where they are not realizing a considerable increase in basket size, and gross margin on basket size. I mean, traffic in the store was up, but per ticket size was DOWN, versus the year ago quarter. The inventories, at 6/30/13, were down like 18% from the year ago period. It is clear that they have largely BLOWN OUT the garbage inventory, and yet, why didn't that result in in improvement in the 6/30/13 quarter, compared to a year ago.

    I am convinced that, internally, there is NO EVIDENCE that the company is succeeding in its turnaround strategy. The more serious question I have is did Brady Churches inappropriately "write off" and "blow out" a $42 million loss on inventory, which GAINED THE COMPANY LITTLE OR NOTHING?

    The proof is in the pudding, and I take the financial results in a 180 degree different fashion from the Street. My confidence level is ENHANCED by 1) Becker Drapkin's major dumping of the stock, and, saliently, this comment from the CEO in the press release: (continued)

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    • "We have made some good progress on the short-term priorities we laid out for the organization and that is evidenced in visibly cleaner stores, reduction in the level of clearance merchandise and improved flow of fresh merchandise as well as new cash registers being rolled out across the store base. Our sights are now set on the next set of priorities as we further position ourselves to execute the turnaround of Tuesday Morning."

      The above is a VERY weak statement. "We have made some good progress on the short term priorities" is weak, and a form of excuse making, or blame shifting. Is he suggesting that they were NOT focused on the key imperative of improving the merchandise, and merchandising, the last few quarters, and that's why results are still terrible?? The last sentence is especially weak: The phrase "our sights are set" is amorphously helpless and ethereal language, in its construction. The notion of "further position ourselves to execute the turnaround of Tuesday Morning" shows that he has NO CONFIDENCE that he will actually be able to EXECUTE a turnaround of Tuesday Morning. (Are they "positioning themselves to execute," or are they actually GOING to execute, the turnaround.)

      It is these kind of melee mouthed phrases, that I have always found are "telltale," significantly increase the risk here, and totally belie any reason for the stock to have soared the way it did.

      This stock should have DROPPED on the earnings release. Not gone up. It is worth $6-8, based on a FAILED turnaround, to date. I think B-D's selling, and the $42 million inventory write-down take the cake. The garbage inventory has been CLEARED, and yet, we have absolutely nothing to show for it, except a $42 million HOLE that was blown in the balance sheet. That is SICK. There is no excuse that we did not show improved gross margins, and increase volume, in fiscal Q4. This company STILL has a problem with its BUYING. Or its business model. I may short more.

      Sentiment: Sell

      • 1 Reply to longtimefollower
      • Now you are just desperate for something to drive the stock down. Its pitiful.

        I dont think you realize how much 3-4 year old #$%$ merchandise that she had sitting in every single one of the stores.I SAW it first hand, before and after.

        The stores are MUCH leaner now and they are not going to stockpile merchandise for the next year & the following year & the following year to boost gross margins when they do sell it.

        Im just not willing to believe a 75 year old executive is lying about all the positives just so he can hype the stock.

        The xmas quarter will tell us a lot.

        Dont worry, you might be right, your downside might only be $6-7 if they have a really good xmas.

        To me, the risk/reward is not even close to where I would consider shorting it even if I was inclined to short stocks.

 
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