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Tuesday Morning Corporation Message Board

  • smaycs4 smaycs4 Sep 13, 2013 11:00 AM Flag

    Hmmm... a $70 billion mutual fund taking a 17% position

    Or a couple of anonymous message board shorts, at least one of which is BRAND NEW to yahoo.


    Which has more credibility ?

    I better study, maybe hire some consultants to help me figure it out.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • Well, instead of looking at HOW MUCH they manage, have you actually considered looking at a prospectus, and seeing if they have a long term record of beating the markets? That would be a lot more credible.

    • I'll tell you why this is a short, in my opinion. However, before that, let's take a large dose of anti-hubris medicine and recall that all sorts of smart-money institutional investors dove head-first into telecom in the run-up to 2000, and housing in the run-up to 2008. They get things wrong too. The fundamental danger signs were all along the highway, but nobody slowed down -- until the car went off the cliff. The same is happening with TUES, IMO, and that's why I keep shorting it.

      a) Consider the CEO's comments on the earnings call. I paraphrase: we want to foster a treasure hunt atmosphere and be "more like Target."

      b) Consider the new CFO's comments in the article you posted. I paraphrase: the company no longer plans to buy large quantities of limited items. This suggests he wants small quantities of many items. Sounds reminiscent of the old TUES model.

      The CEO and CFO comments reveal a conundrum. TUES does not know what it wants to do -- or, more likely in my opinion, can do -- under the circumstances. It's a relatively small company that wants to preserve the quirkiness of the old TUES model, and marry it with the efficiency of a mainline retailer (Target, Kmart, Michaels). Those are very different animals. Close-out retailing is not mainline retailing. The supply chains are totally different. My short bet is based in part on a personal view that TUES can't occupy a middle space. Go up the mountain, or go down the mountain. Perish in the middle because, mixing metaphors, they are neither fish nor fowl.

      Finally, consider the numbers. Calculate how much growth is needed to generate the EBITDA to support the relative valuation of TUES. I did and it's ugly. My background, incidentally, is corporate finance and investment banking -- when I'm not goofing around with my speculative portfolio. I may be wrong. Remember, I do take my anti-hubris medicine. For now, however, TUES is a big short.

      • 1 Reply to gvaol
      • Well, the concept of broadening the merchandise base, and going less deep, seems to make a lot of sense, in terms of enhancing the overall "treasure hunt" experience. But having more skus also increases costs. It remains to be seen whether they will be successful in improving same store sales, which is, at bottom, what they need to achieve. And I'm sure Becker Drapkin sold 25% of their position, because with the LACK of any turnaround to date, the risk reward absolutely doesn't justify maintaining the position. That pretty striking, considering that, if Rouleau & Co. should be successful, we should know within 3-6 months or so. Which suggests to me that Becker Drapkin's confidence level in a turnaround is, frankly, rather limited. (I still believe they were "shaken" by the embarrassment of the Brady Churches fiasco. And now, they couldn't find a CEO wanting to take the job, or that they thought was they went with a board member?)

        This thing stinks to high heaven. That having been said, I wish Rouleau well, and think he certainly has a respectable resume. But this isn't Michael's Stores. As the precious poster points out, I believe the TUES business model has become increasingly "troubled."

        Sentiment: Sell

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