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Tuesday Morning Corporation Message Board

  • longtimefollower longtimefollower Feb 11, 2013 2:43 PM Flag

    Eventual net profit margin (on sales) potential here is 5%.

    I doubt it's any higher, with the bloom being somewhat off their business model. On $850 M in sales, and 42 million shares out, that's EPS of $1. (They did 6-7% net profit margins in the mid 2000's, but that was, I believe, the best margins they ever had, and we'll never see a housing cycle again like we saw then.)

    It will/would probably take them at least couple years to get to 5% net margins. At that point in time, the stock will be worth $10-14, I'm guessing. Seems like, in that context, we've gone too far here.

    Admittedly, they could have additional upside, margin-wise, from all of the cost cutting that's gone on the last 4 or so years. I'm sure there's a lot of operating leverage here. (The fact the company never really lost money in the recession was always something that made me feel the stock was a very safe bet. Of course, that was true when the stock was at $4, $3, $2, $1, and 50 cents.)

    I acknowledge the faith of the board, and insider buying, is hopeful for a turnaround. But I again claim that the stock has gone "too far too fast." And I would have thought they might have preferred a "head merchant" with broader based experience in their specific sector, frankly.

    Sentiment: Hold

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    • I think you are dismissing what better buying and the clearing of the decks old inventory can & will do for margins.

      I have not studied their long term margins but Im confident that these guys can so better than Mason did or the company will get sold to someone who can.

      I presume that Steven Klug is their head merchant but that Brady Churches is very much involved.

      DoesKlug sound like a slug to you ?

      A passion for developing innovative ways to increase sales and profit has been the key to my long-term success with leading retailers such as Value City, Macy’s, Burdines, Montgomery Wards and HomePlace. I have repeatedly turned around struggling organizations and propelled new categories to success by launching new product lines, improving merchandising plans and optimizing daily operations. With a successful background impacting productivity, profitability and competitive performance, I am proud to have established myself as a key contributor to the success of each past employer. Therefore, I am now seeking the opportunity to join your team in a senior-level position such as Senior Vice President, General Merchandise Manager.

      My roles in the past have provided general merchandising management for categories such as domestics, housewares, food, HBC, luggage, floor coverings, window coverings, toys, electronics, table linens, home décor, furniture and seasonal merchandise. A sample of my achievements while serving in my most recent positions includes:

      • Turning around performance of the Value City home business to achieve #1 or #2 ranking for 8 consecutive years by focusing on high-return categories, improving marketing plans and reducing operating expenses.
      • Developing both private label and vendor branded programs that facilitated an intimate knowledge of working with overseas manufacturers and suppliers. I have spent as much as 3 months a year overseas.
      • Facilitating sales growth from startup to $400 million annually within 3 years through effective merchandising, advertising and product selection with a focus on the customer.
      • Consulted on developing and building a new retail company in China of 150,000 square foot stores. This included a meeting with the Deputy Secretary General of the Communist Party.

      My background has allowed me to bring fashion comfortably into the value market.

      I think you are greatly underestimating the possibilities here and the risk/reward of being short a stock you admit has much more upside than downside is trying to find a square peg into a roung hole.

      Could it fall back to $8 ? Sure, but it will likely be because of the market and you'd be better off shorting something REALLY undervalued to get more of a downside move.

      Did you see that RCKY is at a 52 week high ? $15.50ish. Where did you sell ? $7 ? With the same argument you are using for TUES ?

      • 1 Reply to smaycs4
      • There are better stocks to short, obviously, from a long term perspective. But I have a hard time seeing this break $10, in the near term, without fundamental improvement. Which we won't see for a while, imo.

        This is not a long term bet on management. It's a short term bet on an overbought stock.

        You should ALWAYS start scaling out, when stocks run up like this. That is what DISCIPLINE is all about. Your fear that you're going to miss a "big move" ends up costing you money, big time, over the long run....because "reversion to to the mean," over the short run, is always the much more likely happenstance. If I'm wrong this time, I'm wrong. But I am right most of the time, by far, which is why I've got a 42% compounded annual personal rate of return, the last 8 years, according to Fidelity. And 35-38% or so the last 20 years, pretax, by my own rough calculations.

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