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What's in Store for Tuesday Morning's (TUES) Q2 Earnings?

Zacks Equity Research

Tuesday Morning Corporation TUES is likely to have registered a year-over-year decline in earnings, when it reports second-quarter fiscal 2020 results. We note that the company’s bottom line lagged the Zacks Consensus Estimate by 16.7% in the preceding quarter.

The Zacks Consensus Estimate for fiscal second-quarter earnings is pegged at 30 cents, which suggests a decline of more than 14% from the year-ago quarter’s reported figure. Notably, the consensus mark has been unchanged in the past 30 days. The consensus mark for revenues is pegged at $330.2 million, which indicates a fall of 2.4% from the year-ago quarter’s tally.

Key Factors

Higher freight costs and any deleverage in SG&A expenses, as a percentage of net sales, are likely to get reflected on Tuesday Morning’s margins in fiscal second quarter. During the last earnings call, management projected fiscal second-quarter gross margin contraction. The company had witnessed 280-basis point margin expansion in the prior-year quarter, which included significant initial merchandise mark-up improvements.

Clearly, the impact of a tough holiday season with promotional pressure cannot be ignored. The company had earlier anticipated challenges in fiscal second quarter. The company highlighted that the prior-year quarter’s comparable store sales included a 170-basis point contribution from relocated stores.

Nevertheless, efforts to boost performance through improved merchandising execution, marketing and supply chain are likely to get reflected on the company’s performance in fiscal second quarter. It is also committed to drive store productivity, courtesy of its core off-price model and offering compelling assortments to its customers.  Also, the company’s focus on merchant organization, digital expansion and right merchandise mix remain other catalysts.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Tuesday Morning this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Tuesday Morning carries a Zacks Rank #3, it has an Earnings ESP of 0.00%.

Stocks With Favorable Combination

Here are three stocks you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Zumiez Inc. ZUMZ has an Earnings ESP of +0.24% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Walmart Inc. WMT has an Earnings ESP of +0.57% and a Zacks Rank #2.

Macy's, Inc. M has an Earnings ESP of +1.55% and a Zacks Rank #3.

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