Tuesday Morning Considering Bankruptcy: Why The Discount Home Goods Retailer May Restructure

Adding to the list of retailers that are contemplating filing for bankruptcy, discount home goods seller, Tuesday Morning (TUES), is reportedly considering filing for Chapter 11 as its stores sit dark amid the coronavirus pandemic.

Sources told Bloomberg that Tuesday Morning has been in talks with its lenders about securing a bankruptcy loan that would allow the company to restructure. Through a Chapter 11 filing, Tuesday Morning would avoid liquidation, reduce its loan amounts, and close underperforming stores to help reduce its overall costs, the news outlet said.

While no final decision has been made by the retailer, Tuesday Morning is looking at all its financing options bearing in mind market conditions, and when its stores could re-open, the sources said.

Tuesday morning closed all its stores in March because of the coronavirus pandemic. The company is prepared for a sales decline because of the store closures, which could hurt Tuesday Morning more than most retailers as it does not have an online source for sales, Bloomberg said.

The company also withdrew $55 million from its revolving credit facility to get through the COVID-19 crisis after it saw its Q2 sales dip by 3%, compared its 1.9% increase a year prior. Net sales for the company were $324.4 million for the quarter.

Tuesday Morning ended the second quarter of fiscal 2020, with $4.9 million in cash, which is a decrease from the $6.1 million it had a year earlier.

At the time, Steve Becker, CEO at Tuesday Morning, said in a statement, “We again delivered positive transaction growth during the quarter despite a highly promotional environment and fewer shopping days between Thanksgiving and Christmas.

“This transaction growth, however, did not fully offset the decline in basket, leading to a comp decrease of 3% for the period. Despite our topline performance, we managed our receipts tightly and ended the quarter with store level inventory down approximately 10% versus last year,” he added.

Tuesday Morning has about 700 stores in 39 states. The company announced during its Q2 earnings report that it was looking to open three new stores, relocated six stores, and close 28 stores in fiscal 2020.

Shares of Tuesday Morning stock were up 20.88% as of 12:16 p.m. EDT on Thursday.