TUES Tuesday Morning Corporation

Sector financial performance:

This company, primarily an off-price retailer of home accessories, housewares, seasonal goods and famous‑maker gifts, has been grouped into retailer-domestic merchandise and home furnishing sector in furnishing industry.

Benefited from continuously strong growth in online sales and bouncing back of in-stores demand for the home furnishing products since the second half of 2017, the downward trend that we have seen from companies in sector since 2015 seems to be making a turn in 2017 and continuing gin 2018 as indicted by re-gaining increase in their comparable brand sales (the typical growth for 2018, 2017, 2016 and 2015: 1.5%, 0.6%. 0.5% and 3%). At the same time, sales from e-commerce have been very strong as indicated by the typical comparable brand growth (online only): 10%, 6%, -3%, and 7% for2018, 2017, 2016 and 2015 respectively.

The typical average gross margin (included occupancy costs and shipping costs) of companies has been seen to go down from about 39% to about 36% in 2018 primarily due to promotions resulted from slowing down traffic of stores. In addition to increase in the average SG&A as percentage of sales, we see the average operating margin was down to 4% from 7% since 2014.


The typical average enterprise price/EBI ratio: 20(interest/EBI ratio of 18%) and stock price/sales ratio is 0.6.

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Company performance:

It seems that demand for products of this company has kept strong in the past several years as indicated by its increasing transactions. The growth seems slowing down after entering the second half of 2016.

The fiscal 2018 compared with 2017

Comparable sales increased by 4% attributable to increase of 3% in transaction and increase of 1% in transaction size.

Fiscal 2017 compared with 2016

Comparable sales increased by 2.2% attributable to increase of 3.4% in transaction offset decrease of 1.2% in transaction size.

Fiscal 2016 compared with 2015

Comparable sales increased by 7.8% attributable to increase of 7.9% in transaction offset decrease of 0.1% in transaction size.

Its gross margin (excluding store occupancy costs) has been down from about 36% of 2014 to about 34% of 2018 primarily due to higher costs of supply chain and markdowns. In addition to the increase of 90 basis points in SG&A as percentage of sales as a result of increased store rent and depreciation, its operating margin thus decreased from about 1.5% of 2014 to about -2% in 2018.

Stock price

This stock currently has an enterprise price/sales ratio of 0.2 ($3.2). We think that its stock is being relatively fairly valued considering that demand for its products have been strong while concerns with the uncertainty of impact on its cash flow of distribution center and freight problem.