January 29, 2008

Tuesday Morning Corporation Announces Second Quarter Fiscal 2008 Results

DALLAS, Jan 29, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- Tuesday Morning Corporation (Nasdaq: TUES) today reported that as previously announced, net sales for the second quarter of fiscal 2008 were $308.7 million compared to $321.3 million for the quarter ended December 31, 2006, a decrease of 3.9%. Comparable store sales decreased 7.6% for the quarter compared to the same quarter for the prior year. The decrease in comparable store sales was comprised of a 7.2% decrease in traffic and a 0.4% decrease in average ticket. Net income for the second quarter ended December 31, 2007 was $20.5 million or $0.50 per diluted share, compared to $23.8 million or $0.57 per diluted share during the same quarter last year.

For the six month period ended December 31, 2007, net sales were $510.3 million compared to $515.7 million for the same period ended December 31, 2006 for a decrease of 1.0%. Comparable store sales decreased by 5.3% for the six month period compared to the same period for the prior year. The decrease in comparable store sales was comprised of a 4.7% decrease in customer transactions and a 0.6% decrease in average ticket. For the six month period ended December 31, 2007, net income was $21.7 million or $0.52 per diluted share compared to net income of $27.0 million or $0.65 per diluted share for the same period in the prior year.

Kathleen Mason, President and Chief Executive Officer, stated, "We are aggressively responding to the pressures of the home furnishings macro environment. We believe the flexibility of our format will enable us to continue generating positive cash flows and long term profitability."

    Guidance for the fiscal year 2008 ending on June 30, 2008 is as follows:
    -- net sales are projected to be in the range of $920 million to $940
    -- comparable store sales are projected to be in the negative low single
       digits; and
    -- diluted earnings per share are projected to be in the range of $0.55 to

Tuesday Morning management will review second quarter fiscal 2008 financial results in a teleconference call on January 29, 2008 at 10:00 a.m. Eastern Time.

About Tuesday Morning

Tuesday Morning is a leading closeout retailer of upscale, decorative home accessories, housewares and famous-maker gifts in the United States. The Company opened its first store in 1974 and currently operates 831 stores in 47 states. Tuesday Morning is nationally known for bringing its more than 9.0 million loyal customers a unique treasure hunt of high-end, first quality, brand name merchandise ... never seconds or irregulars ... at prices well below those of department and specialty stores and catalogues.

This press release contains forward-looking statements within the meaning of the federal securities laws and the Private Securities Litigation Reform Act of 1995, which are based on management's current expectations, estimates and projections. Forward-looking statements typically are identified by the use of terms such as "may," "will," "should," "expect," "anticipate," "believe," "estimate," "intend" and similar words, although some forward- looking statements are expressed differently. You should carefully consider statements that contain these words because they describe our expectations, plans, strategies and goals and our beliefs concerning future business conditions, our future results of operations, our future financial positions, and our business outlook or state other "forward-looking" information.

Reference is hereby made to "Item 1A. Risk Factors" of the Company's Transition Report on Form 10-KT for the six month period ended June 30, 2007 and the Company's Quarterly Report on Form 10-Q for the three month period ended September 30, 2007 for examples of risks, uncertainties and events that could cause our actual results to differ materially from the expectations expressed in our forward-looking statements. These risks, uncertainties and events also include, but are not limited to, the following: uncertainties regarding our ability to open stores in new and existing markets and operate these stores on a profitable basis; conditions affecting consumer spending; inclement weather; changes in our merchandise mix; timing and type of sales events, promotional activities and other advertising; increased or new competition; loss or departure of one or more members of our senior management, as well as experienced buying and management personnel; an increase in the cost or a disruption in the flow of our products; seasonal and quarterly fluctuations; fluctuations in our comparable store results; our ability to operate information systems and implement new technologies effectively; our ability to generate strong cash flows from our operations; our ability to maintain internal control over financial reporting; and our ability to anticipate and respond in a timely manner to changing consumer demands and preferences. The forward-looking statements made in this press release relate only to events as of the date on which the statements were made. We undertake no obligations to update our forward-looking statements to reflect events and circumstances after the date on which the statements were made or to reflect the occurrence of unanticipated events.

    Tuesday Morning Corporation
    Consolidated Statement of Income
    (In thousands, except per share data)

                             Three Months Ended       Six Months Ended
                                  Dec. 31,                 Dec. 31,
                             2007         2006        2007          2006
                                (unaudited)               (unaudited)

    Net Sales            $ 308,687     $321,266    $ 510,344     $515,679
    Cost of sales          193,783      199,683      319,731      321,030
        Gross profit       114,904      121,583      190,613      194,649

    Selling, general and
     expenses               80,664       84,327      153,208      151,670

        Operating income    34,240       37,256       37,405       42,979

    Other income (expense):
      Interest expense      (1,420)        (753)      (3,106)      (1,545)
      Interest income          152           52          153           57
      Other income
       (expense), net          195          449          572          623
      Other income
       (expense)            (1,073)        (252)      (2,381)        (865)

    Income before income
     taxes                  33,167       37,004       35,024       42,114

    Income tax expense      12,633       13,177       13,334       15,124

    Net income             $20,534      $23,827      $21,690      $26,990

    Earnings Per Share:
    Net income per common
        Basic                $0.50        $0.58        $0.52        $0.65
        Diluted              $0.50        $0.57        $0.52        $0.65

    Weighted average number
     of common shares:
        Basic               41,441       41,416       41,437       41,392
        Diluted             41,451       41,648       41,456       41,647

    Tuesday Morning Corporation (continued)
    Consolidated Balance Sheets
    (in thousands)
                                   Dec. 31,         Dec. 31,      June 30,
                                     2007             2006          2007
                                  (unaudited)      (unaudited)
    Current assets:
      Cash and cash equivalents     $11,993         $49,633       $10,303
      Inventories                   259,299         242,674       288,791
      Prepaid expenses and other
       assets                         6,668           5,617         5,954
      Deferred income taxes             505           3,162         1,211
        Total current assets        278,465         301,086       306,259

    Property and Equipment, net      80,792          86,397        83,776

    Other long-term assets:
      Deferred financing costs          603             514           704
      Other assets                    3,601           5,137         3,582

        Total Assets               $363,461        $393,134      $394,321

    Liabilities and Stockholders'
    Current liabilities:
      Current portion of long-term
       debt                              $-              $-       $26,500
      Accounts payable               59,601          88,514        82,453
      Accrued liabilities            36,223          35,934        31,223
      Deferred income taxes               -               -             -
      Income taxes payable           15,408          15,543           712
        Total current liabilities   111,232         139,991       140,888

    Revolving credit facility, excl.
     current portion                  7,000               -        30,000
    Deferred rent                     4,390           4,618         4,534
    Deferred income taxes             1,922           4,648         3,459
        Total Liabilities           124,544         149,257       178,881

    Stockholders' equity            238,917         243,877       215,440
        Total Liabilities and
         Stockholders' Equity      $363,461        $393,134     $ 394,321

    Tuesday Morning Corporation (continued)
    Consolidated Statement of Cash Flows
    (in thousands)
                                                   Six Months Ended Dec. 31,
                                                      2007            2006
    Net cash flows from operating activities:
      Net income                                    $ 21,690       $ 26,990
      Adjustments to reconcile net income to net
       cash (used in) operating activities:
      Depreciation and amortization                    8,854          8,636
      Amortization of financing fees                     101             85
      Deferred income taxes                            (831)            290
      Loss on disposal of fixed assets                   236            120
      Stock compensation expense                       1,941          2,411
      Other non-cash charges                              35           (17)
      Net change in operating assets and liabilities  31,498         34,045

    Net cash provided by operating activities         63,524         72,560

    Net cash flows from investing activities:
      Capital expenditures                            (6,100)        (8,285)

    Net cash used in investing activities             (6,100)        (8,285)

    Net cash flows from financing activities:
      Borrowings-revolving credit facility           118,500        107,500
      Repayments-revolving credit facility          (168,000)      (128,500)
      Change in cash overdraft                        (6,297)             -
      Proceeds from exercise of common stock options
       and stock purchase plan purchases                  63            529
      Other                                                -             63

    Net cash used in financing activities            (55,734)       (20,408)

    Net decrease in cash and cash equivalents          1,690         43,867

    Cash and cash equivalents, beginning of period    10,303          5,766

    Cash and cash equivalents, end of period        $ 11,993       $ 49,633

SOURCE Tuesday Morning Corporation


"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Tuesday Morning Corporation's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.

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