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$224.4 million in Q1 fiscal 2020 - Comparable store sales decreased 0.7% versus a 3.8% increase in the prior year; comparable transactions increased 2.4%
- Reiterates fiscal 2020 outlook
First Quarter Fiscal 2020 Results of Operations
- Net sales were
$224.4 million , compared to$227.3 million for the first quarter of fiscal 2019. The Company’s sales comparison to the prior year is impacted by the net decrease of 12 stores during the last twelve months.
- Comparable store sales decreased 0.7% compared to the same period a year ago. Transactions increased 2.4% and average ticket decreased 3.0%. During the first quarter, one store was relocated, one store was opened, and eight stores were closed, for an ending store count of 707 as of
September 30, 2019 .
- Gross profit was
$81.1 million compared to$82.4 million for the first quarter of fiscal 2019. Gross margin for the first quarter of fiscal 2020 declined to 36.1% compared to 36.3% last year. The decrease in gross margin was primarily a result of higher markdowns which was mainly attributable to timing, partially offset by a continued improvement in initial merchandise mark-up along with lower supply chain and transportation costs.
- As a percentage of net sales, selling, general and administrative expenses (SG&A) were 40.0% for the first quarter of fiscal 2020 compared to 39.6% in the same period last year. However, SG&A dollars decreased slightly to
$89.8 million in the first quarter of fiscal 2020, compared to$90.0 million in the same period last year.
- Operating loss for the first quarter of fiscal 2020 was
$8.7 million , compared to an operating loss of$7.6 million in the first quarter of fiscal 2019.
- The Company reported a net loss of
$9.6 million , or$0.21 per share, for the first quarter of fiscal 2020 compared to a net loss of$8.1 million , or$0.18 per share, for the first quarter of fiscal 2019.
- EBITDA, a non-GAAP measure, was negative
$2.2 million for the first quarter of fiscal 2020, compared to negative$0.9 million for the prior year period. Adjusted EBITDA, a non-GAAP measure, was negative$1.5 million for the first quarter of fiscal 2020, compared to negative$0.1 million for the prior year period. A reconciliation of GAAP and non-GAAP measures is provided below.
The Company ended the first quarter of fiscal 2020 with
Fiscal Year 2020 Outlook
The Company expects comparable store sales for fiscal 2020 to increase in the low single digits. The Company also expects to achieve improvement in gross margin driven by improved initial merchandise mark-up and lower supply chain expenses. Selling, general and administrative expenses are expected to be relatively flat on a rate basis. For fiscal year 2020, the Company expects meaningful EBITDA improvement.
The Company plans to open approximately three new stores, relocate five stores, and close 25 to 35 stores in fiscal 2020. Capital expenditures for fiscal 2020 are expected to be in the range of approximately
About
Conference Call Information
Tuesday Morning Corporation’s management will hold a conference call to review first quarter fiscal 2020 financial results and provide a general business update today,
Non-GAAP Financial Measures
This press release includes financial measures that are presented both in accordance with U.S. generally accepted accounting principles (“GAAP”) and using certain non-GAAP financial measures, EBITDA and Adjusted EBITDA. For more information regarding the Company’s use of non-GAAP financial measures, including the definition of EBITDA and Adjusted EBITDA, and a reconciliation to net income/(loss), the most directly comparable GAAP measure, see “Non-GAAP Financial Measures” within this press release.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements, 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 consider statements that contain these words carefully because they provide forward-looking information, including management’s current expectations, plans, strategies and goals and management’s current beliefs concerning future business conditions, future results of operations and future financial position. Forward-looking statements also include, but are not limited to, statements of management’s current plans and expectations in the “Fiscal Year 2020 Outlook” section of this press release. Forward-looking statements also include statements regarding management’s sales and growth expectations, EBITDA and Adjusted EBITDA projections, liquidity, capital expenditure plans, inventory management plans, productivity of the Company’s store base, real estate strategy, projections regarding gross margin improvement related to the distribution retrofit project and other supply chain initiatives and their merchandising and marketing strategies.
Reference is hereby made to the Company’s filings with the
The forward-looking statements made in this press release relate only to events as of the date on which the statements were made. Except as may be required by law, the Company disclaims obligations to update any 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. Investors are cautioned not to place undue reliance on any forward-looking statements.
| Tuesday Morning Corporation | |||||||||||||||
| Consolidated Statements of Operations | |||||||||||||||
| (In thousands, except per share data) | |||||||||||||||
| Three Months Ended September 30, | |||||||||||||||
| 2019 | 2018 | ||||||||||||||
| (unaudited) | |||||||||||||||
| Net sales | $ | 224,439 | $ | 227,313 | |||||||||||
| Cost of sales | 143,307 | 144,895 | |||||||||||||
| Gross profit | 81,132 | 82,418 | |||||||||||||
| Selling, general and administrative expenses | 89,783 | 90,006 | |||||||||||||
| Operating loss | (8,651 | ) | (7,588 | ) | |||||||||||
| Other income/(expense): | |||||||||||||||
| Interest expense | (665 | ) | (587 | ) | |||||||||||
| Other income, net | 67 | 190 | |||||||||||||
| Loss before income taxes | (9,249 | ) | (7,985 | ) | |||||||||||
| Income tax provision | 380 | 124 | |||||||||||||
| Net loss | $ | (9,629 | ) | $ | (8,109 | ) | |||||||||
| Earnings per share | |||||||||||||||
| Net loss per common share: | |||||||||||||||
| Basic | $ | (0.21 | ) | $ | (0.18 | ) | |||||||||
| Diluted | $ | (0.21 | ) | $ | (0.18 | ) | |||||||||
| Weighted average number of common shares: | |||||||||||||||
| Basic | 44,955 | 44,490 | |||||||||||||
| Diluted | 44,955 | 44,490 | |||||||||||||
| Tuesday Morning Corporation (continued) | ||||||||||||
| Consolidated Balance Sheets | ||||||||||||
| (in thousands) | ||||||||||||
| September 30, | June 30, | September 30, | ||||||||||
| 2019 | 2019 | 2018 | ||||||||||
| (unaudited) | (audited) | (unaudited) | ||||||||||
| Assets | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 5,273 | $ | 11,395 | $ | 12,552 | ||||||
| Inventories | 285,920 | 237,895 | 291,932 | |||||||||
| Prepaid expenses | 5,435 | 5,388 | 6,349 | |||||||||
| Other current assets | 1,499 | 1,822 | 1,976 | |||||||||
| Total Current Assets | 298,127 | 256,500 | 312,809 | |||||||||
| Property and equipment, net | 108,990 | 110,146 | 118,934 | |||||||||
| Operating lease right-of-use assets | 351,755 | — | — | |||||||||
| Deferred financing costs | 947 | 994 | 592 | |||||||||
| Other assets | 2,882 | 2,881 | 3,225 | |||||||||
| Total Assets | $ | 762,701 | $ | 370,521 | $ | 435,560 | ||||||
| Liabilities and Stockholders' Equity | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 113,036 | $ | 91,251 | $ | 131,950 | ||||||
| Accrued liabilities | 47,721 | 45,923 | 48,116 | |||||||||
| Operating lease liabilities | 66,914 | — | — | |||||||||
| Total Current Liabilities | 227,671 | 137,174 | 180,066 | |||||||||
| Operating lease liabilities — non-current | 311,114 | — | — | |||||||||
| Borrowings under revolving credit facility | 57,900 | 34,650 | 55,600 | |||||||||
| Deferred rent | — | 23,551 | 23,254 | |||||||||
| Asset retirement obligation — non-current | 3,002 | 3,002 | 2,967 | |||||||||
| Other liabilities — non-current | 1,215 | 835 | 757 | |||||||||
| Total Liabilities | 600,902 | 199,212 | 262,644 | |||||||||
| Stockholders' equity | 161,799 | 171,309 | 172,916 | |||||||||
| Total Liabilities and Stockholders' Equity | $ | 762,701 | $ | 370,521 | $ | 435,560 | ||||||
| Tuesday Morning Corporation (continued) | ||||||||||||
| Consolidated Statements of Cash Flows | ||||||||||||
| (in thousands) | ||||||||||||
| Three Months Ended September 30, | ||||||||||||
| 2019 | 2018 | |||||||||||
| (unaudited) | ||||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net loss | $ | (9,629 | ) | $ | (8,109 | ) | ||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Depreciation and amortization | 6,383 | 6,554 | ||||||||||
| Amortization of financing costs | 54 | 79 | ||||||||||
| (Gain)/loss on disposal of assets | 133 | (9 | ) | |||||||||
| Share-based compensation | 705 | 724 | ||||||||||
| Construction allowances from landlords | 247 | 542 | ||||||||||
| Change in operating assets and liabilities: | ||||||||||||
| Inventories | (48,010 | ) | (57,520 | ) | ||||||||
| Prepaid and other assets | 273 | (696 | ) | |||||||||
| Accounts payable | 21,093 | 33,630 | ||||||||||
| Accrued liabilities | 3,422 | 6,570 | ||||||||||
| Operating lease assets and liabilities | (490 | ) | — | |||||||||
| Deferred rent | — | (172 | ) | |||||||||
| Income taxes payable | 470 | 174 | ||||||||||
| Other liabilities — non-current | 97 | (132 | ) | |||||||||
| Net cash used in operating activities | (25,252 | ) | (18,365 | ) | ||||||||
| Cash flows from investing activities: | ||||||||||||
| Capital expenditures | (4,744 | ) | (4,831 | ) | ||||||||
| Purchase of intellectual property | — | (262 | ) | |||||||||
| Proceeds from sale of assets | 10 | 12 | ||||||||||
| Net cash used in investing activities | (4,734 | ) | (5,081 | ) | ||||||||
| Cash flows from financing activities: | ||||||||||||
| Proceeds under revolving credit facility | 90,700 | 38,300 | ||||||||||
| Repayments under revolving credit facility | (67,450 | ) | (21,180 | ) | ||||||||
| Change in cash overdraft | 692 | 9,408 | ||||||||||
| Payments on capital leases | (71 | ) | (40 | ) | ||||||||
| Payment of financing costs | (7 | ) | — | |||||||||
| Net cash provided by financing activities | 23,864 | 26,488 | ||||||||||
| Net increase/(decrease) in cash and cash equivalents | (6,122 | ) | 3,042 | |||||||||
| Cash and cash equivalents, beginning of period | 11,395 | 9,510 | ||||||||||
| Cash and cash equivalents, end of period | $ | 5,273 | $ | 12,552 | ||||||||
TUESDAY MORNING CORPORATION
NON-GAAP FINANCIAL MEASURES
(Unaudited)
The Company defines EBITDA as net income or net loss before interest, income taxes, depreciation, and amortization. Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the impact of certain items, including certain non-cash items and other items that the Company believes are not representative of its core operating performance. These measures are not presentations made in accordance with GAAP. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income or loss as a measure of operating performance. In addition, EBITDA and Adjusted EBITDA are not presented as, and should not be considered as, alternatives to cash flows as a measure of liquidity. EBITDA and Adjusted EBITDA should not be considered in isolation, or as substitutes for analysis of the Company’s results as reported under GAAP and Adjusted EBITDA should not be construed as an inference that the Company’s future results will be unaffected by such adjustments. The Company believes it is useful for investors to see these EBITDA and Adjusted EBITDA measures that management uses to evaluate the Company’s operating performance. These non-GAAP financial measures are included to supplement the Company’s financial information presented in accordance with GAAP and because the Company uses these measures to monitor and evaluate the performance of its business as a supplement to GAAP measures and believes the presentation of these non-GAAP measures enhances investors’ ability to analyze trends in the Company’s business and evaluate the Company’s performance. EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in the Company’s industry. The non-GAAP measures presented in this press release may not be comparable to similarly titled measures used by other companies.
Reconciliation of GAAP Net Loss to Non-GAAP EBITDA and Adjusted EBITDA:
The following table reconciles net loss, the most directly comparable GAAP financial measure, to EBITDA and Adjusted EBITDA, both of which are non-GAAP financial measures:
| (unaudited - in thousands) | Three Months Ended September 30, |
||||||
| 2019 | 2018 | ||||||
| Net loss (GAAP) | $ | (9,629 | ) | $ | (8,109 | ) | |
| Depreciation and amortization | 6,383 | 6,554 | |||||
| Interest expense, net | 663 | 575 | |||||
| Income tax provision | 380 | 124 | |||||
| EBITDA (non-GAAP) | $ | (2,203 | ) | $ | (856 | ) | |
| Share-based compensation expense (1) | 705 | 724 | |||||
| Cease-use rent expense (2) | — | 65 | |||||
| Adjusted EBITDA (non-GAAP) | $ | (1,498 | ) | $ | (67 | ) | |
(1) Adjustment includes charges related to share-based compensation programs, which vary from period to period depending on volume, timing, and vesting of awards. The Company adjusts for these charges to facilitate comparisons from period to period.
(2) Adjustment includes accelerated rent expense recognized in relation to closing stores prior to lease termination. While accelerated rent expense may occur in future periods, the amount and timing of such expenses will vary from period to period.
INVESTOR RELATIONS:
ICR
203-682-8200
Farah.Soi@icrinc.com
Caitlin.Churchill@icrinc.com
MEDIA:
PERRY STREET COMMUNICATIONS
214-965-9955
JMorgan@perryst.com
Source: Tuesday Morning Corp.