Tuesday Morning Files for Bankruptcy, Latest Company to Succumb to Coronavirus -- Update
May 27 2020 - 2:23PM
Dow Jones News
By Aisha Al-Muslim and Dave Sebastian
Discount home-goods retailer Tuesday Morning Corp. became the
latest company to seek bankruptcy protection as the coronavirus
pandemic continues to hamper retail even as government-mandated
closures and social-distancing regulations are eased.
The spate of bankruptcies in the retail sector comes as long
closures tipped companies that were already struggling over the
edge.
The off-price retailer filed for chapter 11 bankruptcy Wednesday
in the U.S. Bankruptcy Court in Dallas, saying it plans to close
about a third of its stores permanently, after temporary closures
in March created an "insurmountable financial hurdle." The Wall
Street Journal earlier reported that the company was preparing to
file for bankruptcy after a debt default.
"The prolonged and unexpected closures of our stores in response
to Covid-19 has had severe consequences on our business," Chief
Executive Steve Becker said. "However, the complete halt of store
operations for two months put the company in a financial position
that can be effectively addressed only through a reorganization in
chapter 11."
Tuesday Morning said about 80% of stores closed due to the
pandemic have reopened, with more reopenings over the coming weeks.
So far, comparable-store sales for reopened stores were about 10%
higher than a year earlier, the retailer said.
The Dallas company said that over the summer, it expects to
permanently close about 230 of its 687 stores as well as its
distribution center in Phoenix. It plans a footprint of roughly 450
stores after the closures, it said.
Founded in 1974, the national retailer of off-price home
textiles, home furnishings, housewares, gourmet food, toys and
seasonal décor had annual sales of about $1 billion in recent
years. It operates in 39 states.
Tuesday Morning's growth has been hampered by weak brand
recognition partly due to a lack of marketing and by inconsistent
merchandise offerings, said Neil Saunders, managing director of the
retail team at analytics firm GlobalData.
"Many stores are not so much an Aladdin's cave of exciting
treasures as a jumbled flea market of whatever buyers could
seemingly get their hands on," Mr. Saunders said.
Unlike some of its competitors, Tuesday Morning is a discount
retailer without an e-commerce presence at a time when more sales
are shifting online.
The shift to e-commerce amid the pandemic is expected to lead to
a record number of bricks-and-mortar store closures this year and
in the coming years, analysts say. Roughly 100,000 stores are
expected to close over the next five years -- more than triple the
number that shut during the 2007-09 recession -- as e-commerce
jumps to a quarter of U.S. retail sales from 15% last year, UBS
estimates.
The pandemic has pushed a number of troubled retailers --
department-store chain J.C. Penney Co., luxury retailer Neiman
Marcus Group Inc., apparel seller J.Crew Group Inc., rural
department store operator Stage Stores Inc. and branded-apparel
maker Centric Brands Inc. among them -- into bankruptcy in recent
weeks.
On Friday, Hertz Global Holdings Inc., one of the nation's
largest car-rental companies, sought protection from creditors
under chapter 11, hoping to survive a drop-off in ground traffic
because of the coronavirus.
And on Wednesday, rental-car company Advantage and the U.S. arm
of restaurant chain Le Pain Quotidien filed for bankruptcy
protection.
The coronavirus has also devastated business for other home-good
retailers, driving Pier 1 Imports Inc. and Art Van Furniture Inc.
out of business after they filed for bankruptcy.
Tuesday Morning said it plans to emerge from bankruptcy by the
early fall. The retailer will also consider other alternatives,
including a sale of assets out of bankruptcy, according to a sworn
declaration filed by Barry Folse, a managing director at
AlixPartners LLP, the company's restructuring adviser.
In the meantime, Tuesday Morning will continue operating during
the reorganization process with the help of a $100 million
bankruptcy financing commitment from its lenders. It said it is
also negotiating a commitment for up to $25 million in additional
financing.
In court papers, the company valued its assets at $92 million
and listed total debt of about $88.4 million. Its largest
shareholders are mutual-fund company T. Rowe Price Group Inc.;
activist investor Delta Value Group Investment Partnership LP, a
firm controlled by investor Kenneth Traub; as well as money manager
Vanguard Group.
Tuesday Morning has also hired law firm Haynes & Boone LLP
and investment bank Miller Buckfire, part of Stifel, Nicolaus &
Co.
Judge Harlin DeWayne Hale has been assigned the case, number
20-31476.
Write to Aisha Al-Muslim at aisha.al-muslim@wsj.com and Dave
Sebastian at dave.sebastian@wsj.com
(END) Dow Jones Newswires
May 27, 2020 14:08 ET (18:08 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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