Tuesday Morning Files Chapter 11 – Closing 230 of 687 Stores
DALLAS, Texas — Tuesday Morning Corporation (NASDAQ: TUES) announced Wednesday it will pursue financial and operational reorganization designed to allow the Company to reduce its outstanding liabilities and strengthen its overall financial position. These actions are in response to the immense strain the COVID-19 pandemic and related store closures have put on the business.
To pursue this reorganization, Tuesday Morning filed voluntary petitions for protection under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas – Dallas Division. Ultimately, this process will provide Tuesday Morning with an opportunity to continue navigating the COVID-19 pandemic and emerge as a stronger company by early fall 2020.
To enable the Company to continue operations during the reorganization process, the Company has obtained a commitment from its existing lender group to provide $100 million of debtor-in-possession (DIP) financing. As required by the DIP agreement, the Company is required to obtain a commitment for up to $25 million of additional financing, which the Company is negotiating.
Following the closure of the entire store portfolio as a result of COVID-19, Tuesday Morning has re-opened over 80% of its existing store footprint to date and expects to continue store re-openings and bringing associates back to work over the coming weeks.
Steve Becker, Chief Executive Officer, stated, “The prolonged and unexpected closures of our stores in response to COVID-19 has had severe consequences on our business. Prior to the pandemic, we were gaining momentum in our merchant organization, growing our vendor base and improving brands, assortment and value for our customers, while investing in our technology and corporate leadership team. 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.”
Mr. Becker continued, “We plan to emerge from Chapter 11 in a stronger position as a leading home goods off-price retailer, providing unmatched value to our customers. The commitment from our lenders to provide access to significant capital demonstrates faith in our value-driven business model and iconic brand. Looking ahead, we’ve been encouraged by very positive performance of the business as we continue to re-open our doors and welcome back our dedicated customers.”
Realignment of Store & Distribution Footprint
The Company expects the reorganization process to enable the Company to realign its store footprint. Following a thorough and comprehensive store-by-store analysis with the help of its financial and restructuring advisors, the Company expects to close approximately 230 of its 687 stores to focus on high-performing locations and will do this with a phased approach. The store closure process will take place over the summer. The Company has requested bankruptcy court approval to close at least 132 locations in a first phase and, eventually, the Company’s distribution center in Phoenix that supports these stores. These stores were identified as underperforming or are situated in areas where too many locations are in close proximity.
Tuesday Morning plans to attempt to renegotiate a significant number of leases during this process. Of the remaining 555 stores, the Company plans to exit approximately 100 additional locations leaving a go-forward footprint of approximately 450 stores.
This realignment will allow Tuesday Morning to improve its product offering by focusing on the highest performing stores in its most productive markets, provide greater value to customers by sending the best deals to a smaller number of stores, and enhance the overall profitability and credit worthiness of the Company with resources directed at its most profitable stores.
Phase one identifies 130 stores to shutter. The only store on the list in Arizona is Northmall Centre, 4841 North Stone Ave, Suite 115, Tucson, AZ 85704
COVID-19 Update
The Chapter 11 process is not expected to impact the Company’s ability to re-open stores closed due to COVID-19 and it will continue to do so in accordance with state and local mandates where the Company operates.
Since Tuesday Morning began re-opening its stores on April 24, 2020, comparable store sales for the reopened stores have been approximately 10% higher than sales during the same period in fiscal 2019, and over 7,300 associates have returned to work.
The Company’s highest priority continues to be the health and safety of its customers and employees. Tuesday Morning has put in place a number of safety measures at each newly re-opened location, including the implementation of enhanced cleaning protocols and social distancing at all times. Additionally, employees have completed training on safety procedures and are required to wear masks.