DALLAS-Increases in expenses turned Tuesday Morning’s bottom line from black to red in the second quarter, with the closeout retailer reporting a $21.5 million loss for the quarter, which ended on Dec. 31.
The loss came about in spite of a 4.4 percent gain in net sales, which totaled $285.3 million and which included an increase of 5.6 percent in same-store sales. The retailer recorded an inventory valuation charge of $41.8 million, which was required to devalue certain inventory based on a strategic decision to sell off the inventory. That charge was reflected in cost of goods sold, and sent Tuesday Morning’s gross margin skidding downward by 1,680 basis points to 21.6 percent. In addition, selling, general and administrative expenses grew 6.1 percent in dollars and 46 basis points as a percentage of sales, to 29.5 percent.
Brady Churches, Tuesday Morning’s president and CEO, said the inventory write-down was “difficult but necessary,” adding that “much work remains to restore Tuesday Morning’s core value proposition.” Churches said the company was “pleased with our initial sales progress, which was driven by enthusiastic customer response across a range of seasonal merchandise and well-received deals during the second quarter.”