Tuesday Morning takes preemptive strike on cotton prices
Home Accents Today Staff -- Home Accents Today, April 26, 2011
Dallas - Trying to delay the inevitable increasing of prices on its cotton-made and home textiles merchandise, Tuesday Morning Corp. said it stocked up recently on inventory in these core categories - a strategy that the closeout chain said has proved successful.
During its third quarter earnings conference call Monday afternoon, the 840-unit chain's evp and cfo, Stephanie Bowman, said Tuesday Morning "took advantage of opportunistic buys" that became available in the second quarter, and now "this inventory is selling through as we planned."
Added president and ceo, Kathleen Mason: "We invested excess cash in certain merchandise categories to hold pricing, primarily in cotton and textile categories" - which together account for more than one-third of Tuesday Morning's business, she said.
"Although we don't have a true commodity business, this is as close as we get to a commodity item. And we feel very good about that inventory, and we have definitely addressed any inventory that we believe needs price reduction," she continued.
Some of the product categories Mason cited included mattress pads, pillows, rugs, "and that kind of thing."
Proof that the pricing strategy was the right move is evident in Tuesday Morning's recent textile product sales, which Mason described as "fairly good right now across the board. We are certainly pleased with where our textiles business is right now."
The chain's overall third quarter results, however, were lackluster, which the company attributed in part to severe weather conditions in February.
Net loss for the third quarter ended March 31 was $3.6 million, or 8 cents per share, compared to a net loss of $4.3 million, or 10 cents per share, for the same period last year.
Sales rose 1.3% to $174.3 million and comps inched up 0.7%, which was comprised of a 3.9% increase in average ticket offset by a 3.2% decrease in traffic.
"While sales in mid to late January were encouraging, we endured dire record-breaking weather conditions in markets where we have a high concentration of stores in the month of February," Mason said.
In March, Tuesday Morning saw a return to a positive trend in sales and traffic "as the severe winter weather was no longer a factor."
Still, other general economic issues have Tuesday Morning cautiously optimistic about its sales and traffic trends in the coming months.
"While we are pleased with our March performance, our enthusiasm is tempered by the inflation we are seeing in fuel and food, among other areas, and the resulting impact on our customers and their discretionary spending behavior," Mason said.
For the nine months, the company had earnings per share of 25 cents versus 22 cents for the same period in fiscal 2010.
Year to date, sales slipped 0.2% to $626.4 million, and comps were down 0.1%.
Based on its quarterly and year-to-date results, Tuesday Morning said it is maintaining its revised guidance for the full fiscal year ending on June 30, 2011. This includes: net sales expected to be in the range of $830 million to $836 million; flat comparable store sales; and earnings per diluted share in the range of $0.30 to $0.34 compared to $0.25 in the prior fiscal year.