Tuesday Morning Corporation (NASDAQ: TUES) Reports Loss in Most Recent Quarter: Investor Beware?
Tuesday Morning Corporation (NASDAQ: TUES) Reports Loss in Most Recent Quarter: Investor Beware?
Tuesday Morning Corporation (NASDAQ:TUES) reported a net loss of $21.5 million, equivalent $0.51 per share, for fiscal 2013 second quarter. The loss, according to the company, is attributable to the effects of some non-recurring items: items that are not expected to affect the company frequently. Aside from a few frayed investor nerves, the loss doesn’t translate into disaster for Tuesday Morning. In fact, according to Tuesday Morning C;O Brady Churches, Q1 loses were attributed to improvements in areas of merchandising, store operations and marketing, which, in my opinion, translates into the same non-recurring items cited the company’s second quarter results. But, this piece isn’t about defending TUES. This article is about looking beyond the loss to key indicators that investors should consider when looking at this play for possible addition to a portfolio.
Increased Sales
The results show that net sales increased by 4.5 percent for the quarter ended December 31, 2012 compared to the second quarter for fiscal 2012. This may not look substantial, but according to the company’s financial history, the last fiscal year second quarter that Tuesday Morning reported an increase in net sales was in 2010. Fiscal 2011 and 2012 have seen successive decreases in net sales. So, it’s a good thing to see increased sales again, bearing in mind that sales in every second quarter are affected by one common factor; the holiday season. For a retail company like Tuesday Morning, it is important for net sales to be heading north. Increased sales invariably translate into increased income.
Barring extant improvements, the numbers for the quarter ended December 31, 2012 are impressive. Management explained that the improvements were made in order to satisfy customers, thereby driving sales up. Increased sales will result in increased financial returns for shareholders. If this upward trend in sales continues over the coming quarters, the cost of improvements should not affect Tuesday Morning stock.
Negative Income Has No Effect Tuesday on Share Price
As of January 22, when the second quarter results were released, Tuesday morning was trading at about $7.08 per share. Until the time of writing this article, Tuesday Morning share price has been on the rise, closing on February 13 at about $9.57 per share. Essentially, sensitive information such as financial statements do affect share price. Therefore, for a company that seems to be having problems, investors would hardly expect an increase in share price in the manner Tuesday Morning has been experiencing. This is especially true after reporting a loss. I recommend that you watch this one for the next 90 days.
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Definitely not investing on this one. Retail is a tough one.
If you believe technical analysis to any extent, negative earnings reports produce an upswing in stock price about 40% of the time in a bull market. This typically plays out within a few weeks, and the stock turns down. The pattern is most reliable in bear markets and has a failure rate of almost a third, so it’s not anything to bet the farm on, but my point is that you shouldn’t count on a protracted upswing in this stock. I’m with Meiko on this one: if the government can’t get its act together and any one of the multiple upcoming budget crisis points tanks the economy, most retailers will get hit hard.
While your analysis seems well researched, I disagree with you and Meiko. Your analysis is too general.
I’ll keep the company on my watch list. When a company’s net revenue suddenly increases after two years, and its other figures are impressive, I tend to adopt a ‘wait-and-see’ attitude.
good time to buy the stock cheap
It doesn’t look so to me. More so, buying a stock cheap may actually mean you are paying for dumb stuff that nobody else wants.
No earnings until next year (estimated), no debt, looks decently cheap from a fundamental perspective but the stock has had a nice run so far this year and appears to be making a corrective downturn.
Retail has been tough lately. I like this store though and as a consumer would consider investing here. Cheap entry point but need to look at long-term analysis. Again…this is a neat store…(spoken like a girl I know.