Seeking a post-bankruptcy rebound, Tuesday Morning adds former Burlington execs to C-suite

Dive Brief:

Tuesday Morning is shuffling its C-suite after emerging from Chapter 11 early this year.
This week the off-price retailer named Marc Katz as its interim CFO amid a search for a permanent financial chief. Katz's appointment follows the departure of former CFO Stacie Shirley in March. Katz most recently served as CFO at Burlington Stores.
Tuesday Morning also has a new CEO after appointing former Burlington Chief Operating Officer Fred Hand as chief executive earlier in May. Other recent hires include Brian Vaclavik, formerly of Tailored Brands, as chief accounting officer. Vaclavik replaces Kelly Munsch, who resigned from Tuesday Morning in January.

Dive Insight:

After closing nearly 200 stores in bankruptcy, Tuesday morning made its exit early in January with 490 stores, enough, the company says, to provide "a solid footprint for future growth."

Yet the retailer still has work to do in stabilizing its business. In the quarter ending March 31, Tuesday Morning posted a $12 million operating loss as sales declined about 7.5% year over year. Over the past nine months through March the company’s operating loss came to $32.8 million.

In its securities filings, Tuesday Morning management says they believe that "our plans, already implemented and continuing to be implemented, will mitigate the conditions and events that have raised substantial doubt about the entity's ability to continue as a going concern." But those plans "cannot be deemed probable of mitigating this substantial doubt as to our ability to continue as a going concern," in part because of continued disruption from COVID-19, according to the company.

Such "going concern" accounting language is required boilerplate additions for publicly traded companies facing uncertainty about their solvency.

In February, S&P Global Market Intelligence added Tuesday Morning back on to its list of most vulnerable publicly traded retailers after its earlier default in bankruptcy. According to S&P's May report, Tuesday Morning had a 12.9% one-year probability of default and a 17.3% two-year probability.

An early pioneer of the off-price model, Tuesday Morning was founded in the mid-1970s by Lloyd Ross with a warehouse in Dallas selling leftover inventory from brands and retailers at discount prices. The first store opened just a few years before the first T.J. Maxx.

Since then, TJX Cos. (owner of T.J. Maxx) has become an off-price juggernaut, along with Ross Stores and, to a lesser extent, Burlington. All have overshadowed Tuesday Morning, which lost money and posted middling sales in the years leading up to its bankruptcy.

When COVID-19 hit, Tuesday Morning — like other off-pricers with no e-commerce business to speak of— watched as its revenue zeroed out, sending it skidding into Chapter 11.

The years new CEO Fred Hand spent at Burlington holds the promise of bringing Tuesday Morning in line with the bigger off-price players. At the time of his hire, Chairwoman Sherry Smith praised Hand's operating and merchandising acumen, "and importantly [Hand] has a deep understanding of the off-price business model," Smith said in a statement at the time.

For his part, Hand said, "I am motivated to build this organization to one that will not just compete, but win."