Dive Brief:

• Tuesday Morning made another round of executive appointments at the C-suite level as it tries to engineer a turnaround following its recent trip through Chapter 11.
• Marc Katz slid into the newly created role of chief operating officer and principal. Katz, who was an executive at Burlington Stores for more than a decade, most recently served as Tuesday Morning's interim chief financial officer.
• Joining the company as its new CFO is Jennifer Robinson, who previously served as a finance executive at craft specialist Michaels. Tuesday Morning also announced the hire of Bill Baumann as its new chief information officer. Baumann previously held the same title at apparel retailer Torrid.

Dive Insight:

Since exiting bankruptcy in January, Tuesday Morning has revamped its executive team with industry veterans as it tries to find its footing in a still-difficult environment and highly competitive off-price sector.

In Katz and CEO Fred Hand, who joined in May, the retailer has some Burlington veterans heading its operations. The company also brought in Brian Vaclavik, formerly of Tailored Brands, as chief accounting officer this year. 

The new team has plenty of challenges ahead. In the short term, the pandemic continues to disrupt life in the U.S., which creates a special challenge for an off-price retailer without an e-commerce channel.

Tuesday Morning also has to navigate the global supply chain bottlenecks wreaking havoc on planning and margins throughout the industry. In the company's most recent fiscal year, which ended June 30, gross margin fell to 29.8% from 32.6% in the previous year, a decrease mainly due to increased supply chain costs.

While the largest off-price players continue expanding their footprints, Tuesday Morning has shrunk since closing stores in bankruptcy. Currently it operates 490 stores, down from 714 at the end of its fiscal 2019. Comparable sales for the remaining group increased 1.2% since fiscal 2019 even though inventory was down 34% from that period. 

The company has managed to significantly shrink its losses over the past year but is still operating in the red, with an operating loss of $49 million for the fiscal year as well as a loss for the quarter ending on June 30 — a period that lifted many boats elsewhere in the retail world. (The company posted a small positive net profit for the full fiscal year.)

Tuesday Morning was one of the original innovators of the off-price model. Lloyd Ross launched the company in 1974, a few years before the first T.J. Maxx opened, with a Dallas warehouse full of leftover inventory from other brands and retailers.

The company expanded over the following decades, but ran into a rough patch in recent years. Sales leading up to its bankruptcy grew far less than that of its off-price peers while its losses mounted. When COVID-19 hit, Tuesday Morning, like others in its sector, was especially vulnerable because it lacked a digital channel to sell through. Unlike its peers, it didn't have the strong financial profile to carry it through. The company filed for bankruptcy in May 2020. 

Since emerging from bankruptcy, Tuesday Morning has appeared on S&P Global Market Intelligence's list of most vulnerable publicly traded retailers, and its financial health score with RapidRatings has fallen significantly over the past year.

With a new team in place, the company is trying to find its footing. On the conference call, Hand teased coming initiatives, including restructuring the retailer's distribution center network to be more efficient in speed-to-market, as well as building on its IT systems, reducing manual work and improving decision-making, according to a Seeking Alpha transcript.

"In the near term, however, we will be looking at everything from merchandise flows and adjacencies, the tasks being performed in our stores to the customer's shopping experience," Hand said.