Dive Brief:
- Tuesday Morning, the Dallas-based off-price home decor retailer, will go out of business following a court-approved bankruptcy sale to Hilco Merchant Resources for $32 million on Thursday. The retailer had filed for Chapter 11 in February, the second time in three years.
- Judge Edward Morris of the Fort Worth division of the U.S. Bankruptcy Court for the Northern Division of Texas approved the decision, overruling an objection from Invictus Global Management. At the time of Tuesday Morning’s filing, the company said Invictus had committed $51.5 million to support the retailer’s operations during bankruptcy and sought to keep the company in business.
- As part of its reorganization plan, the company had already moved to close over 250 stores and sought to exit Chapter 11 with a much smaller store footprint. The company’s remaining locations have now begun store closing sales.
Dive Insight:
After spending less than 90 days in bankruptcy, Tuesday Morning will go out of business. Before its first bankruptcy, the company had nearly 700 stores.
At the time of its most recent Chapter 11 filing, Tuesday Morning had 487 stores in 40 states in late November. In its most recent 10-K filing, Tuesday Morning said it employed about 1,600 full-time and 4,700 part-time workers. The company in March initiated auctions of about 260 store leases.
The company reported net sales of $749.8 million for the 2022 fiscal year, up from $690.8 million the prior year. For the company’s first quarter of fiscal 2023, which ended Oct. 1, 2022, Tuesday Morning reported a net loss of $28.2 million, an operating loss of nearly $26 million and negative EBITDA of $22.7 million compared to negative $9.5 million in the year-ago period.
Court documents offer insight into factors that contributed to Tuesday Morning’s troubles.
In the weeks ahead of its bankruptcy filing, Tuesday Morning says its creditors, led by Wells Fargo, increased the company’s reserve requirements from $10 million to $30 million. That action “effectively eliminated” Tuesday Morning’s operating liquidity and contributed to the company’s untenable financial position.
Invictus made a stalking horse bid to buy the company out of bankruptcy but that deal fell apart in March. Gordon Brothers stepped up and offered $12.5 million of debtor-in-possession financing. Overall, the retailer secured about $27 million to maintain its operations. But it wasn’t enough.
On April 13, Tuesday Morning sought about $10 million from Invictus under an existing credit agreement. But according to Dell Young, Tuesday Morning’s senior vice president of finance, analysis and treasury, “Invictus failed to fund the requested Loan and instead requested that the Debtors submit a new request for the minimum amounts necessary to operate,” through April 17.
In response, the retailer reduced its borrowing request to $3.5 million. Invictus funded the request on April 17. The company asked for $4.9 million to make up the difference from the original request. But Young said in court documents that “Invictus failed to fund the requested Loan and no reason was provided by Invictus for its failure to fund.”
After additional funding requests were denied, Young warned in a court declaration that an inability to access financing would leave the company unable to pay vendors, freight for delivery, monthly rent for May or make payroll.
Tuesday Morning, Hilco and Invictus did not immediately respond to requests for comment from Retail Dive.
Tuesday Morning describes itself as one of the original off-price retailers. Established in 1974, the company’s main merchandise categories include upscale home furnishings, housewares, pet supplies, bath and body products and toys. In contrast with some retailers in the discount segment, the company says it doesn’t sell seconds or irregular items.
Now, everything is on sale. The company said on social media that all merchandise is 30% off the lowest ticketed price and that gift cards and merchandise return gift cards will be accepted through May 13. “Starting today,” the company posted on its Facebook page Saturday, “we have begun the process of closing all our stores.”
