Dive Brief:
- Tuesday Morning is getting a $35 million injection of capital from an investor group led by Retail Ecommerce Ventures, owner of Pier 1, RadioShack, Dressbarn and other retail brands.
- REV is providing Tuesday Morning with $32 million in the form of convertible debt from a special purpose vehicle. Another $3 million in convertible debt is set to come from some of the off-pricer’s executives, including CEO Fred Hand.
- With the deal, REV and co-investor Ayon Capital will control a majority of Tuesday Morning’s board. The retailer will get access to REV’s distribution system as well as rights to sell products from the Pier 1 brand, which REV acquired out of bankruptcy in 2020.
Dive Insight:
Tuesday Morning has struggled to find its footing since it emerged from Chapter 11 last year.
The retailer helped build the off-price retail model nearly 50 years ago, but in recent years has been outgunned by the giants of the sector such as TJX Cos. and Ross Stores. It entered bankruptcy, as many did, in the first months after the COVID-19 pandemic hit the U.S. but had struggled with financial losses for years prior.
Tuesday Morning reorganized in bankruptcy and exited with fewer stores and new debt financing, and later in 2021 it brought in new executives as it sought to build a post-bankruptcy path.
By mid-2021 the company was back in the black. But with global economic disruption, the company in its most recent earnings report revised down its sales expectations and projected an adjusted EBITDA loss of up to $29 million for its current fiscal year.
As of mid-August, S&P Global Market Intelligence had Tuesday Morning at the top of its list of most vulnerable retail companies, with a market-implied one-year default probability of 34.3%, based on trading volatility, liabilities and other data.
The deal with REV — comprised of a loan, a portion of which can be converted into equity — is aimed at strengthening Tuesday Morning’s balance sheet and will repay a portion of its existing facilities and loans. It will also help it invest in its omnichannel capabilities, the company said. On the agenda is building out an e-commerce business for the first time — something that could have helped it weather the early days of COVID-19.
While Tuesday Morning restructured in Chapter 11 during the height of the pandemic, REV was also busy. The e-commerce specialist bought numerous brands out of bankruptcy, including Pier 1, Stein Mart, Modell’s Sporting Goods and others.
With the deal, Tuesday Morning, which is largely focused on home goods, will get access to products from REV’s Pier 1 brand, along with digital and e-commerce capabilities as Tuesday Morning looks to build out an online presence.
While the board will change, Tuesday Morning’s management team will remain in place, the company said.
The company said the deal is expected to close on or around Sept. 19.
