Textiles Weaken at Tuesday Morning

Dallas — The textiles category was among the "particularly depressed" segments at Tuesday Morning Corp. during its third quarter, the 821-unit retailer said during its earnings call last week.

Kathleen Mason, president and ceo, likened textiles to mid-level collectibles — both categories proving poor performers during the period, and both also areas "we probably would not want to go too deep into" in inventory any time soon.

The closeout chain reported a net loss of $4.7 million for the quarter ended March 31, a swing to the red from net income of $1.0 million in the same period last year.

Sales of $178.4 million fell 5.7%, while comps were down 8.2%.

Through three quarters, net income was slashed 39.3% to $17.0 million from $28.0 million in the year-ago period. Sales of $688.8 million were off 2.3%, while comps are down 6.1%.

"Textiles has been a very weak and difficult category," Mason explained. "And I believe it's because of the irrational promotional activity that is going on by a lot of textiles retailers who have just really been trying to manage their business and keep generating sales." Sales of home-related products remained weak "even for broad-based retailers," she noted.

Mason emphasized that Tuesday Morning is "not walking away from [the textiles category] by any stretch of the imagination, but, once again, we're going to try to respond to that environment without totally cratering our gross margins in those categories."

Lines that suffered less during the challenging quarter included new high-end items, such as Lalique-branded pieces. When an analyst asked Mason about the performance of specific new higher ticket items, she laughingly replied, "Shh, don't tell," and then added, "It's done well."

Tuesday Morning's outlook for the uncertain retail period is optimistic. Mason noted the company's customer base — while shopping less frequently than in the past — remains "intact," and said the retailer is well equipped to "deal with" difficult times. "We do have the experience of managing through a number of quarters of evaluating expenses and managing inventories to trend," she said, later adding, "We've been dealing with a number of store closings and bankruptcies [among competitors] over the last couple of years [as well as] a highly promotional environment. It's almost part of our DNA now to try to deal with that."

"We do respond to the mix based on demand," Mason said. "So we're continuing to evaluate what the customer is responding to and the depth of the response to the inventory that we cover."