Dallas-based Tuesday Morning Corp. filed for bankruptcy Wednesday, saying that the pandemic’s “forced prolonged closure” of its almost 700 stores put it into financial distress.
The company, which was founded in Dallas in 1974, plans to close about 230 stores and exit Chapter 11 in the fall with 450 stores.
Earlier this month, the retailer’s bank, J. P. Morgan Chase, told the company to hire financial advisers. The retailer said Wednesday that it has gotten $100 million in debtor-in-possession financing from Chase to get it through bankruptcy, which was filed in U.S. Bankruptcy Court in Dallas.
That financing agreement requires Tuesday Morning to obtain additional financing of up to $25 million.
Tuesday Morning CEO Steven Becker said in a statement that before the pandemic, the retailer’s balance sheet was conservative, with only $3.6 million drawn on its $180 million credit line. That credit line was reduced to $130 million while stores were temporarily closed. As it was beginning to reopen stores, Tuesday Morning warned investors in April that it needed new financing and might not be able to withstand the COVID-19 disruption. The company said before the pandemic that it had improved its brand assortment and was investing in its technology.
“The complete halt of store operations for two months put the company in a financial position that can be effectively addressed only through a reorganization in Chapter 11,” Becker said.
Tuesday Morning follows Dallas-based Neiman Marcus and Plano-based J.C. Penney into bankruptcy court after the pandemic forced retailers deemed nonessential to close stores for almost two months. Fort Worth-based Pier 1 Imports filed for bankruptcy in February and planned to find a buyer and reorganize, but it ended up having to liquidate. Pier 1 is holding going-out-of-business sales. Dallas-based online men’s clothing brand J. Hilburn has also been reorganizing in bankruptcy since May 4.
Tuesday Morning said it will ask the court to close an initial 133 of its 687 stores and its distribution center in Phoenix, a fairly new facility that ended up costing more than planned and taking longer to open. Tuesday Morning has 110 stores in Texas, including 37 in Dallas-Fort Worth.
A dozen Texas stores are in that first batch of closings: at 9384 N. Central Expressway in Dallas; 104 North Murphy Road in Murphy; 819 Arapaho Road and 1750 E. Belt Line Road in Richardson; 3401 W. Airport Frwy. in Irving; and 5930 Interstate 20 West in Arlington.
Other Texas locations closing are in Austin, Clute, Lufkin, Pasadena, San Antonio and Seabrook.
The retailer has reopened more than 80% of its stores, and more than 7,300 employees have returned to work, Becker said. Reopened stores are seeing sales increases, he said, "we have the support of our lenders to reorganize through this process.”
As of April 24, when it started reopening stores, the company says its comparable store sales have been about 10% higher than sales during the same period last year.
But other locations were already a drag on operations. The first batch of stores that are closing “were identified as underperforming or are situated in areas where too many locations are in close proximity," the company said.
Tuesday Morning said it plans to renegotiate a significant number of leases during the bankruptcy reorganization. After its first round of closings, it will be down to 555 stores, and the company said it plans to close 100 additional locations.
The company, which had sales last year of $1 billion, said it has assets of $92 million and liabilities of $88.35 million. Among its trade creditors, only one is owed more than $1 million, as the company buys manufacturers’ overruns and merchandise that other retailers canceled from dozens of suppliers. That frequently changing inventory is one reason the retailer has said it hasn’t established an e-commerce business.
Tuesday Morning sells bed, bath and kitchen textiles, home décor and rugs, luggage, pet accessories and toys. It also has a large seasonal business, and during Christmas particularly, its stores are stocked with party and decorative supplies.
The store has a strong following, and many shoppers make a practice of going up and down its aisles to see what’s new as part of their shopping errands. That may be true in Texas and throughout the Southeast, but the company operated in 39 states.
“A lack of marketing and poor word-of-mouth recommendations means that a lot of potential consumers are simply not aware of the brand,” said GlobalData in a research report on Wednesday. While some stores are in good locations, the report said, “many are poorly sited and suffer from a lack of visibility.”
It’s been hard for one of the original home discounters to grow as competition in home furnishings has accelerated in recent years, both online and in stores. TJMaxx, Marshalls, Big Lots and Burlington have expanded their home departments, and so did the traditional discounters Walmart and Target. TJX also created Home Goods in the 1990s and expanded it to a chain of 814 stores.
“Although the pandemic has been a challenging time, we’re well-positioned going forward,” Becker said in an emailed statement. “On emergence, the company will be stronger with a footprint of our best-performing locations.”
Haynes and Boone is the retailer’s law firm. Miller Buckfire, a Stifel company, is serving as financial adviser, and AlixPartners is its restructuring adviser.
Twitter: @MariaHalkias
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