Off-price retailer Tuesday Morning Corp. has filed for Chapter 11 bankruptcy protection, in response to the “immense strain the COVID-19 pandemic and related store closures have put on the business.”
The retailer, based in Dallas, TX, opened in 1974 and currently operates 687 stores in 39 states. It said it expects to close approximately 230 stores in a phased approach. The first wave of 132 closures will take place this summer and also include the company’s distribution center in Phoenix that supports theses stores. These stores were identified as underperforming or are situated in areas where too many locations are in close proximity.
The company plans to exit approximately 100 additional locations and emerge from Chapter 11 this fall with a footprint of around 450 stores.
“Ultimately, this process will provide Tuesday Morning with an opportunity to continue navigating the COVID-19 pandemic and emerge as a stronger company by early fall 2020,” the company said in a statement.
Following the closure of the entire store portfolio as a result of COVID-19, Tuesday Morning has re-opened over 80% of its existing store footprint to date and expects to continue store re-openings and bringing associates back to work over the coming weeks. Since Tuesday Morning began re-opening its stores on April 24, 2020, comparable store sales for the reopened stores have been approximately 10% higher than sales during the same period in fiscal 2019, and over 7,300 associates have returned to work.
To enable the company to continue operations during the reorganization process, it has obtained a commitment from its existing lender group to provide $100 million of debtor-in-possession (DIP) financing. As required by the DIP agreement, the retailer must obtain a commitment for up to $25 million of additional financing, which it is negotiating.
“The prolonged and unexpected closures of our stores in response to COVID-19 has had severe consequences on our business,” CEO Steve Becker stated. “Prior to the pandemic, we were gaining momentum in our merchant organization, growing our vendor base and improving brands, assortment and value for our customers, while investing in our technology and corporate leadership team. However, 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.
“We plan to emerge from Chapter 11 in a stronger position as a leading home goods off-price retailer, providing unmatched value to our customers. The commitment from our lenders to provide access to significant capital demonstrates faith in our value-driven business model and iconic brand. Looking ahead, we’ve been encouraged by very positive performance of the business as we continue to re-open our doors and welcome back our dedicated customers.”
The Chapter 11 process is not expected to impact the company’s ability to re-open stores closed due to COVID-19 and it will continue to do so in accordance with state and local mandates.
Haynes and Boone, LLP is serving as legal advisor, Miller Buckfire, a Stifel company, is serving as financial advisor, and AlixPartners, LLP is serving as restructuring advisor to Tuesday Morning.