Americans love a discount and they love to feel as if they found bargains that others may have missed.
That's why stores that use a value-based treasure-hunt concept have generally done well.
Marshalls, TJ Maxx, and HomeGoods, all owned by TJX Cos. (TJX), use this model. Customers visit those stores not fully knowing what they might find. That makes a visit as much about entertainment as shopping.
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This model works for a number of top retailers. It may not be the full business model for warehouse clubs Costco (COST) and Walmart's (WMT) Sam's Club, but a big part of why a lot of people join warehouse clubs is the joy of the hunt. You visit for groceries, but you also might come home with a winter coat, a book, some new jeans, or a kayak.
This model has also proved resilient during economic downturns. People can visit a store that offers low prices and a treasure-hunt experience to feel as if they're both having fun and being careful about spending.
That makes the failure of Tuesday Morning (TUEM) , an off-price retailer selling home decor, bedding, bath, pet products, and kitchen items, even more shocking.
The retailer, which filed Chapter 11 in February with the expectation of selling some stores and continuing to operate, said on its Facebook page that “we have begun the process of closing all our stores.”
Image source: Shutterstock
Tuesday Morning Failed In Its Chapter 11 Efforts
Tuesday Morning, one of the original retailers to use the off-price, treasure-hunt model, was unable to recover from the covid pandemic.
Unlike rival Ollie's Bargain Outlet (OLLI), which was able to pivot to selling food and essential items during the period when nonessential retailers were closed in many markets, Tuesday Morning spent long periods with most of its stores shuttered.
Once the impact of the pandemic faded, Tuesday Morning seemed unable to get its customers back. The retailer shrunk its portfolio to under 500 stores from 700, but its model was hurt badly by residual fallout from the pandemic.
"Gross margin was $30.3 million, and gross margin rate was 18.7% for the fourth quarter of fiscal 2022. Gross margin was $46.7 million, and gross margin rate was 26.3% for the fourth quarter of fiscal 2021. This year-over-year decline in gross margin is primarily due to increased supply chain and transportation costs," the company said in a news release about its fourth-quarter and full-year results.
That fairly stunning margin shrinkage contributed to the company's failure. Chief Executive Fred Hand tried to be optimistic at the time. (He stepped down a few weeks later.)
"We continue to believe in the long-term opportunities ahead for Tuesday Morning. While the back half of fiscal 2022 presented significant macro-related challenges, I am proud of how our teams remained focused and committed to delivering our customers an improved treasure-hunt experience," he said.
"....With the recent support of our new investors, we move forward into fiscal 2023 with a strengthened balance sheet, incremental liquidity, and a strategic partner who we believe over time will have a positive influence on driving incremental traffic and sales to our stores.”
Ultimately, those new investors declined to fully fund the company's turnaround, which led to its decision to shut down.
What's Next for Tuesday Morning?
The retailer has begun liquidation sales at its remaining stores. Its website now says "everything must go, all stores are closing." The chain is also advertising that all merchandise is now 30% off the lowest ticketed price.
Tuesday Morning has not set a final day for operations. It did, however, warn customers holding gift cards that they will be accepted only until May 13.
The Dallas-based retailer, which began operating in 1974, described its target customer on its website:
"Our customer is a savvy shopper with a discerning taste for quality at a value. With almost 500 stores across the country, we are in the neighborhood in convenient, accessible locations. Our store layout is clean and simple, and that low-frills environment means we can pass even deeper savings on to our dedicated customer base."
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