When we last visited Income Investor selection Tuesday Morning (Nasdaq: TUES), it was struggling to clear the cobwebs from its head after finally bringing to an end an uninspiring 2006 performance that left it with quite the hangover. Unfortunately, the room was still spinning into the new year, as its first-quarter results show a huge drop in earnings and lower comps despite a small increase in overall sales. However, management provided improved guidance, which means it is finally feeling a bit more comfortable about its prospects.
For the first quarter ended March 31, Tuesday Morning earned just $1 million, or $0.03 per diluted share, after earning $6.5 million, or $0.16 per diluted share, in the first quarter last year. Although net sales edged up 0.7% to $189.2 million, comps were 5.4% lower as fewer people visited its stores, but spent a bit more per visit.
Tuesday Morning may offer a diverse lineup of discounted products, but it relies heavily on home furnishings. This is an area that's been difficult for many companies lately. While it performed a bit better than its lowly expectations, Pier 1 (NYSE: PIR) continues to fight to stay afloat. There has even been debate regarding some of the numbers presented recently at Bed Bath & Beyond (Nasdaq: BBBY).
Despite these facts and its own recent struggles, Tuesday Morning management feels strongly about making improvements throughout the remainder of the year. It expects to earn between $0.85 and $0.90 per share for the year. That's above analysts' estimates of $0.80 per share, but essentially flat compared to the $0.87 per share it earned last year. Meanwhile, it expects comps to be flat, or even down as much as 2%.
While it is hardly off to the races, Tuesday Morning is at least beginning to show signs of life. The retailer is reasonably priced, maintains a good cash balance, and pays a dividend that is currently yielding about 5.7%. If it can steadily improve throughout the year and into next year, I think it will make a decent investment for patient, long-term investors.
For more on the happenings at Tuesday Morning and the home-furnishings biz, grab a comfy chair and read:
Just as Tuesday Morning can give your house a fresh look, stocks that pay dividends can help keep your portfolio returns looking fresh. To find out how Income Investor is outperforming the market, come sign up today for a free 30-day trial.
Fool contributor Mike Cianciolo welcomes feedback and doesn't own any of the companies in this article. Bed Bath & Beyond is both a Stock Advisor and an Inside Value selection. The Fool has a disclosure policy.
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