What's Next for Tile Shop?

It's been quite a week for Tile Shop (NASDAQ: TTS  ) . After a fraud accusation from Gotham City Research last Thursday, shares dropped more than 50%, but have since moved higher as major financial firms and some analysts came to the defense of the upstart home-improvement retailer.

For now, shares seem to have found an equilibrium around $16-$17, or about 25% less than where they stood before the short-seller released its thesis. What should investors look for going forward? Fool contributor Jeremy Bowman explains what you need to know about Gotham City's allegation and what investors can expect from Tile Shop in the near future.

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  • Report this Comment On November 23, 2013, at 8:03 PM, MonsterFluff wrote:

    almost all consumer retail puts employee expense in operating expense. That doesn't make TTS any different than its peers. Why do you present this as a reason they are allowed a higher gross margin?

  • Report this Comment On November 27, 2013, at 11:19 AM, TMFHobo wrote:

    @LeKitKat:

    Thanks for the question. Yes, employee expense is always an operating expense, but there are two primary kinds of operating expenses - Cost of Goods Sold (COGS)and Selling, General & Administrative expenses (SG&A).

    In order to get gross profit, you subtract Cost of Goods Sold from revenue. SG&A comes after. COGS generally includes labor and product costs, but Tile Shop charges their labor to SG&A as a selling expense, since their salesmen are paid on commission.

    Hope that helps. Take a look at any company's income statement for more information.

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