It was a pretty uneventful quarter at discount retailer and Income Investor recommendation Tuesday Morning
I assume the Street was forgiving of Tuesday Morning's mediocre performance because it saw it coming well in advance. Management previously warned that this year would prove challenging and full-year comps would be flat to down as much as 2%. Further, the company said it expects to earn between $0.04 and $0.06 per share in the second quarter as energy costs negatively impact earnings. Although that's down from the $0.07 per share it earned in the second quarter last year, it is right in line with analysts' predictions of $0.05 per share.
While I understand the reasons why investors are choosing to stick with Tuesday Morning, including its impressive 6.7% dividend yield, I'm a bit surprised to see its stock price pushed so much higher. While it continues to keep earnings positive, earnings growth is negative. It also continues to operate in a very challenging environment that has taken its toll on the likes of Bed Bath & Beyond
I see nothing to indicate there are upcoming improvements in the environment that will soon benefit Tuesday Morning. Energy costs don't seem to be set to decrease anytime soon, the housing market is still in a slump, and competition remains fierce. Therefore, I see little reason to invest in a company that is battling these factors and has declining earnings and flat or declining full-year comps as a result.
To catch up on recent news in home furnishings, read:
- Fool on Call: Bed Bath & Beyond U.S. Borders
- Tuesday Morning Sees the Clouds Clearing
- A Tuesday Morning Hangover