Executive Summary

Q4 FY2022 was weak operationally: comps declined 8.0%, net sales fell 8.7% y/y to $161.9M, and gross margin compressed to 18.7% (down ~760 bps y/y) on elevated supply chain and freight costs; net loss widened to $28.1M ($0.33) versus $18.9M ($0.22) a year ago .
Sequentially, revenue ticked up vs Q3 ($161.9M vs $159.6M) but profitability deteriorated (Adjusted EBITDA loss of $22.3M vs $11.9M loss in Q3) amid higher recognized logistics costs and deleverage on lower sales .
Management closed a $35M convertible financing with REV/Ayon, gaining liquidity and an omni-channel/brand partnership (Pier 1 licensing), which they expect to help traffic and mix over time; they forecast FY2023 comps flat to -3% and Adjusted EBITDA of -$18M to -$23M, with incurred supply chain costs ~$15M below recognized costs embedded in guidance .
Q1 FY2023 guide calls for comps down 10%–12% and Adjusted EBITDA of -$21M to -$24M, reflecting a soft start and the roll-through impact of capitalized supply chain costs; August trends improved on “receipt freshness,” but September was disrupted by vendor shipment delays during financing negotiations .
Street consensus from S&P Global was unavailable for TUEMQ this quarter; however, Q4 comps missed the prior quarter’s -3% to -5% comp guide (actual -8%)—a likely negative surprise for investors tracking internal guidance .

What Went Well and What Went Wrong

What Went Well

Strategic capital and partner: $35M convertible financing from REV/Ayon closed, providing incremental liquidity and a partner with brand (Pier 1) and e-commerce capabilities to drive traffic over time. “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…” .
Product/receipts momentum in August: Trends “significantly improv[ed] in August as we brought in more receipts and our receipt freshness started to exceed last year,” indicating the model responds when inventory flow normalizes .
Cost discipline backdrop: Management is acting on distribution center staffing, detention charges, and freight rates to reduce incurred logistics costs versus recognized costs; they expect incurred supply chain/transportation to be ~$15M lower than the recognized amounts in FY2023 Adjusted EBITDA guidance .

What Went Wrong

Demand and promotions: Comparable store sales fell 8% y/y on lower transactions, with management citing decades-high inflation and a highly promotional retail backdrop that pressured traffic and pricing .
Margin compression: Gross margin dollars declined to $30.3M and rate to 18.7% (26.3% last year), primarily due to increased supply chain and transportation costs; operating loss widened to $26.9M .
Shipment delays into September: Vendor negotiations tied to securing financing delayed shipments, reversing August momentum and pushing Q1 FY2023 comps guidance to -10% to -12% .

Financial Results

Metric	Q4 2021	Q3 2022	Q4 2022
Net Sales ($M)	$177.3	$159.6	$161.9
Gross Margin ($M)	$46.7	$38.9	$30.3
Gross Margin Rate (%)	26.3%	24.4%	18.7%
SG&A ($M)	$59.6	$55.6	$57.4
SG&A (% of Sales)	33.6%	34.8%	35.4%
Operating Income (Loss) ($M)	$(16.2)	$(16.4)	$(26.9)
Net Income (Loss) ($M)	$(18.9)	$(18.2)	$(28.1)
Diluted EPS ($)	$(0.29)	$(0.21)	$(0.33)
Adjusted EBITDA ($M, non-GAAP)	$(8.2)	$(11.9)	$(22.3)

KPIs and Balance/Liquidity

KPI	Q4 2021	Q3 2022	Q4 2022
Store Count (end of period)	490	490	489
Comp Store Sales (%)	—	+0.6%	-8.0%
Total Inventory ($M)	$145.1	$176.6	$148.5
Cash & Equivalents ($M)	$6.5	—	$7.8
Revolving Credit Borrowings ($M)	$12.0	$54.1	$57.2
ABL Availability ($M)	—	$26.6	$10.3

Notes:

Non-GAAP: Adjusted EBITDA reconciliations provided by the company; management cites supply chain/transportation costs and other items within adjustments .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Comparable Store Sales (%)	Q1 FY2023	N/A	-10% to -12% vs Q1 FY2022	Initiated
Adjusted EBITDA ($M)	Q1 FY2023	N/A	-$21 to -$24	Initiated
Comparable Store Sales (%)	FY2023	N/A	Flat to -3% vs FY2022	Initiated
Adjusted EBITDA ($M)	FY2023	N/A	-$18 to -$23	Initiated
Comparable Store Sales (%)	Q4 FY2022 (for context)	-3% to -5% (from Q3 call)	Actual: -8.0%	Below prior guide

Management also disclosed an expectation that incurred supply chain/transportation costs in FY2023 will be approximately $15M less than the recognized costs reflected in annual Adjusted EBITDA guidance, implying potential cash cost relief vs P&L recognition .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 & Q3)	Current Period (Q4)	Trend
Supply chain and freight costs	Q2: Expected elevated inbound freight through FY2022; Q3: recognized ~$6M of capitalized supply chain costs in gross margin; margin rates pressured	Gross margin rate fell to 18.7% primarily due to increased supply chain and transportation costs; expect incurred costs ~$15M below recognized amounts in FY2023	Still pressured, some relief expected in cash costs
Macro/promotional environment	Q2: Omicron/weather softness; Q3: inflationary pressures and highly promotional environment	Continued difficult consumer environment and promotions weighing on comps (-8%)	Persistent headwind
Inventory flow and receipts	Q2: Improved freshness; pack/flow/short-hold strategies; Q3: permanent markdowns to clean up aged goods	August improved as receipt freshness exceeded last year; September disrupted by vendor shipment delays during financing	Improving when receipts normalize; execution risk during financing
Strategic investment/omni-channel	Q2/Q3: Debt transactions improved liquidity; no omni-channel partner	Closed $35M convertible financing; Pier 1 licensing; evaluating e-commerce via REV infrastructure	New strategic vector (brands/e-comm)
Logistics/DC and IT initiatives	Q2: Two-DC network benefits under study; calendar/system enhancements; Q3: continued work on DC/real estate	Focus remains on transitioning DC network and enhancing IT platform	Ongoing multi-year execution
Store footprint actions	—	FY2023 plan: open ~1, close ~5; store count 489	Net modest closures
Liquidity/ABL	Q3: revised ABL/FILO; 12-month liquidity comfort	$32M (REV SPV) + $3M (Ayon/mgmt) convertible debt; $10.3M ABL availability at FY end	Liquidity improved post-close

Management Commentary

“We continue to believe in the long-term opportunities ahead for Tuesday Morning… our guidance for the year assumes sequential topline improvement as well as continued disciplined expense management.” – CEO Fred Hand .
“Over time, we see tremendous opportunities… access to other REV brands… leverage REV’s expertise, infrastructure and systems, technology and e-marketing… evaluate [e-commerce] as another potential opportunity.” – CEO Fred Hand .
“In August, we started to see a significant positive change in trend… however… we began to see delays in product shipments given ongoing negotiations… These delays negated the improvement we saw in August.” – CEO Fred Hand .
“Gross margin rate… declined to 18.7%… primarily driven by an increase in recognized supply chain and transportation costs… [and] reduction in markup and incremental markdowns.” – COO/Interim CFO Marc Katz .
“We expect [FY2023 incurred] supply chain and transportation cost to be approximately $15 million less than the recognized costs, which are reflected in the annual EBITDA guidance.” – COO/Interim CFO Marc Katz .

Q&A Highlights

The company provided pre-recorded prepared remarks and guided for Q1 and FY2023; there was no live Q&A session for Q4 FY2022 (press release directed investors to prepared remarks webcast and dial-in) .

Estimates Context

Wall Street consensus (S&P Global) for TUEMQ Q4 FY2022 EPS and revenue was unavailable through our S&P Global connection for this ticker mapping at this time; therefore, beat/miss vs consensus cannot be assessed. We note Q4 comps (-8%) came in below the prior guide (-3% to -5%) from the Q3 call, implying a shortfall vs internal expectations .

Key Takeaways for Investors

Structural margin pressure remains the core issue: recognized logistics costs and a promotional environment pushed gross margin down to 18.7%; watch for how quickly incurred cost relief (management’s ~$15M expectation) converts into improved P&L margins in FY2023 .
Liquidity and strategy pivot: the $35M convertible financing plus Pier 1 licensing/e-comm optionality could bolster traffic/mix over time; near-term, it stabilized vendor relationships and working capital, but execution risk remains on receipt flow and brand integration .
Top-line trajectory: Management assumes sequential improvement through FY2023 (easier comps, Pier 1 arrivals in Q4), but Q1 guide (-10% to -12% comps) underscores a weaker start; monitor monthly trend inflections as receipts normalize .
Expense control vs deleverage: SG&A as a % of sales rose to 35.4% on lower sales; continued cost discipline and footprint optimization (modest net closures) are needed to offset deleverage .
Guidance credibility: The miss vs prior Q4 comp guide (-8% actual vs -3% to -5% guided) heightens the bar on FY2023 guidance execution; watch cadence into holiday and the timing/scale of Pier 1 product .
Trading setup: Absent published Street estimates, narrative catalysts are tied to monthly comps stabilization, gross margin recapture as incurred costs fall, and tangible traffic uplift from REV/Pier 1 initiatives .

References:

Q4/FY2022 8-K (press release and financials)
Q4 FY2022 prepared remarks (transcript)
Strategic investment 8-Ks (September 2022)
Prior quarter transcripts (Q3 and Q2 FY2022)

TUESDAY MORNING CORP/DE (TUEMQ)·Q4 2022 Earnings Summary