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Shopping Centers Today -> August 2001
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TOP OF THE MORNING
Tuesday Morning offers low prices on top-shelf home accessories
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| Tuesday Morning bends the retail rules by offering high-end home accessories in a warehouse setting. |
By Kimberly Pfaff
Anyone who believes that deep discounters deal only with low-end goods has never been to Tuesday Morning.
The Dallas-based retailer specializes in high-end home accessories and gifts, from Ralph Lauren linens to fine china, imported lamps, rugs, wood accents and more — all at prices that are 50% to 80% below retail. It’s an upscale treasure hunt, and the firm’s typical customer is a college-educated female professional with a median household income of $63,000.
“It doesn’t matter what socioeconomic strata you’re in these days, people want bargains,” said Robin Murchison, a senior vice president and equity analyst with Hibernia Southcoast Capital, New Orleans. “People are smarter about how they spend their money, and to the extent that you can provide them with a compelling product, they’ll make a purchase. I think Tuesday Morning does that.”
Something else Tuesday Morning does is to bend the rules of retailing. In addition to employing a no-frills approach (affluent customers shop in a warehouse-style format with open racks and cement floors), the chain also operates on a part-time basis. Stores are closed about 100 days a year, and open eight times a year for special themed sales “events” lasting from four to six weeks. Tied into peak selling seasons, the events are promoted with customer mailers and advertisements; between events, the chain closes to restock.
The unconventional approach creates a shopping frenzy for buyers, who know that when they see something they like they should buy it today, because it might not be there tomorrow.
“The day they’re opening, we have people lined up almost around the block to get in the store,” said John Sfire, president of The Fidelity Group, which owns nine commercial centers in the Chicago metropolitan area, and has two Tuesday Morning stores.
“It’s not uncommon to see BMWs and Mercedes-Benzes in the parking lot,” he added. “They create an interesting phenomenon, and they’re constantly busy. I’d work with them again in a heartbeat.”
“The vendors like it, because sometimes merchandise is gone within minutes when the store opens,” said Kathleen Mason, Tuesday Morning’s president and CEO, who came on board last year. “The merchandise doesn’t languish on our shelves; it’s gone.”
To be sure, there have been recent problems. The chain’s stock was down for an extended period, and distribution costs skyrocketed, leading the retailer to bring in two outside consulting firms.
But Tuesday Morning is streamlining its distribution process, having closed most of its regional centers and now focusing solely on its main facility in Dallas. Earlier this year, the firm hired Michael Marchetti as senior vice president of strategic planning, with direct responsibility for distribution.
And the company’s stock, which had dipped as low as $4 a share in November, was over $13 at press time. “We’re on a steady upward climb,” noted Mason.
Further signs of recovery: Sales for first-quarter 2001 rose 21% to $109.5 million over last year, while comparable-store sales increased 8.4% for the quarter. Overall sales for 2000 were $586.9 million, up 20% from 1999.
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| Tuesday Morning offers high-end housewares at deeply discounted prices. |
While the full effect of some corporate changes won’t be seen until the second half of the year, industry watchers believe the chain is back on track. “They’ve identified the problems, and they’re correcting them,” analyst Murchison noted. “They had to get someone in there who would say, ‘We have to make some changes,’ and that person had to bring in the right people to deal with that, and they apparently did. It seems like we’re beginning to see changes, more quickly than I expected.”
Tuesday Morning relies on relationships with vendors for merchandise, and occasionally ventures into private-label goods. About 60% of the items are imported. The recent dot-com debacle provided a fresh source of merchandise, as the firm bought out inventory from Toysmart.com and Pets.com. “We buy no seconds or irregulars,” noted Mason. “Unlike other off-price retailers, we carry only first-quality merchandise, and we reject anything that’s simply irregular.”
Stores generally range in size from 8,000 to 10,000 square feet, although in the past the company has experimented with sizes from 4,000 to 30,000 square feet. And although the store is not open year-round, it still does about $200 a square foot.
The company has 461 stores in 41 states, and has been adding stores at a rate of about 10% annually; about 35 new stores are planned for this year. The company says it could eventually expand to 900 or 1,000 stores.
The name Tuesday Morning is rooted in founder Lloyd Ross’ past. As a teen he delivered The Saturday Evening Post and, ever since then, the Canadian-born entrepreneur had always wanted to name his own company after his favorite day of the week — Tuesday. Ross always believed that it was the first positive day of the week. So, in 1971, when he discovered an unfilled niche in the retail industry and formulated the concept for a deep-discount store specializing in selling first-quality, famous-maker, upscale home furnishings and gifts, Tuesday Morning was the name he chose for the chain.
While the firm plans to venture into new territory, such as Seattle, it also plans to fill in some existing locations. “What’s really amazing about our customer is that they like to shop multiple stores; they know it’s a treasure hunt,” noted Mason. “The cannibalization problems aren’t as great for us. I came in with an opinion that we should be careful about that, but the stores seem to rebound on their own.”
The majority of Tuesday Morning stores are located in strip centers; a small percentage are stand-alone locations. “There are certain co-tenants we would prefer, but we’ve been in attics, basements, the rear of shopping centers,” noted Mason. “What really drives the economics is the ability to achieve a favorable rent structure, in order to pass the savings on. We’re very careful about the economics of the deal.”
One deciding factor the chain is adamant about when choosing a location, however, is demographics. “We reject areas that don’t have a higher demographic, because we are selling high-end products, even though we are greatly discounted,” explained Mason. “If you’re selling a set of sheets for $300 at discount, they may have been legitimately sold for $1,200. When you’re selling a high-end product, it takes a certain customer to recognize the value.”
Will high-end customers still flock to Tuesday Morning for discounted Burmese baskets, mouth-blown crystal and fine European linens if the economy sours? Analysts believe so. “Their sales gains might decline to single-digit from double-digit, but I think they’ll be able to weather it,” said Murchison. “People’s desires don’t change, so they look for affordable ways to get what they want, and that’s what Tuesday Morning will give them.”
 | Current Issue November 2008 |