Tuesday Morning is facing Chapter 11 bankruptcy and selling everything they have in a complete liquidation.
Tuesday Morning is a popular discount store headquartered in Dallas, Texas. The major retailer recently announced they will close down 24 of its stores nationwide and has filed for bankruptcy. Now, Tuesday Morning is selling everything they have in a complete liquidation.
According to Retail Dive, Tuesday Morning’s creditor, Wells Fargo, increased its reserve requirements from $10 million to $30 million. The CEO, Andrew Berger, shared that he felt there was no need to deprive the company of operating funds or demand that they liquidate and fire hundreds of employees. Now, the store announced they plan to close half of their stores nationwide.
Due to the bankruptcy and store closing, many items are being marked down significantly. NewsBreak reports that Tuesday Morning once had 687 stores across the U.S., but it has faced many financial issues since then. The retailer is selling everything in select stores, including fixtures and equipment.
When a company has a lot of debt, it might not be able to pay it back. To help the company get back on its feet, the US government created a special kind of bankruptcy called Chapter 11 bankruptcy. This allows a company to keep running while it works out a plan to pay back the money it owes.
This plan allows businesses to reorganize their debts and restructure their operations. This kind of bankruptcy is often used by businesses that have complex financial structures, like Tuesday Morning. Under Chapter 11, the company will have to make significant changes that may involve reducing costs or selling assets to pay off creditors.
The bankruptcy court oversees the process and works with the business to develop a plan for repayment that is fair and reasonable to all parties. Filing Chapter 11 bankruptcy does not necessarily spell the end of a business. However, how long can Tuesday Morning survive once it begins selling its fixtures and equipment?
According to the Administrative Office of the U.S. Courts, 4,918 businesses filed for Chapter 11 bankruptcy in the United States this past year. That is a 1.7 percent increase from the previous year. The success rate for emerging from Chapter 11 bankruptcy can be as low as 10 percent.
Several well-known companies have emerged from Chapter 11 bankruptcy including General Motors, United Airlines, and Marvel Entertainment. However, it seems the odds are stacked against Tuesday Morning. CNN reports that this is Tuesday Morning’s second bankruptcy in three years.
Many factors led to Tuesday Morning’s bankruptcy declaration. The Covid-19 pandemic caused widespread store closures and a significant decrease in foot traffic. As a result, it was unable to generate enough cash flow.
Tuesday Morning reported dwindling revenue and high debt on its balance sheet. The company’s debt payments were a significant drain on its cash flow. The high-interest rates it was paying made it difficult to generate profits.
Tuesday Morning had aggressively expanded at one point with a reported 500 locations nationwide. Unfortunately, this led to a high number of underperforming stores. Their expenses included high rents, because stores were often located in upscale shopping centers, and high employee wages and benefits.
A full list of open locations can be found on Tuesday Morning’s website. Many items are marked down, and even fixtures are being sold. Hurry in soon because it’s likely a once in a retailer’s lifetime sale!