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Tuesday Morning upscales mix, expands stores

Dallas– Closeout chain Tuesday Morning is on plan to expand its store base and emphasize upscale products during 2007, the company said during its first quarter earnings call this morning.

This real estate initiative calls for 50 net new stores, the expansion of about 25 existing units, and the relocation of about 50 stores. That translates to a store-base growth of 6% and a square-footage increase of about 10% for the year.

Kathleen Mason, president and ceo, remarked, “With the expansion opportunity, the company will be working with high-producing stores to increase the selling square footage. We believe this adjustment in our real estate plan will benefit the company and better position us for the long term while maintaining a low cost per square foot rent expense.”

The company reported flat sales and a wider loss for the first quarter compared to the same period one year ago, but the statement was on target and the outlook was better than anticipated. Sales were up 0.7% to $189.2 million, with a 5.4% drop in comp sales, while net income was down 84% to 1.0 million, or $0.03 per share.

Guidance was for 2007 sales of $975 million to $985 million, comps flat to down 2.0%, and earnings of $0.85 to $0.90 per share.

At the end of the first quarter, Tuesday Morning operated 795 stores in 47 states. That includes 10 relocated units and two expanded sites accomplished during the first quarter.

“We have already started the process,” said Michael Marchetti, evp and coo. “The expansion side takes a little more negotiation. We did do two during the first quarter. And we do have a lot lined up for this quarter and the back half of the year as well.”

Identifying a trend toward more high-end decorative categories vs. utilitarian goods, Tuesday Morning is stocking its stores with more upscale products as well as more seasonal offerings. Without offering more detail “for competitive reasons,” Mason said the company is working on its total mix “to really pay attention to the performance of the decorative categories…Our average tickets have really maintained, so our total mix continues to be favorably an upscale mix. We’re working hard at making sure we keep that upscale image.”

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