Deutsche Bank Downgrades Tuesday Morning (TUES) to Sell

July 11, 2008 8:32 AM EDT

Deutsche Bank downgrades Tuesday Morning (NASDAQ: TUES) from Hold to Sell and lowers their price target from $4.30 to $3.40.

The firm believes that Tuesday Morning is losing share and gross margin in a crowded home furnishing space affected by weak housing and consumers and said, "Tuesday Morning remains a weak competitor in a tough sector. We don't look for improvements in the home furnishings macro any time soon, as consumers stay at bay. This should keep the entire industry promotional, which dilutes Tuesday's 'cheapest pricing' value proposition, in our view. We believe that management has been slow to develop sales/margin initiatives, relative to competitors."

The firm also believes that the FY09 consensus is too aggressive because it implies stabilization. Deutsche Bank believes that stabilization will not happen in FY09 and looks for the Street to reduce estimates. Also, the firm believes that Tuesday Morning’s valuation is too high relative to the industry.

Tuesday Morning Corporation operates as a closeout retailer of upscale home furnishings, housewares, gifts, and related items in the United States.

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