Christopher Karlin of Aquitania Capital Management presented his investment thesis on Tuesday Morning (US: TUEM) at Best Ideas 2022.
Thesis summary:
Tuesday Morning is an off-price home goods retailer that has been operating since 1974. In 2020, the company filed for bankruptcy during the COVID pandemic to shrink its store base from 687 to 490 stores and negotiate more favorable rental terms on the remaining stores.
It emerged from bankruptcy at the end of 2020 with a significantly reduced cost structure and brought in a highly regarded and well-incentivized management team in mid-2021. The stock has been under pressure as the savings achieved during bankruptcy have been obscured by increased supply chain costs – which should abate in 2022.
Normalized EBIT is estimated at $50 million, and TUEM shares recently traded below 5x this figure, creating an attractive reward-to-risk opportunity for the patient investor, with upside to ~$6 per share and downside to $1.60 per share, as compared to the recent quote of $2.05 per share.
slide presentation audio recording
About the instructor:
Christopher Karlin has been in the investment business since 1991. Prior to founding Aquitania Capital Management in 2012, Christopher held positions as a Research Analyst and Portfolio Manager at First Pacific Advisors, Kestrel Investment Management and Fairview Capital Investment Management. Christopher interned with Farallon Capital Management while pursuing his MBA. He began his career with Wells Fargo Nikko Investment Advisors which later became a part of Blackrock. Christopher received his BBA from the University of Wisconsin in 1990 his MBA from Yale University in 1998 and has held the CFA designation since 1994.
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