UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑K10-K

(Mark One)

For the fiscal year ended June 30, 20172021

or

Commission File Number 0‑19658001-40432

Tuesday Morning Corporation

(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well‑known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  ☐  No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  ☐  No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 Regulation S‑T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  ☒  No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S‑K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or any amendment of this Form 10‑K.  ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Non‑accelerated filer ☐                                     Smaller reporting company ☐   (Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of itsinternal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firmthat prepared or issued its audit report.  ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Act).  Yes  ☐  No  ☒

The aggregate market value of shares of the registrant’s common stock held by non‑affiliates of the registrant at December 31, 20162020 wasapproximately $193,603,090$78,942,980 based upon the closing sale price on the Nasdaq Global SelectOTC Pink Market reported for such date.

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.   Yes  ☒  No  ☐

As of the close of business on August 22, 2017,September 7, 2021, there were 45,145,07985,934,779 outstanding shares of the registrant’s common stock.

Documents Incorporated By Reference:

Portions of the Registrant’s Definitive Proxy Statementregistrant’s definitive proxy statement to be filed in connection with the 20172021 Annual Meeting of Stockholders are incorporated herein by reference (to the extent indicated) into Part III of this Form 10‑K.10-K.

Table of Contents

Cautionary Statement RegardingRegarding Forward‑Looking Statements

This Form 10‑K contains forward‑looking statements within the meaning of the federal securities laws and the Private Securities Litigation Reform Act of 1995, which are based on management’s current expectations, estimates and projections. These statements may be found throughout this Form 10‑K, particularly under the headings “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” among others. Forward‑looking statements typically are identified by the use of terms such as “may,” “will,” “should,” “expect,” “anticipate,” “believe,” “estimate,” “intend” and similar words, although some forward‑looking statements are expressed differently. You should consider statements that contain these words or words that state other “forward‑looking” information carefully because they describe our current expectations, plans, strategies and goals and our beliefs concerning future business conditions, future results of operations, future financial positions, and our current business outlook.  Forward looking statements also include statements regarding the Company’s strategy, future operations, performance and prospects, sales and growth expectations, our liquidity, capital expenditure plans, future store openings and closings, our inventory management plans and merchandising and marketing strategies.

The terms “Tuesday Morning,” “the Company,” “we,” “us,” and “our” as used in this Form 10‑K refer to Tuesday Morning Corporation and its subsidiaries.

The factors listed below in Item 1A. under the heading “Risk Factors” and in other sections of this Form 10‑K provide examples of risks, uncertainties and events that could cause our actual results to differ materially from the expectations expressed in our forward‑looking statements. These risks, uncertainties and events also include, but are not limited to, the following:

•our ability to successfully implement our long-term business strategy;

•changes in economic and political conditions which may adversely affect consumer spending;

•our failure to identify and respond to changes in consumer trends and preferences;

•our ability to continuously attract buying opportunities for off-price merchandise and anticipate consumer demand;

•our ability to successfully manage our inventory balances profitably;

•our ability to effectively manage our supply chain operations;

•loss of, disruption in operations, or increased costs in the operation of our distribution center facilities;

•unplanned loss or departure of one or more members of our senior management or other key management;

•increased or new competition;

•our ability to successfully execute our strategy of opening new stores and relocating and expanding existing stores;

•increases in fuel prices and changes in transportation industry regulations or conditions;

•our ability to generate strong cash flows from operations and to continue to access credit markets;

•increases in the cost or a disruption in the flow of our imported products;

•changes in federal tax policy;

•the success of our marketing, advertising and promotional efforts;

•our ability to attract, train and retain quality employees in appropriate numbers, including key employees and management;

•increased variability due to seasonal and quarterly fluctuations;

our ability to protect the security of information about our business and our customers, suppliers, business partners and employees;

•our ability to comply with existing, changing and new government regulations;

•increased costs or exposure to fraud or theft resulting from payment card industry related risk and regulations.

The forward‑looking statements made in this Form 10‑K relate only to events as of the date on which the statements are made. Except as may be required by law, we disclaim obligations to update any forward‑looking statements to reflect events or circumstances after the date on which the statements were made or to reflect the occurrence of unanticipated events. Investors are cautioned not to place undue reliance on any forward‑looking statements.

PART I

Item 1. Business

Business Overview

One of the original off-price retailers, Tuesday Morning is a leading destination for unique home and lifestyle goods. We were established in 1974 and specialize in name-brand, better/best products for the home. We are known for irresistible finds at an incredible value and we search the world for amazing deals to bring to our customers.

We are a true closeoutan off-price retailer, selling high-quality products at prices generally below those found in boutique, specialty and department stores.stores, catalogs and on-line retailers. Our customers come to us for an ever-changing, exceptional assortment of brand names at great prices. Our primary merchandise categories are luxuryupscale home textiles, home furnishings, housewares, gourmet food, pet supplies, bath and body products, toys and seasonal décor. Key vendors are Peacock Alley, Sferra, Lenox, Waterford, Hartmann, Home Environment, and Charisma. We buy our inventory opportunistically from a variety of sources including direct from manufacturer, through closeout sellers and occasionally other retailers. We have strong supplier relationships and we strive to make it easy for our vendors to do business with us, so that they oftenwill come to us first. Our goods are deeply-discounted, but never seconds or irregulars.

Our customer is a savvy shopper with a discerning taste for quality at a value. Our strong value proposition has established a loyal customer base, who we engage regularly with social media, email, direct mail, and digital media and newspaper circulars.media.

With over 700490 stores across the country as of June 30, 2021 (“fiscal 2021”), we are in the neighborhood in convenient, accessible locations. Our store layout is clean and simple, and the low-frills environment means we can pass even deeper savings on to our dedicated customer base. Our stores operate in both primary and secondary locations of major suburban markets, near our middle and upper‑income customers. We are generally able to obtain favorable lease terms due to our flexibility regarding site selection and our straightforward format, allowing us to use a wide variety of space configurations.

We operate our business as a single operating segment.

COVID-19 Pandemic

The COVID-19 pandemic has had an adverse effect on our business operations, store traffic, employee availability, financial conditions, results of operations, liquidity and cash flow. On March 25, 2020, we temporarily closed all of our 687 stores nationwide, severely reducing revenues and resulting in significant operating losses and the elimination of substantially all operating cash flow. As allowed by state and local jurisdictions, 685 of our stores gradually reopened as of the end of June 2020. Two stores were permanently closed during the fourth quarter 2020.  In accordance with our bankruptcy plan of reorganization, described below, we completed the permanent closure of 197 stores in the first quarter of 2021 and the closure of our Phoenix, Arizona distribution center (“Phoenix distribution center”) in second quarter of 2021. In addition, as part of our restructuring, we secured financing to pay creditors in accordance with the plan of reorganization and to fund planned operations and expenditures.  

Future impacts from the COVID-19 pandemic will depend on the potential further geographic spread and duration of the ongoing pandemic, the timing and extent of recovery in traffic and consumer spending in our stores, the extent and duration of ongoing impacts to domestic and international supply chains and the related impacts on the flow, availability and cost of products, the production and administration of effective medical treatments and vaccines, and the actions that may be taken by various governmental authorities and other third parties in response to the pandemic.

Emergence from Chapter 11 Bankruptcy Proceedings

Business Strategy

Several years ago,In fiscal 2021, we beganfocused on resetting our merchandise strategy to our heritage of being an off-price retailer. We edited our assortment and drove our merchandising efforts to deliver our customers a transformationtreasure hunt and strong values that are representative of our Company in order to regain our position as a leader in off‑the off price retail. We executed on a number of critical steps under our business turnaround strategy. These steps included exiting certain categories, refreshing and reorganizing stores, reducing the level of clearance merchandise, modifying company policies, and eliminating assets that were no longer needed. During this phase,marketplace. Additionally, we took specific stepsworked to improve our inventory management process, sourcing of inventory, merchandise offerings and sales productivity.

In fiscal year 2014, we moved into our rebuilding phase, in which we have focused on supply chain efficiency, working capital management and inventory turns, repositioningand continued to optimize our real estate portfolio, marketing strategy, continued improvement of our merchandise assortment,effectiveness, cost controls and infrastructure.

As a key component of this rebuilding phase, we are focused on improving store locations and the in-store experience for our customers. In this regard, we are closing less productive stores with limited foot traffic and relocating some of these stores to, or opening new stores in, better locations with footprints that are on average three to five thousand square feet larger. In some cases, we are also expanding existing stores to this larger footprint. In addition, we are improving the finishes in these relocated, new and expanded stores, such as polished concrete floors, simple but attractive fixture packages and new lighting and color palettes, in an effort to match the in-store experience for our customers with the quality of our products.

Competition & Seasonality

We believe the principal factors by which we compete are value, brand names, pricebreadth and breadthquality of our product offerings. Our prices are generally below those of department stores and specialty stores, catalog and on‑line retailer pricesretailers and we offer a broad assortment of high‑end, first quality, brand-name merchandise. We currently compete against a diverse group of retailers, including department, discount and specialty stores, e‑commerce and catalog retailers and mass merchants, which sell, among other products, home furnishings, housewares and related products. We also compete in particular markets with a substantial number of retailers that specialize in one or more types of home furnishing and houseware products that we sell. Some of these competitors have substantially greater financial resources that may, among other things, increase their ability to purchase inventory at lower costs or to initiate and sustain aggressive price competition.

Our business is subject to seasonality, with a higher level of our net sales and operating income generated during the quarter ending December 31, which includes the holiday shopping season. Net sales in the quarters ended December 31, 2016, 2015,2020, 2019, and 20142018 accounted for approximately 34%29%, 33%37% and 33%34% of our annual net sales for 2017, 2016 and 2015 fiscal years 2021, 2020 and 2019, respectively.  The rate for fiscal 2021 is impacted by store closures during the first quarter of fiscal 2021.

Working Capital Items

Because of the seasonal nature of our business, our working capital needs are greater in the months leading up to our peak sales period from Thanksgiving to the end of December. The increase in working capital needs during this time is typically financedWe expect to fund our operations with funds generated from operating activities, available cash flow provided by operations and cash equivalents, and borrowings under our revolving credit facility.  Additional details are provided in theSee Liquidity and Capital Resources section in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.Operations for additional information.  

Inventory is one of the largest assetassets on our balance sheet. Efficient inventory management is a key component of our business success and profitability. To be successful, we must maintain sufficient inventory levels to meet our customers’ demands while keeping the inventory fresh and turning the inventory appropriately to optimize profitability.

Purchasing

We provide an outlet for manufacturers and other sources looking for effective ways to reduce excess inventory resulting from order cancellations by retailers, manufacturing overruns, bankruptcies and excess capacity. Since our inception, we have not experienced significant difficulty in obtaining first quality, brand-name off‑price merchandise in adequate volumes and at competitive prices. We utilize a mix of both domestic and international suppliers. We generally pay our suppliers timely and generally do not request special consideration for markdowns, advertising or returns. During fiscal 2017,2021, our top ten vendors accounted for approximately 12%10.3% of total purchases, with no single vendor accounting for more than 3%1.3% of total purchases. We continue to build strong vendor relationships following our emergence from Chapter 11 and have had no significant supplier issues as a result of the bankruptcy filing.

Low Cost Operations

It is our goal to operate with a low cost structure in comparison to many other retailers. We place great emphasis on expense management throughout the Company. Our stores have a “no frills” format and we are flexible in our site selection in order to maintain favorable lease terms.

Customer Shopping Experience

While we offer a “no frills” format in our stores, we have made progress in reorganizing and refreshing our stores to enhance our customers’ shopping experience. We offer a flexible return policy and we accept all major payment methods including cash, checks, and all major credit cards.cards, gift cards and digital wallets. We continue to work on initiatives we believe will enhance our customers’ shopping experience.

Distribution Network

We utilize 1.4In fiscal 2021, we primarily utilized our 1.2 million square feet of distribution center facilities in Dallas, Texas along with bypass facilities and a 0.6 million square foot distribution center in Phoenix, Arizonanetwork of pool point facilities throughout the country which service all of our stores throughout the United States. The Phoenix distribution center commenced operations duringDuring the fourth quarter of fiscal 2016. During fiscal 2017,2020, we incurred incremental costs relatedreached the decision to the continued integration ofclose our 0.6 million square foot distribution center in the Phoenix distribution center and consolidate operations in our Dallas-based facility, withwhich was completed in the second quarter of fiscal 2021. In June 2021, we leased an additional 100,000 square foot warehouse in Dallas, Texas (the “Stemmons DC Facility”) to supplement our multi-distribution center network which adversely impacted gross margin.  Net sales during fiscal 2017 were negatively impacted by lower than plan store level inventories for a portion of the year due to the supply chain challenges we experienced during the year. We shipped approximately 116 million units to our stores during fiscal 2017.distribution network.

Pricing

Our pricing policy is to sell merchandise generally below retail prices charged by department stores and specialty stores, catalog and on‑line retailers. Prices are determined centrally and are initially uniform at all of our stores. Once a price is determined for a particular item, labels displaying two‑tiered pricing are affixed to the product. A typical price tag displays a “Compare At” or “Compare Estimated Value” price, and “Our Price”. Our buyers determine and verify retail “Compare At” or “Compare Estimated Value” prices by reviewing prices published in advertisements, catalogs, on‑line and manufacturers’ suggested retail price lists and by visiting department or specialty stores selling similar merchandise. Our information systems provide daily sales and inventory information, which enables us to evaluate our prices and inventory levels and to adjust prices on unsold merchandise in a timely manner and on a periodic basis as dictated by sales volumes and incoming purchases,sell-through percentages, thereby effectively managing our inventory levels and offering competitive pricing.

Employees

Human Capital Management

As of June 30, 2017,2021, we employed 1,8341,607 persons on a full‑time basis and 7,0444,692 persons on a part‑time basis.basis, which is a significant reduction from the prior year due to the impacts of COVID-19 resulting with a reduction in force we implemented in the fourth quarter of fiscal 2020. Our employeesassociates are not represented by any labor unions. Weunions, and we have not experienced any work stoppage due to labor disagreements, and wedisagreements. We believe that our employee relationsassociate relationships are strong.strong, in part, due to the following areas of commitment to a loyal and inclusive associate base:

Associate Engagement

We have an Engagement Committee of which the associate members are diverse from across the organization. The Committee focuses on communication and events to bring our associates together such as ongoing associate events, associate appreciation week, community volunteer opportunities, and charitable events. We conduct periodic associate opinion surveys to directly engage with and collect feedback from our associates, which we use to improve the experience of our teams. Our leadership and human resources department maintain an open-door policy for associates to report concerns, and we provide an anonymous reporting hotline, available in multiple languages. Also, we conduct town hall meetings so that associates can directly hear about the business from senior leaders. We strive to deliver a workplace experience where the quality of our engagement with fellow associates, business partners and customers aligns with our company values.  

Talent Development

We utilize an online training and education platform for all associates to be compliant with federal, state, privacy and cybersecurity laws as applicable. We also invest in our store associates through structured training programs for our assistant store managers and store managers that enable our associates to be more effective leaders and helps them strive towards achieving the career they envision for themselves. All associates are given detailed feedback about their performance on at least an annual basis through formal performance appraisals. Based on the associate’s career goals, leaders may work to design individual development plans. Further, the company engages in succession planning to identify and develop talent within the organization.

Diversity, Equity and Inclusion

Associate engagement and retention require an understanding of the needs of a diverse, creative and purpose-driven workforce. We firmly believe that working in a culture focused on diversity, equity and inclusion spurs innovation, creates healthy and high-performing teams, and delivers superior customer experiences. We aim to provide equal opportunity for all employees. As of June 30, 2021, 74.5% of our total workforce identified as female and 43.8% were minorities. Additionally, 50% of our Vice-Presidents and above identified as female. Currently, we are building relationships with organizations, universities, colleges and other networks to expand our reach to potential diverse candidates including a summer internship program at the corporate office that we look to expand to other areas of the business in the near future.

We remain focused on increasing the representation of minority talent through hiring and career development by striving to have our stores reflect the diversity in their communities. Our core value of being welcoming to all celebrates our commitment to respect and diversity. Further, the stores offering a diverse range of products creates an inclusive shopping experience.  Our passion for the deal extends to our commitment to providing our customers with a multicultural range of products at a variety of price points.

Safety/Health and Wellness

We are committed to providing a safe and healthy work environment for our associates and customers. Aligned with our values, we strive to continuously monitor our work environment to keep our associates and customers as safe as possible. We have an open door policy for all associates to report concerns or safety issues. If an associate does not feel comfortable reporting an incident to their immediate manager or the human resources department, then the associate may contact the company’s ethics and compliance hotline via a toll free number or access it via the web.  The hotline is available 24 hours a day, 7 days a week. Our commitment to associate safety also include ongoing safety communications with weekly safety topics, safety training and audits for review.

During fiscal 2020, to address the safety and public health of our workforce and customers due to the unprecedented COVID-19 pandemic, we implemented a number of protocols, including:

During the fourth quarter of fiscal 2021, we began offering a vaccination incentive program including offering vaccines onsite at the corporate office and distribution center.

Compensation and Benefits

We offer a benefits package designed to put our associates’ health and well-being, and that of their families, at the forefront. Depending on position and location, associates may be eligible for: 401(k) plan and other investment opportunities; paid vacations, holidays and other time-off programs; health, dental and vision insurance; health and dependent care tax-free spending accounts; medical, family and bereavement leave; paid maternity/primary caregiver benefits; tax-free commuter benefits; wellness programs; time off to volunteer, and matching donations to qualifying nonprofit organizations.

In connection with the COVID-19 pandemic, we acted quickly to meet the needs of our team members, by providing certain enhanced benefits, such as:

• Created a dedicated associate hotline to provide real time support for any COVID-19-related issues;

• Reinforced social distancing through signage, floor markers, taped grid patterns on floors, and directional arrows;

• Continued telehealth support and employee assistance programs; and

• Provided special wellness resources and tools.

Intellectual Property

The trade name “Tuesday Morning” is material to our business. We have registered the name “Tuesday Morning” as a service mark with the United States Patent and Trademark office. We have also registered other trademarks including but not limited to “Tuesday Morning Perks^®”.  Solely for convenience, trademarks and trade names referred to in this Form 10‑K may appear without the ^® or ^tm symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the rights of the applicable licensor, to these trademarks and trade names.

Corporate Information

Tuesday Morning Corporation is a Delaware corporation incorporated in 1991. Our principal executive offices are located at 6250 LBJ Freeway, Dallas, Texas 75240, and our telephone number is (972) 387‑3562.

We maintain a website at www.tuesdaymorning.com. Copies of our Annual Reports on Form 10‑K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8‑K and any amendments to such reports filed with, or furnished to, the Securities and Exchange Commission (the “SEC”) are available free of charge on our website under the Investor Relations section as soon as reasonably practicable after we electronically file such reports and amendments with, or furnish them to, the SEC.

The reports we file or furnish to the SEC may be read and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1‑800‑SEC‑0330.  In addition, the SEC maintains a website, www.sec.gov, which contains the reports, proxy and information statements and other information which we file with, or furnish to, the SEC.

Stores and Store Operations

Store Locations.  As of June 30, 2017,2021, we operated 731490 stores in the following 40 states:

In fiscal 2022, we plan to open approximately eight new stores. We also plan to close approximately eight stores.

Site Selection. We continuallycontinue to evaluate our current store base for potential enhancement or relocation of our store locations. As a result of this ongoing evaluation, we intend to pursue attractive relocation opportunities in our existing store base, close certain stores by allowing leases to expire for underperforming stores or where alternative locations in similar trade areas are not available at acceptable lease rates, and, when appropriate, open new stores. For both new stores and relocations, we negotiate for upgraded sites.  Additionally, we have reviewed all of our leases and renegotiated the terms, with favorable outcomes for many of our leases.  We believe that this strategy will better position us for long‑term profitable growth.

Store Leases. We expectconduct substantially all operations from leased facilities, including our corporate offices in Dallas and the Dallas warehouse, distribution and retail complex, which were leased on December 31, 2020, subsequent to upgrade both the appearancesale and operationleaseback of our new and relocated stores compared to our existing stores and do not anticipate difficulty in locating additionalthose facilities on that date. Our retail store locations, in areas with our target customer demographics.

Store Leases.  Except for one store adjacent tocorporate office and our existing distribution center in Dallas, Texas, we lease our store locationsare under operating leases that typically include renewal options. Somewill expire over the next 1 to 10 years. Many of our leases also provide for contingent rent based upon store sales exceeding stipulated amounts.

Our store leases typically include “kick clauses,” which allow us,options to renew at our option, to exitdiscretion. We include the lease with no penalty 24 to 60 months after entering into the lease if store sales do not reach a stipulated amount statedrenewal option periods in the calculation of our operating lease assets and liabilities when it is reasonably certain that we will renew the lease. These kick clauses provide us with flexibility in opening new stores and relocating existing stores by allowing us to quickly and cost‑effectively vacate a siteWe also lease certain equipment under finance leases that does not meet our sales expectations. As a result, we generally do not operate locations with continued store‑level operating losses.expire within 5 years.

Store Layout. Our site selection process and “no frills” approach to presenting merchandise allow us to use a wide variety of space configurations. The size of our stores ranges from approximately 5,0006,000 to 30,90030,000 square feet, averaging on a per store basis approximately 11,50012,400 square feet as of June 30, 2017.2021.  Historically, we have designed our stores to be functional, with less emphasis placed upon fixtures and leasehold aesthetics. With our current real estate strategy, we continue to be focused on designing a very functional, easy to shop environment that also highlights the quality of the merchandise. We display all merchandise on counters, shelves, or racks while maintaining minimum inventory in our stockrooms.

Store Operations.  Our stores are generally open seven days a week, excluding certain holidays. We continue to maintain theThe timing and frequency of shipments of merchandise whichto our stores results in improved efficiency of receiving and restocking activities at our stores. We attempt to align our part‑time employees’ labor hours with anticipated workload and with current customer sales. We conduct annual physical counts of our store merchandise staggered throughout the second half of our fiscal year, primarily when stores are closed.

Store Management.  Each store has a manager who is responsible for recruiting, training and supervising store personnel and assuring that the store is managed in accordance with our established guidelines and procedures. Store managers are full‑time employees. Our store managers are supported by district and regional level support. Store managers are responsible for centrally-directed store disciplines and routines. The store manager is assisted primarily by part‑time employees who generally serve as assistant managers and cashiers, and help with merchandise stocking efforts. Members of our management visit selected stores periodicallyroutinely to review inventory levels and merchandise presentation, personnel performance, expense controls, security and adherence to our policies and procedures. In addition, district and regional field managers periodically meet with senior management to review store policies and discuss purchasing, merchandising, advertising and other operational issues.

Item 1A.  Risk Factors

Our business is subject to significant risks, including the risks and uncertainties described below. These risks and uncertainties and the other information in this Form 10‑K, including our consolidated financial statements and the notes to those statements, should be carefully considered. If any of the events described below actually occur, our business, financial condition or results of operations could be adversely affected in a material way.

Risks Related to Our Business

Outbreaks of communicable disease, or other public health emergencies, such as the current COVID-19 pandemic, could substantially harm our business.

The COVID-19 pandemic has had, and could continue to have, an adverse effect on our business operations, store traffic, employee availability, financial condition, results of operations, liquidity and cash flow.

As of March 25, 2020, we had temporarily closed all of our stores nationwide, severely reducing revenues and resulting in significant operating losses and the elimination of substantially all operating cash flow. Stores gradually reopened as allowed by state and local jurisdictions, and all but two of our stores had reopened as of the end of June 2020. In the first quarter of fiscal 2021, we completed the permanent closure of 197 stores in connection with our Chapter 11 bankruptcy proceedings. The pandemic also has significantly impacted the global supply chain, with restrictions and limitations on business activities causing disruption and delay. These disruptions and delays have strained certain domestic and international supply chains, which have affected and could continue to negatively affect the flow or availability of certain products.

Our customers may also be negatively affected by the consequences of COVID-19, which could negatively impact demand for our products as customers delay, reduce or eliminate discretionary purchases at our stores. Any significant reduction in customer visits to, and spending at, our stores caused directly or indirectly by COVID-19 would result in a further loss of revenue and cash flows and negatively impact profitability and could result in other material adverse effects.

The extent to which the ongoing COVID-19 pandemic will continue to impact our business, results of operations, financial condition and liquidity is uncertain considering the rapidly evolving environment and will depend on future developments, including the potential further geographic spread and duration of the ongoing pandemic, the timing and extent of recovery in traffic and consumer spending in our stores, the extent and duration of ongoing impacts to domestic and international supply chains and the related impacts on the flow, availability and cost of products, the production and administration of effective medical treatments and vaccines, and the actions that may be taken by various governmental authorities and other third parties in response to the pandemic.

Increases in fuel prices and changes in transportation industry regulations or conditions may increase our freight costs and thus our cost of sales, which could have a material adverse effect on our business and operations.

Our freight costs are impacted by changes in fuel prices through surcharges. Fuel prices and surcharges affect freight costs both on inbound shipments from vendors and outbound shipments to our stores. In addition, the U.S. government requires drivers of over‑the‑road trucks to take certain rest periods which reduces the available amount of time they can drive during a 24‑hour period. Changes in trucking industry conditions, such as truck driver shortages and highway congestion, could increase freight costs. High fuel prices or surcharges, as well as stringent driver regulations and changes in transportation industry conditions, may increase freight costs and thereby increase our cost of sales.

An increase in the cost or a disruption in the flow of our imported products may significantly decrease our sales and profits.

Merchandise manufactured and imported from overseas represents the majority of our total product purchases acquired both domestically and internationally. A disruption in the shipping of imported merchandise or an increase in the cost of those products may significantly decrease our sales and profits. In addition, if imported merchandise becomes more expensive or unavailable, the transition to alternative sources may not occur in time to meet our demands. Products from alternative sources may also be of lesser quality and more expensive than those we currently import.

Risks associated with our reliance on imported products include disruptions in the shipping and importation or increases in the costs of imported products because of factors such as:

The products we buy abroad are sometimes priced in foreign currencies and, therefore, we are affected by fluctuating exchange rates. We might not be able to successfully protect ourselves in the future against currency rate fluctuations, and our financial performance could suffer as a result.

Our results of operations will be negatively affected if we are unsuccessful in effectively managing our supply chain operations.

With few exceptions, all inventory is shipped directly from suppliers to our distribution network, primarily through our Dallas distribution center, where the inventory is then processed, sorted and shipped to our stores. We also use bypass and pool point facilities to distribute inventory to our stores. We depend in large part on the orderly operation of this receiving and distribution process, which depends, in turn, on adherence to shipping schedules and effective management of our distribution centers. External factors, such significant supply chain dislocation caused by COVID-19 pandemic and excessive market demand, can negatively impact our supply chain operations resulting in increased costs and delay.  We may not be successfulanticipate all of the changing demands which our operations will impose on our receiving and distribution system.

The loss of, disruption in operations of, or increased costs in the implementationoperation of our long‑term business strategy, which could adversely affectdistribution center facilities would have a material adverse effect on our business and our results of operations.

Our success depends,Events beyond our control, such as disruptions in operations due to fire or other catastrophic events, labor disagreements or shipping problems, may result in delays in the delivery of merchandise to our stores. In the event our distribution center is shut down for any reason, we cannot assure that our insurance will be sufficient, or that insurance proceeds will be paid to us in a significant degree, on our abilitytimely manner.  As a result of the COVID-19 pandemic and impact to successfully implement our long‑term business strategy. Our ability to successfully implement our business, strategies depends upon a significant numberwe decided to close our Phoenix distribution center in fourth quarter fiscal 2020 with the closure completed in the second quarter of factors, including but not limited to:

Changes in economic and political conditions may adversely affect consumer spending, which could significantly harm our business, results of operations, cash flows and financial condition.

The success of our business depends, to a significant extent, upon the level of consumer spending. A number of factors beyond our control affect the level of consumer spending on merchandise that we offer, including, among other things:

The merchandise we sell generally consists of discretionary items. Reduced consumer confidence and spending cut backs may result in reduced demand for our merchandise, including discretionary items, and may force us to take significant inventory markdowns. Reduced demand also may require increased selling and promotional expenses. Adverse economic conditions and any related decrease in consumer demand for our merchandise could have a material adverse effect on our business, results of operations, cash flows and financial condition.

Any failureFailure to identify and respond to changes in consumer trends and preferences could significantly harm our business.

The retail home furnishings and housewares industry is subject to sudden shifts in consumer trends and consumer spending. Our sales and results of operations depend in part on our ability to predict or respond to changes in trends and consumer preferences in a timely manner. Although our business model allows us greater flexibility than many traditional retailers to meet consumer preferences and trends, we may not successfully do so. Any sustained failure to anticipate, identify and respond to emerging trends in consumer preferences could negatively affect our business and results of operations.

Our sales depend on a volume of traffic to our stores, and a reduction in traffic to, or the closing of, anchor tenants and other destination retailers in the shopping centers in which our stores are located could significantly reduce our sales and leave us with excess inventory.

Most of our stores are located in shopping centers that benefit from varied and complementary tenants, whether specialty or mass retailers, and other destination retailers and attractions to generate sufficient levels of consumer traffic near our stores. Any decline in the volume of consumer traffic at shopping centers, whether because of consumer preferences to shop on the internet or at large warehouse stores, an economic slowdown, a decline in the popularity of shopping centers, the closing of anchor stores or other destination retailers or otherwise, could result in reduced sales at our stores and leave us with excess inventory, which could have a material adverse effect on our financial results or business.

We must continuously attract buying opportunities for off‑price merchandise and anticipate consumer demand as off‑price merchandise becomes available, and our failure to do so could adversely affect our performance.

By their nature, specific off‑price merchandise items are available from manufacturers or vendors generally on a non‑recurring basis. As a result, we do not have long‑term contracts with our vendors for supply, pricing or access to products, but make individual purchase decisions, which may be for large quantities. Due to economic uncertainties, some of our manufacturers and suppliers may cease operations or may otherwise become unable to continue supplying off‑price merchandise on terms acceptable to us. We cannot assure that manufacturers or vendors will continue to make off‑price merchandise available to us in quantities acceptable to us, which is especially true at present with the inherent supply chain issues caused by the COVID-19 pandemic, or that our buyers will continue to identify and take advantage of appropriate buying opportunities. In addition, if we misjudge consumer demand for products, we may

significantly overstock unpopular products and be forced to take significant markdowns and miss opportunities to sell more popular products. An inability to acquire suitable off‑price merchandise in the future or to accurately anticipate consumer demand for such merchandise would have an adverse effect on our business, results of operations, cash flows and financial condition.

Our results of operations will be negatively affected if we are not successful in managing our inventory profitably.

Inventory is one of the largest assetassets on our balance sheet and represented approximately 62% and 67%35% of our total assets at June 30, 20172021 and 2016, respectively.23% at June 30, 2020. Our inventory balance at June 30, 2021 is higher than during fiscal 2020 due to the COVID-19 disruption to our sales and store closures during the third and fourth quarter of fiscal 2020. Efficient inventory management is a key component of our business success and profitability. To be successful, we must maintain sufficient inventory levels to meet our customers’ demands without allowing those levels to increase to such an extent that the costs to store and hold the goods unduly impact our financial results. If our buying decisions do not accurately

predict customer trends or purchasing actions, we may have to take unanticipated markdowns to dispose of the excess inventory, which also can adversely impact our financial results. We continue to focus on ways to reduce these risks, but we cannot assure that we will be successful in our inventory management. If we are not successful in managing our inventory balances, our results of operations may be negatively affected. We have recorded significant inventory write‑downs from time to time in the past and there can be no assurances that we will not record additional inventory charges in the future.

Our results of operations will be negatively affected if we are unsuccessful in managing our supply chain operations.

With few exceptions, all inventory is shipped directly from suppliers either to our distribution center in the Dallas, Texas metropolitan area, or our Phoenix distribution center, where the inventory is then processed, sorted and shipped to our stores. We depend in large part on the orderly operation of this receiving and distribution process, which depends, in turn, on adherence to shipping schedules and effective management of the distribution center. We may not anticipate all of the changing demands which our expanding operations will impose on our receiving and distribution system. We may also experience increased costs in continuing to integrate the Phoenix distribution center with our existing distribution operations.

The loss of, disruption in the operation of, or increased costs in the operation of our distribution center facilities would have a material adverse effect on our business and operations.

Events beyond our control, such as disruptions in operations due to fire or other catastrophic events, labor disagreements or shipping problems, may result in delays in the delivery of merchandise to our stores. We also cannot assure that our insurance will be sufficient, or that insurance proceeds will be timely paid to us, in the event a distribution center is shut down for any reason.

The unplanned loss or departure of one or more members of our senior management or other key employeesmanagement could have a material adverse effect on our business.

Our future performance will depend in large part upon the efforts and abilities of our senior management and other key employees. The loss of service of these persons could have a material adverse effect on our business and future prospects. We do not maintain key person life insurance for our senior management. In addition, we have recently experienced turnover of a number of members of senior management. We cannot provide any assurance that we will not experience future turnover related to our senior management team.

Our business is intensely competitive, and a number of different competitive factors could have a material adverse effect on our business, results of operations, cash flows and financial condition.

The retail home furnishings and housewares industry is intensely competitive. As an off‑price retailer of home furnishings and housewares, we currently compete against a diverse group of retailers, including department stores and discount stores, specialty, on‑line, and catalog retailers and mass merchants, which sell, among other products, home furnishing, houseware and related products similar and often identical to those we sell. We also compete in particular markets with a substantial number of retailers that specialize in one or more types of home furnishing and houseware products that we sell. Many of these competitors have substantially greater financial resources that may, among other things, increase their ability to purchase inventory at lower costs or to initiate and sustain aggressive price competition.

A number of different competitive factors could have a material adverse effect on our business, results of operations, cash flows and financial condition, including:

We cannot assure that we will be able to continue to compete successfully with our existing or new competitors, or that prolonged periods of deep discount pricing by our competitors will not materially harm our business. We compete for customers, employees, locations, merchandise, services and other important aspects of our business with many other local, regional, national and

international retailers. We also face competition from alternative retail distribution channels such as catalogs and, increasingly, e‑commerce websites and mobile device applications. Changes in the merchandising, pricing and promotional activities of those competitors, and in the retail industry, in general, may adversely affect our performance.

If we are unable to successfully execute our strategy of relocating and expanding existing stores and when appropriate, opening new stores, our operating performance could be adversely impacted.

As part of our business strategy, we intend to pursue relocation opportunities to improve our existing store base as well as open new stores that will offset the closing of lower performing stores as they come up for renewal. However, we cannot assure that we will be able to achieve our relocation goals or that we will be able to operate any new or relocated stores profitably. Further, we cannot assure that any new or relocated store will achieve similar operating results to those of our existing stores or that new, relocated or expanded stores opened in markets in which we operate will not have a material adverse effect on the net sales and profitability of our existing store base.

The success of our store development strategy will be dependent upon numerous factors, many of which are beyond our control, including the following:

While we opened stores in existing markets during fiscal 2017, 2016, and 2015, we also opened stores in new markets during that time period. These markets may have different competitive conditions, consumer trends and discretionary spending patterns than our existing markets, which may cause our new stores in these markets to be less successful than stores in our existing markets.

Increases in fuel prices and changes in transportation industry regulations or conditions may increase our freight costs and thus our cost of sales, which could have a material adverse effect on our business and operations.

Our freight costs are impacted by changes in fuel prices through surcharges. Fuel prices and surcharges affect freight costs both on inbound freight from vendors to our distribution centers and outbound freight from our distribution centers to our stores. In addition, the U.S. government requires drivers of over‑the‑road trucks to take certain rest periods which reduces the available amount of time they can drive during a 24‑hour period. Changes in trucking industry conditions, such as truck driver shortages and highway congestion, could increase freight costs. High fuel prices or surcharges, as well as stringent driver regulations and changes in transportation industry conditions, may increase freight costs and thereby increase our cost of sales.

If we are not able to generate strong cash flows from our operations or to continue to access credit markets, we will not be able to support capital expansion, operations or debt repayment.

Our business is dependent upon our operations generating strong cash flows to support capital expansion requirements and general operating activities. In addition, we have a credit agreement providing for a revolving credit facility in the amount of up to $180.0 million. The revolving credit facility contains certain restrictive covenants, and if borrowing availability falls below certain thresholds, a financial covenant. If we are unable to comply with the revolving credit facility, we may not be able to obtain an alternate source of funding on satisfactory terms, if at all. Our inability to continue to generate sufficient cash flows to support these activities or the lack of availability of financing in adequate amounts and on appropriate terms could adversely affect our financial performance.

An increase in the cost or a disruption in the flow of our imported products may significantly decrease our sales and profits.

Merchandise manufactured and imported from overseas represents the majority of our total product purchases acquired both domestically and internationally. A disruption in the shipping of imported merchandise or an increase in the cost of those products may significantly decrease our sales and profits. In addition, if imported merchandise becomes more expensive or unavailable, the transition to alternative sources may not occur in time to meet our demands. Products from alternative sources may also be of lesser quality and more expensive than those we currently import.

Risks associated with our reliance on imported products include disruptions in the shipping and importation or increases in the costs of imported products because of factors such as:

The products we buy abroad are sometimes priced in foreign currencies and, therefore, we are affected by fluctuating exchange rates. We might not be able to successfully protect ourselves in the future against currency rate fluctuations, and our financial performance could suffer as a result.

Changes to federal tax policy may adversely impact our operations and financial performance.

The U.S. federal government is analyzing comprehensive tax reform options that could negatively impact companies that directly or indirectly import goods. Major developments in tax policy or trade relations, such as the disallowance of tax deductions for imported merchandise or the imposition of unilateral tariffs on imported products, could have a material adverse effect on our business, results of operations, financial condition, and liquidity.

Our success depends upon our marketing, advertising and promotional efforts. If we are unable to implement them successfully, or if our competitors are more effective than we are, our results of operations may be adversely affected.

We use marketing and promotional programs to attract customers to our stores and to encourage purchases by our customers. We use various media for our promotional efforts, including print, database marketing, email, direct marketing, and other electronic communications such as online social networks. If we fail to choose the appropriate medium for our efforts, or fail to implement and execute new marketing opportunities, our competitors may be able to attract some of our customers and cause them to decrease purchases from us and increase purchases elsewhere, which would negatively impact our net sales. Changes in the amount and degree of promotional intensity or merchandising strategy by our competitors could cause us to have some difficulties in retaining existing customers and attracting new customers.

If we do not attract, train and retain quality employees in appropriate numbers, including key employees and management, our performance could be adversely affected.

Our performance is dependent on recruiting, developing, training and retaining quality sales, distribution center and other employees in large numbers, as well as, experienced buying and management personnel. Many of our employees are in entry level or

part‑time positions with historically high rates of turnover. Our ability to meet our labor needs while controlling costs is subject to external factors, such as unemployment levels, prevailing wage rates, minimum wage legislation, and changes in rules governing eligibility for overtime and changing demographics. In the event of increasing wage rates, if we do not increase our wages competitively, our customer service could suffer because of a declining quality of our workforce, or our earnings would decrease if we increase our wage rates, whether in response to market demands or new minimum wage legislation. Changes that adversely impact our ability to attract and retain quality employees and management personnel could adversely affect our performance.

Our results of operations are subject to seasonal and quarterly fluctuations, which could have a material adverse effect on our operating results or the market price of our common stock.

Our business is subject to seasonality with a higher level of net sales and operating income generated during the quarter ended December 31, which includes the holiday shopping season. Net sales in the quarters ended December 31, 2016, 2015, and 2014 accounted for approximately 34%, 33% and 33% of our annual net sales for 2017, 2016 and 2015 fiscal years, respectively.  For more information about our seasonality, please read Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quarterly Results and Seasonality.”

Because a significant percentage of our net sales and operating income are generated in the quarter ending December 31, we have limited ability to compensate for shortfalls in December quarter sales or earnings by changes in our operations or strategies in other quarters. A significant shortfall in results for the quarter ending December 31 of any year could have a material adverse effect on our annual results of operations and on the market price of our common stock. In addition, in anticipation of higher sales during this period, we purchase substantial amounts of seasonal inventory and hire many temporary employees. An excess of seasonal merchandise inventory could result if our net sales during this principal selling season were to fall below either seasonal norms or expectations. If our December quarter sales results are substantially below expectations, our financial performance and operating results could be adversely affected by unanticipated markdowns, particularly in seasonal merchandise. Lower than anticipated sales in the principal selling season would also negatively affect our ability to absorb the increased seasonal labor costs.

Our quarterly results of operations may also fluctuate significantly based on additional factors, such as:

These factors could also have a material adverse effect on our annual results of operations and on the market price of our common stock.

If we are unable to maintain and protect our information technology systems and technologies, we could suffer disruptions in our business, damage to our reputation, increased costs and liability, and obstacles to our growth.

The operation of our business is heavily dependent upon the implementation, integrity, security, and successful functioning of our computer networks and information systems, including the point‑of‑sale systems in our stores, data centers that process transactions, and various software applications used in our operations.  Our systems are subject to damage or interruption from weather events, power outages, telecommunications or computer failures, computer viruses, security breaches, employee errors and similar occurrences. A failure of our systems to operate effectively as a result of damage to, interruption, or failure of any of these systems could result in data loss, a failure to meet our reporting obligations, or material misstatements in our consolidated financial statements, or cause losses due to disruption of our business operations and loss of customer confidence. These adverse situations could also lead to loss of sales or profits or cause us to incur additional repair, replacement and development costs. Our inability to improve our information technology systems and technologies may continue to result in inefficiencies, fail to support our growth and may limit opportunities.

Changes to federal tax policy may adversely impact our operations and financial performance.

Changes in U.S. tax or trade policy regarding merchandise produced in other countries could adversely affect our business. Changes in U.S. tariffs, quotas, trade relationships or tax provisions that reduce the supply or increase the relative cost of goods produced in other countries could increase our cost of goods and/or increase our effective tax rate. Although such changes would have implications across the entire industry, we may fail to effectively adapt and to manage the adjustments in strategy that would be necessary in response to those changes. In addition to the general uncertainty and overall risk from potential changes in U.S. laws and policies, as we make business decisions in the face of uncertainty as to potential changes, we may incorrectly anticipate the outcomes, miss out on business opportunities, or fail to effectively adapt our business strategies and manage the adjustments that are necessary in response to those changes. These risks could adversely affect our revenues, increase our effective tax rates, and reduce our profitability.

Our success depends partly upon our marketing, advertising and promotional efforts. If our marketing spend is inadequate, if we fail to implement programs successfully, or if our competitors are more effective than we are, our results of operations may be adversely affected.

Historically, we have used marketing and promotional programs to attract customers to our stores and to encourage purchases by our customers. We use various media for our marketing efforts, including email, direct mail, digital video, digital display, search and social networks. If we fail to choose the appropriate medium for our efforts, or fail to implement and execute new marketing opportunities, our competitors may be able to attract some of our customers and cause them to decrease purchases from us and increase purchases elsewhere, which would negatively impact our net sales. Changes in the amount and degree of promotional intensity or merchandising strategy by our competitors could cause us to have some difficulties in retaining existing customers and attracting new customers.

If we do not attract, train and retain quality employees in appropriate numbers, including key employees and management, our performance could be adversely affected.

Our performance is dependent on recruiting, developing, training and retaining quality sales, distribution center and other employees in large numbers, as well as, experienced buying and management personnel. Many of our store employees are in entry level or part‑time positions with historically high rates of turnover. Our ability to meet our labor needs while controlling costs is subject to external factors, such as unemployment levels, prevailing wage rates, minimum wage legislation, and changes in rules governing eligibility for overtime and changing demographics. In the event of increasing wage rates, if we do not increase our wages competitively, our staffing levels and customer service could suffer because of a declining quality of our workforce, or our earnings would decrease if we increase our wage rates, whether in response to market demands or new minimum wage legislation. In addition, our recent emergence from bankruptcy may negatively impact our ability to attract and retain employees. Changes that adversely impact our ability to attract and retain quality employees and management personnel could adversely affect our performance.

Our results of operations are subject to seasonal and quarterly fluctuations, which could have a material adverse effect on our operating results or the market price of our common stock.

Our business is subject to seasonality with a higher level of net sales and operating income generated during the quarter ended December 31, which includes the holiday shopping season. Net sales in the quarters ended December 31, 2020, 2019, and 2018 accounted for approximately 29%, 37% and 34% of our annual net sales for fiscal years 2021, 2020 and 2019, respectively. For more information about our seasonality, please read Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quarterly Results and Seasonality.”

Because a significant percentage of our net sales and operating income are generated in the quarter ending December 31, we have limited ability to compensate for shortfalls in December quarter sales or earnings by changes in our operations or strategies in other quarters. A significant shortfall in results for the quarter ending December 31 of any year could have a material adverse effect on our annual results

of operations and on the market price of our common stock. In addition, in anticipation of higher sales during this period, we purchase substantial amounts of seasonal inventory and hire many temporary employees. An excess of seasonal merchandise inventory could result if our net sales during this principal selling season were to fall below either seasonal norms or expectations. If our December quarter sales results are substantially below expectations, our financial performance and operating results could be adversely affected by unanticipated markdowns, particularly in seasonal merchandise. Lower than anticipated sales in the principal selling season would also negatively affect our ability to absorb the increased seasonal labor costs.

Our quarterly results of operations may also fluctuate significantly based on additional factors, such as:

These factors could also have a material adverse effect on our annual results of operations and on the market price of our common stock.

If we fail to protect the security of information about our business and our customers, suppliers, business partners and employees, we could damage our reputation and our business, incur substantial additional costs and become subject to litigation and government investigations and enforcement actions.

In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our customers, suppliers and business partners, and personally identifiable information of our customers and employees, on our computer networks and information systems.  The secure processing, maintenance and transmission of this information is critical to our operations.  Despite our security measures, our information technology and infrastructure and that of our service providers may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions.  Cyber threats are rapidly evolving and are becoming increasingly sophisticated. Any such attack or breach could compromise our security and remain undetected for a period of time, and confidential information could be misappropriated, resulting in a loss of customers’, suppliers’, business partners’ or employees’ personal information, negative publicity, harm to our business and reputation, and potentially causing us to incur costs to reimburse third parties for damages and potentially subjecting us to government investigations and enforcement actions. In addition, the regulatory environment surrounding data and information security and privacy is increasingly demanding, as new and revised requirements are frequently imposed across our business. Compliance with more demanding privacy and information security laws and standards may result in significant expense due to increased investment in technology and the development of new operational processes, and implementing new initiatives could result in system disruptions. We maintain cyber risk insurance, but this insurance may not be sufficient to cover all of our losses from any future breaches of our systems.

We are subject to various government regulations, changes in the existing laws and regulations and new laws and regulations which may adversely affect our operations and financial performance.

The development and operation of our stores are subject to various federal, state and local laws and regulations in many areas of our business, including, but not limited to, those that impose restrictions, levy a fee or tax, or require a permit or license, or other regulatory approval, and building and zoning requirements. Difficulties or failures in obtaining required permits, licenses or other regulatory approvals could delay or prevent the opening of a new store, and the suspension of, or inability to renew, a license or permit could interrupt operations at an existing store. We are also subject to laws governing our relationship with employees, including minimum wage requirements, overtime, and other state and federal wage and hour regulations, regulations governing leaves of absence, health insurance mandates, working and safety conditions, and immigration status requirements. In May 2016, the Department of Labor released its final rule increasing the minimum salary that employees must be paid to qualify as exempt from the overtime requirements under the Fair Labor Standards Act, which will likely increase our labor costs.  Additionally, potential changes in federal labor laws including “card check” regulations, could result in portions of our workforce being subjected to greater organized labor influence. This could result in an increase to our labor costs. A significant portion of our store personnel are paid at rates related to the minimum wage established by federal, state and municipal law. Additionally, we are subject to certain laws and regulations that govern our handling of customers’ personal information. A failure to protect the integrity and security of our customers’ personal information could expose us to private litigation and government investigations and enforcement actions, as well as materially damage our reputation with our customers. While we endeavor to comply with all applicable laws and regulations, governmental and regulatory bodies may change such laws and regulations in the future which may require us to incur substantial cost increases. If we fail to comply with applicable laws and regulations, we may be subject to various sanctions, penalties or fines and may be required to cease operations until we achieve compliance which could have a material adverse effect on our consolidated financial results and operations.

We face risks to our corporate reputation from our customers, employees and other third parties.

Damage to our corporate reputation could adversely affect our sales results and profitability. Our reputation is partially based on perception. Any incident that erodes the trust or confidence of our customers or the general public could adversely affect our reputation and operating performance, particularly if the incident results in significant adverse publicity or governmental inquiry. An incident could include alleged acts, or omissions by, or situations involving our vendors, our landlords, or our employees outside of work, and may pertain to social or political issues or protests largely unrelated to our business. The use of social media platforms, including blogs, social media websites, and other forms of internet-based communications, which allow individuals access to a broad audience, continues to increase. The opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily available. Information concerning our Company may be posted on such platforms at any time. Information posted may be adverse to our interests or may be inaccurate, which could negatively affect our sales and profitability, diminish customer trust, reduce employee morale and productivity, and lead to difficulties in recruiting and retaining qualified employees. The harm may be immediate, without affording us an opportunity for redress or correction.

We face litigation risks from customers, employees, and other third parties in the ordinary course of business.

Our business is subject to the risk of litigation by customers, current and former employees, suppliers, stockholders and others through private actions, class actions, administrative proceedings, regulatory actions, or other litigation. The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. The cost to defend future litigation may be significant. There may also be adverse publicity associated with litigation that could decrease customer acceptance of merchandise offerings, regardless of whether the allegations are valid or whether we are ultimately found liable.

We face risks with respect to product liability claims and product recalls, which could adversely affect our reputation, our business, and our consolidated results of operations.

We purchase merchandise from third parties and directly import a limited amount of product as importer of record and offer this merchandise to customers for sale. In addition, we currently expect to develop and manufacture certain merchandise for sale, initially on a very limited basis. Merchandise could be subject to recalls and other actions by regulatory authorities. Changes in laws and regulations could also impact the type of merchandise we offer to customers. We have experienced, and may in the future experience, issues that result in recalls of merchandise. In addition, in the past, individuals

have asserted claims, and may in the future assert claims, that they have sustained injuries from third‑party merchandise offered by us, and we may be subject to future lawsuits relating to these claims. There is a risk that these claims or liabilities may exceed, or fall outside the scope of, our insurance coverage. Any of the issues mentioned above could result in damage to our reputation, diversion of development and management resources, or reduced sales and increased costs, any of which could harm our business.

Our stores may be adversely affected by local conditions, natural disasters, and other events.

Certain regions in which our stores are located may be subject to adverse local conditions, natural disasters, and other events. If severe weather, such as heavy snowfall or extreme temperatures, discourages or restricts customers in a particular region from traveling to our stores, our sales could be adversely affected. If severe weather conditions occur during the second quarter of our fiscal year, the adverse impact to our sales and profitability could be even greater than at other times during the year because we generate a significant portion of our sales and profits during these periods.this period. Natural disasters including tornados, hurricanes, floods, and earthquakes may damage our stores, corporate office, and distribution facilities or other operations, which may adversely affect our financial results. Additionally, demographic shifts in the areas where our stores are located could adversely impact our financial results and operations.

Our results of operations may be negatively affected by inventory shrinkage.

We are subject to the risk of inventory loss and theft. Although our inventory shrinkage rates have not fluctuated significantly in recent years, we cannot assure that actual rates of inventory loss and theft in the future will be within our estimates or that the measures we are taking will effectively reduce the problem of inventory shrinkage. Although some level of inventory shrinkage is an unavoidable cost of doing business, if we were to experience higher rates of inventory shrinkage or incur increased security costs to combat inventory theft, our results of operations could be affected adversely.

Our results of operations may be negatively impacted by exposure to unexpected costs related to our insurance programs.

Our insurance coverage is subject to deductibles, self-insured retentions, limits of liability and similar provisions that we believe are prudent based on our overall operations. We may incur certain types of losses that we cannot insure or which we believe are not economically reasonable to insure, such as losses due to acts of war and terrorism, employee and certain other crime, and some natural

disasters. If we incur these losses and they are material, our business could suffer. Certain material events may result in sizable losses for the insurance industry and adversely impact the availability of adequate insurance coverage or result in excessive premium increases. To offset negative cost trends in the insurance market, we may elect to self-insure, accept higher deductibles or reduce the amount of coverage in response to these market changes. In addition, we self-insure a significant portion of expected losses under our workers’ compensation, general liability, including automobile, and group health insurance programs. Unanticipated changes in any applicable actuarial assumptions and management estimates underlying our recorded liabilities for these self-insured losses, including potential increases in medical and indemnity costs, could result in significantly different expenses than expected under these programs, which could have a material adverse effect on our financial condition and results of operations. Although we continue to maintain property insurance for catastrophic events, we are self-insured for losses up to the amount of our deductibles. If we experience a greater number of self-insured losses than we anticipate, our financial performance could be adversely affected.

Our sales depend on a volume of traffic to our stores, and a reduction in traffic to, or the closing of, anchor tenants and other destination retailers in the shopping centers in which our stores are located could significantly reduce our sales and leave us with excess inventory.

Most of our stores are located in shopping centers that benefit from varied and complementary tenants, whether specialty or mass retailers, and other destination retailers and attractions to generate sufficient levels of consumer traffic near our stores. Any decline in the volume of consumer traffic at shopping centers, whether because of consumer preferences to shop on the internet or at large warehouse stores, an economic slowdown, a decline in the popularity of shopping centers, the closing of anchor stores or other destination retailers or otherwise, could result in reduced sales at our stores and leave us with excess inventory, which could have a material adverse effect on our financial results or business.

We are subject to customer payment-related risks that could increase operating costs or exposure to fraud or theft, subject us to potential liability and potentially disrupt our business.

We accept payments using a variety of methods, including cash, credit and debit cards, gift cards, gift certificates, store credits, and store credits.digital wallets. Acceptance of these payment options subjects us to rules, regulations, contractual obligations and compliance requirements, including payment network rules and operating guidelines, data security standards and certification requirements, and rules governing electronic funds transfers. In October 2015, the payment card industry shifted liability for certain debit and credit card transactions to retailers who are not able to accept EMV chip technology transactions. Any inabilitydisruption to our ability to accept EMV chip technology transactions may subject us to increased risk of liability for fraudulent transactions and may adversely affect our business and operating results.

For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs. We rely on third parties to provide payment processing services, including the processing of credit cards, debit cards, and other forms of electronic payment. If these companies become unable to provide these services to us, or if their systems are compromised, it could potentially disrupt our business. The payment methods that we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly more sophisticated, seeking to obtain unauthorized access to or exploit weaknesses that may exist in the payment systems.  If we fail to comply with applicable rules or requirements for the payment methods we accept, or if payment-related data is compromised due to a breach or misuse of data, we may be liable for costs incurred by payment card issuing banks and other third parties or subject to fines and higher transaction fees, or our ability to accept or facilitate certain types of payments may be impaired. In addition, our customers could lose confidence in certain payment types, which may result in a shift to other payment types or potential changes to our payment systems that may result in higher costs. As a result, our business and operating results could be adversely affected.

Risks Related to OurTrading Restrictions in our Common Stock

Our certificatecommon stock is subject to ownership and transfer restrictions intended to preserve our ability to use our net operating loss carryforwards and other tax attributes.

We have incurred significant net operating loss carryforwards and other tax attributes, the amount and availability of incorporation,which are subject to certain qualifications, limitations and bylawsuncertainties. Our Amended and Delaware law contain provisions that could make it more difficult for a third party to acquire us withoutRestated Certificate of Incorporation imposes certain restrictions on the consent of our Board of Directors.

Provisions in our certificate of incorporationtransferability and bylaws will have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:

Because we do not presently have any plans to pay dividendslimitations on our common stock, stockholders must look solelyability to appreciationutilize net operating loss carryforwards and other tax attributes from prior years for federal income tax purposes.  Any acquisition or sale of our common stock that results in a stockholder being in violation of these restrictions may not be valid.

Subject to realize a gain on their investment.

We have not paid a regular cash dividend since 2008 and do not presently havecertain exceptions, these ownership restrictions restrict (i) any plans to pay dividends for the foreseeable future. Accordingly, stockholders must look solely to appreciationtransfer that would result in any person acquiring 4.5% or more of our common stock, to realize a gain on their investment. This appreciation may not occur.

The price(ii) any transfer that would result in an increase of the ownership percentage of any person already owning 4.5% or more of our common stock, has fluctuated substantially overor (iii) any transfer during the past several years and may continue to fluctuate substantiallyfive-year period following December 31, 2020 that would result in a decrease of the future.

From July 1, 2016 to June 30, 2017, the trading pricesownership percentage of any person already owning 4.5% or more of our common stock ranged from a lowstock.  These restrictions will remain in effect until the earliest of $1.60 per share to a high(i) the repeal of $8.11 per share. We expect our stock to continue to be subject to fluctuations as a resultSection 382 of the Internal Revenue Code or any successor statute if the board of directors determines these restrictions are no longer necessary for preservation of the Company’s tax benefits, (ii) the beginning of a varietytaxable year in which the board of factors, including factors beyond our control, which have been included throughout this Annual Report on Form 10‑K. Wedirectors determines no tax benefits may fail to meetbe carried forward, or (iii) such other date as shall be established by the expectationsboard of our stockholders or securities analysts at some time in the future, and our stock price could decline as well.directors.

Item 1B.  Unresolved Staff Comments

None.

Item 2.  Properties

Stores.

We lease all of our stores from unaffiliated third parties, except one Company‑owned store located adjacent to our existing distribution facility in Dallas, Texas.parties. A description of the location of our stores is provided in Item 1, “Business—Stores and Store Operations.” At June 30, 2017,2021, the remaining terms of the majority of our store leases range from one month to five years. The

average initial term of store leases executed under our new real estate strategy is approximately ten years, typically with options available for renewal. We intend to continue to lease all of our new stores from unaffiliated third parties. Our store leases typically include “kick clauses,” which allow us, at our option, to exit the lease with no penalty 24 to 60 monthsapproximately 5 years after entering into the lease if store sales do not reach a stipulated amount stated in the lease.

Distribution Facilities and Corporate Headquarters.

We ownpreviously owned a 104,675 square foot building which houses our corporate office in Dallas, Texas. OurTexas and a Dallas distribution center, utilizes approximately 1.4 million square feet of which we utilize approximately 1.2 million square feetfeet. On December 31, 2020, we sold our corporate office and Dallas distribution center properties and leased back those facilities. The lease of the corporate office is ownedfor a term of 10 years, and 0.2 million square feet, which we do not consider partthe lease of our long-termthe distribution network,center is leased through March 2018. for an initial term of two and one-half years, with an option to extend the distribution center lease for one additional year. We believe it is reasonably certain the option to extend will be exercised.

During fiscal 2015, we executed a lease for approximately 0.6 million square feet related to our additional distribution center in Phoenix, Arizona which started operations in the fourth quarter of fiscal 2016. We reached the decision in the fourth quarter of fiscal 2020 to close our Phoenix distribution center and consolidate operations in our Dallas-based facility, which was completed in the second quarter of fiscal 2021.

We also lease from unaffiliated third parties threefour parcels of land of approximately 400,250538,250 square feet, for trailer storageparking and parking.

We are continuinga 100,000 square foot warehouse in Dallas, Texas to evaluatesupplement our distribution network needs to accommodate our distribution requirements for our existing store base as well as for future growth.network.

Item 3.  Legal Proceedings

From time

Information related to time,the Chapter 11 Cases that were filed on May 27, 2020 is included in Notes 1 and 2 in the Notes to Consolidated Financial Statements.

In addition, we are involved in litigation which is incidental tolegal and governmental proceedings as part of the normal course of our business. InReserves have been established when a loss is considered probable and are based on management’s best estimates of our opinion, nopotential liability in these matters. These estimates have been developed in consultation with internal and external counsel and are based on a combination of litigation to which we are currently a party is likely to have aand settlement strategies.  Management believes that such litigation and claims will be resolved without material adverse effect on our consolidated financial condition,position or results of operations, or cash flows.operations.

Item 4.  Mine Safety Disclosures

Not applicable.

PART II

Item 5.  Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our

During the pendency of our bankruptcy proceedings, the Company’s common stock is listedwas delisted by the Nasdaq Stock Market, LLC (“Nasdaq”) and began trading on the NASDAQ Global Select MarketOTC Pink marketplace under the symbol “TUES.” The“TUESQ”. In January 2021, following table sets forthour emergence from bankruptcy, the Company’s common stock began trading on the OTCQX market under the ticker symbol “TUEM.”

On May 24, 2021, Nasdaq approved our application for the periods indicatedrelisting of the high and low sales prices per share as reportedCompany's common stock on the NASDAQ Select Global Market:

Nasdaq Capital Market. The Company's common stock was relisted and commenced trading on the Nasdaq Capital Market at the opening of the market on Tuesday, May 25, 2021, under the ticker symbol "TUEM."

As of August 22, 2017,September 7, 2021, there were approximately 220149 holders of record of our common stock.

Performance Graph

The following performance graph compares the cumulative total return to holders of our common stock, since January 13, 2021, with the cumulative total returns of the S&P 500 index and the S&P Specialty Retail index.  The graph assumes that the value of the investment in the Company's common stock, S&P 500 index and S&P Specialty Retail index on January 13, 2021 and is calculated assuming the quarterly reinvestment of dividends as applicable. Due to our legal emergence from bankruptcy on December 31, 2020, information for our common stock is only available from January 13, 2021 (the date shares of our common stock began trading following our legal emergence from bankruptcy).  The information is included for historical comparative purposes only, reflects a time period of very limited duration, and should not be considered indicative of future share performance.

The information under the heading performance graph shall not be deemed "soliciting material" or to be "filed" with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference into such filing.

Dividend Policy

During the fiscal years ended June 30, 2017, 20162021, 2020, and 2015,2019, we did not declare or pay any cash dividends on our common stock. We do not presently have plans to pay dividends on our common stock. Our revolving credit facility may, in some instances, limitThe agreements relating to our outstanding indebtedness restrict our ability to pay cash dividends andor repurchase our common stock. Additional details are provided in Item 7, “Management’s Discussion and Analysis of Financial ConditionConditions and Results of Operations—Operations – Liquidity and Capital Resources—Revolving Credit Facility.Resources.”

Repurchases of Common Equity

On August 22, 2011, our Board of Directors adopted a share repurchase program pursuant to which we are authorized to repurchase from time to time shares of Common Stock, up to a maximum of $5.0 million in aggregate purchase price for all such shares (the “Repurchase Program”). On January 20, 2012, our Board of Directors increased the authorization for stock repurchases under the Repurchase Program from $5.0 million to a maximum of $10.0 million. The Repurchase Program does not have an expiration date and may be amended, suspended or discontinued at any time. The Board will periodically evaluate the Repurchase Program and there can be no assurances as to the number of shares of Common Stock we will repurchase. During the twelve month period ended June 30, 2017, 4,343 shares were repurchased under the Repurchase Program at an average cost of $5.35 per share and for a total cost (excluding commissions) of approximately $23,235. All of such shares were purchased by us in connection with the vesting of equity awards under our equity incentive plans.Item 6.  Reserved

Repurchases of equity securities during the three months ended June 30, 2017 are listed in the following table:Not Required

Stock Price Performance

The following graph illustrates a comparison of the cumulative total stockholder return (change in stock price plus reinvested dividends) for the fiscal years ended June 30, 2017, 2016, 2015, 2014 and 2013, of (1) our common stock, (2) the S&P 500 Index, and (3) the S&P 500 retailing index, a pre‑established industry index. The chart assumes that $100 was invested on June 30, 2012, in our common stock and each of the comparison indices, and assumes that all dividends were reinvested.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among Tuesday Morning, the S&P 500 Index

and the S&P 500 Retailing Index

Fiscal year ending June 30.

Copyright© 2014 S&P, a division of The McGraw‑Hill Companies Inc. All rights reserved.

These indices are included for comparative purposes only and do not necessarily reflect management’s opinion that such indices are an appropriate measure of the relative performance of the stock involved, and are not intended to forecast or be indicative of possible future performance of our common stock.

The performance graph and related text are being furnished to and not filed with the SEC, and will not be deemed to be “soliciting material” under Regulation 14A or 14C under the Securities Exchange Act of 1934 or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, and will not be deemed to be incorporated by reference into any filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically incorporate such information by reference into such a filing.

Item 6.  Selected Financial Data

The following table sets forth the selected consolidated financial and operating data for the fiscal years ended June 30, 2017, 2016, 2015, 2014, and 2013.

The selected consolidated financial and operating data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes thereto included elsewhere in this Form 10‑K.

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with “Selected Financial Data” and our consolidated financial statements and related notes thereto included elsewhere in this Form 10‑K.

Overview

See Note 2 in the Notes to Consolidated Financial Statements herein for a discussion of restructuring, impairment, and abandonment charges, as well as reorganization items.

2021 Compared with 2020

Net sales for fiscal 2021 were $690.8 million, a decrease of 21.0%, compared to $874.9 million for the same period last year, primarily due to the completion of our permanent store closing plans approved through bankruptcy proceedings of 197 stores, partially offset by an increase in comparable store sales of 0.7%. New stores are included in the same store sales calculation starting with the sixteenth month following the date of the store opening. A store that relocates within the same geographic market or modifies its available retail space is generally considered the same store for purposes of this computation. Stores that are closed are included in the computation of comparable store sales until the month of closure. The slight increase in comparable store sales was due to an 8.7% increase in average ticket and by the temporary closure of all stores on March 25, 2020 related to COVID-19, largely offset by a 7.4% decrease in customer transactions. As of June 30, 2021, store inventory levels on a comparable store basis, were approximately 41.1% higher than last year. Store level inventory challenges were due in part to the closure of much of our merchant and supply chain operations during the third quarter of fiscal 2020, at the height of the spring 2020 COVID outbreak as well as pandemic-related disruptions to the supply chain. Non-comparable store sales decreased by a total of $187.3 million primarily due to the permanent closure of 199 stores since the third quarter of fiscal 2020. Non-comparable store sales include the net effect of sales from new stores and sales from stores that have closed. We expect inventory levels to increase throughout the fall and expect supply chain costs to remain elevated due to higher freight costs and other supply chain conditions.

Gross margin for fiscal 2021 was $206.0 million, a decrease of 27.7% compared to $284.9 million for fiscal 2020.  As a percentage of net sales, gross margin decreased to 29.8% in fiscal 2021 compared with 32.6% in fiscal 2020. The decrease in gross margin as a percentage of net sales was primarily a result of higher supply chain and transportation costs recognized in the current year, partially offset by lower markdowns.

Selling, general and administrative expenses are comprised(‘SG&A”) decreased $86.4 million to $244.2 million in fiscal 2021, compared to $330.6 million in fiscal 2020.  The decrease was due to lower store expenses on a smaller store base, including a significant decrease in store rents for both closed stores and renegotiated rents for the ongoing store base.  Subsequent to the filing of wagesthe Chapter 11 proceedings, we commenced negotiations with our landlords on substantially all of our ongoing leases, resulting in significant modifications and reduced lease costs. Labor costs and depreciation were also lower on the smaller base. Also contributing to the favorable comparison were reduced advertising costs and lower corporate expenses.  As a percentage of net sales, SG&A decreased 250 basis points to 35.3% for fiscal 2021, compared to 37.8% in fiscal year 2020.

Restructuring, impairment and abandonment charges were $10.8 million during fiscal 2021, compared to $113.5 million during fiscal 2020, related to the executive severance and employee retention cost of $3.6 million, and intangible impairment charge of $1.6 million, as well as abandonment costs of $5.6 million related to the permanent closure of our stores and the Phoenix distribution center. These costs during fiscal 2020, were charges primarily related to (i) $80.1 million in impairment cost and $25.1 million in abandonment cost relating to our permanent store closing plan along with our decision to close the Phoenix distribution center; (ii) $5.2 million in pre-filing incremental professional fees; and (iii) $3.1 million in compensation costs related to a reorganization reduction in force completed prior to the filing of the Chapter 11 Cases.  Decisions regarding store closures and the Phoenix distribution center were made in the fourth quarter of fiscal 2020, prior to filing the Chapter 11 Cases; however, the closure of the Phoenix distribution center was not completed until the second quarter of fiscal 2021.

Our operating loss was $49.0 million during fiscal 2021 as compared to an operating loss of $159.2 million for fiscal 2020, a decrease of $110.2 million.  The operating loss in the current year was primarily the result of the lower net sales which were significantly driven by the impact of the COVID-19 pandemic, together with an increased cost of sales, significant impairment and abandonment charges recognized for the approved permanent store and Phoenix distribution center closures.

Interest expense increased $4.4 million to $8.2 million in fiscal 2021 compared to $3.8 million in the prior year.  The increase in fiscal 2021 primarily due to the amortization of financing fees incurred on our new revolving credit facility our debtor-in-possession financing agreements, and accrued interest on our term loan.  See Note 3 to our consolidated financial statements for additional information.

Reorganization items were a net benefit of $60.0 million for fiscal 2021 compared to a net expense of $3.6 million in fiscal 2020. The net benefit during fiscal 2021 related primarily to a $66.2 million net gain from store lease terminations and the termination of our Phoenix distribution center lease under our permanent closure plan and a $49.6 million gain due from the sale-leaseback transactions pursuant to the Plan of Reorganization.  These benefits rentwere partially offset by $34.6 million in professional and occupancy costs, depreciation, advertising, store operating expenseslegal fees related to our reorganization as well as $20.0 million in non-cash charges related to execution of our Rights Offering.  For fiscal 2020, reorganization items, net represent professional fees of $3.6 million incurred during our Chapter 11 proceedings.

Income tax expense for fiscal 2021 was $0.3 million compared to $0.2 million in fiscal 2020.  The effective tax rates for fiscal 2021 and corporate office costs.  While selling, general2020 were 8.9% and administrative expense increases and decreases are generally attributable(0.1%), respectively. We currently believe the expected effects on future year effective tax rates to changes in variable expenses, higher rents, depreciation, and real estate project costs have increased as we continue to implementbe nominal until the cumulative losses and valuation allowance are fully utilized.  A full valuation allowance is currently recorded against substantially all of our store real estate strategy. Variable expenses include payrollnet deferred tax assets at June 30, 2021.  The total valuation allowance at the end of fiscal years 2021, 2020, and related benefits, advertising expense2019 was $53.7 million, $67.6 million and other expenses such$27.5 million, respectively.  A deviation from the customary relationship between income tax benefit and pretax income results from utilization of the valuation allowance.

Our net earnings/(loss) for fiscal 2021 was $3.0 million, or diluted net earnings per share of $0.05 compared to a net loss for fiscal 2020 of $166.3 million, or diluted net loss per share of $3.68

Fiscal Year Ended June 30, 2020 Compared to Fiscal Year Ended June 30, 2019

For a discussion of fiscal 2020 results of operations as credit card fees.compared to fiscal 2019 results of operations, please refer to Part II, Item 7, Management’s Discussion of Financial Condition and Results of Operations in our Form 10-K for the fiscal year ended June 30, 2020, filed with the SEC on September 14, 2020.

Non-GAAP Financial Measures

We define EBITDA as net income or net loss before interest, income taxes, depreciation, and amortization. Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the impact of certain items, including certain non-cash items and other items that we do not believe are not representative of our core operating performance. These measures are not presentations made in accordance with GAAP. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income or loss as a measure of operating performance. In addition, EBITDA and Adjusted EBITDA are not presented as, and should not be considered as alternatives to cash flows as a measure of liquidity. EBITDA and Adjusted EBITDA should not be considered in isolation, or as substitutes for analysis of our results as reported under GAAP and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by such adjustments. We believe it is useful for investors to see these EBITDA and Adjusted EBITDA measures that management uses to evaluate our operating performance. These non-GAAP financial measures are included to supplement our financial information presented in accordance with GAAP and because we use these measures to monitor and evaluate the performance of our business as a supplement to GAAP measures and we believe the presentation of these non-GAAP measures enhances investors’ ability to analyze trends in our business and evaluate our performance. EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. The non-GAAP measures presented may not be comparable to similarly titled measures used by other companies.

Adjusted EBITDA.  

The following table reconciles net income/earnings (loss), the most directly comparable GAAP financial measure, to EBITDA and Adjusted EBITDA, each of which is a non-GAAP financial measure (in thousands):

Fiscal Year Ended June 30, 2017 Compared to Fiscal Year Ended June 30, 2016

Net sales increased $10.3 million, or 1.1%, to $966.7 million in fiscal 2017 from $956.4 million in fiscal 2016, primarily due to a $19.7 million increase in sales from comparable stores (stores open at least one year, including stores relocated in the same market and renovated stores) of 2.2%. Net sales during fiscal 2017 were negatively impacted by lower than plan store level inventories for a portion of the year due to the supply chain challenges we experienced during the year, as well as 20 fewer stores. The increase in comparable store sales was comprised of an increase in customer transactions of 3.4%, offset by a decrease in average ticket of 1.2%. Our comparable store sales increase was partially offset by a decrease in our non-comparable store sales, which decreased a total of $9.5 million, resulting in a 100 basis point negative impact on our increase in net sales. Sales at the 52 stores relocated during the past 12 months increased approximately 52% on average for fiscal 2017 as compared to last year and contributed approximately 290 basis points of comparable store sales growth.  Non-comparable store sales include the net effect of sales from new stores and sales from stores that have closed. The non-comparable store sales decrease was driven by 41 store closures, partially offset by 21 store openings, which have occurred since the end of fiscal 2016.

Gross profit for fiscal 2017 was $320.7 million, a decrease of 6.2% compared to $341.8 million for fiscal 2016. As a percentage of net sales, gross margin decreased to 33.2% in fiscal 2017 compared with 35.7% in fiscal 2016. The decrease in gross margin was primarily due to elevated costs associated with our supply chain operations, including distribution center and freight costs recognized in the current period. The impact of elevated supply chain and freight costs was a 250 basis point decrease to our gross margin rate in fiscal 2017, as compared to the prior year, driven significantly by our supply chain issues experienced earlier in the year.  Additionally, markdowns increased in the current year.  Partially offsetting these increases in costs was an improvement in initial merchandise mark-up.

SG&A increased 4.0% to $353.0 million in fiscal 2017, compared to $339.4 million in the same period last year.  As a percentage of net sales, SG&A was 36.5% for fiscal 2017 compared to 35.5% for the prior year.  This increase in SG&A as a percentage of net sales was driven primarily by higher store rent, depreciation, and real estate project expenses, due in part to our strategy to improve store real estate and increased corporate labor and share-based compensation expense in the current period as compared to the prior year period due to executive vacancies in the prior year period.  Additionally, we continued to invest in technology and infrastructure which drove incremental costs related to systems in comparison to the prior year period.  Partially offsetting these increased costs were reductions in certain other corporate expenses, including legal and professional fees, which decreased as a percentage of net sales from the prior year. In the prior year, we recorded approximately $8.7 million of incremental expenses to support our strategic initiatives.  These costs included $3.2 million of accelerated rent expense related to closing stores prior to lease termination, as well as up-front costs for our Phoenix distribution center and duplication of certain costs at our Dallas