Tuesday Morning (TUEMQ) 8-K Results of Operations and Financial Condition

Exhibit 99.1

FOR IMMEDIATE RELEASE

CONTACT:	Loren K. Jensen
	Chief Financial Officer
	TUESDAY MORNING CORPORATION
	972/934-7299
	Laurey Peat
	LAUREY PEAT + ASSOCIATES
	214/871-8787

TUESDAY MORNING CORPORATION

ANNOUNCES FOURTH QUARTER AND

 FULL-YEAR RESULTS FOR 2005

DALLAS, TX – February 23, 2006 – Tuesday Morning Corporation (NASDAQ: TUES) today reported that net sales for the fourth quarter of 2005 increased to $335.2 million from $332.4 million for the fourth quarter last year.  Comparable store sales decreased 5.3% for the fourth quarter of 2005.  On a year-to-date basis, sales were up 3.8% to $931.8 million, with a comparable store sales decrease of 4.0%, compared to $897.8 million for the same prior-year period of 2004.

Net income for the fourth quarter ended December 31, 2005 decreased 3.7% to $35.5 million, or $0.85 per diluted share, compared to $36.9 million, or $0.88 per diluted share, for the fourth quarter of 2004.  For the full-year ended December 31, 2005, net income decreased to $61.0 million, or $1.46 per diluted share, compared to $62.6 million, or $1.50 per diluted share, in the same prior-year period.  Excluding the after-tax lease adjustment in the first quarter of 2005 that reduced net income and diluted earnings per share by $2.4 million and $0.06, respectively, full-year net income and diluted earnings per share would have been $63.4 million and $1.52, respectively.  Please see the attached table for reconciliation.

“In an obviously challenging environment for home furnishings focused retailers, we were able to achieve solid double-digit operating profit for 2005, pay our first cash dividend and provide a return on assets of 17% for our stockholders,” said Kathleen Mason, President and Chief Executive Officer.   “We see continuing pressure on consumers with reduced discretionary income, but believe our operating model will allow us to continue providing double-digit operating profits and an excellent return on assets for our stockholders in 2006.”

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For fiscal year 2006, Tuesday Morning expects to open approximately 65 to 70 net new stores and forecasts a total sales increase of approximately 10% which includes a comparable store sales growth assumption of 2%.  On January 1, 2006, we adopted FASB Statement No. 123(R) which requires the recognition of stock compensation expense in our financials.  We expect this expense to reduce our annual 2006 diluted earnings per share by approximately $0.09.  Based on achieving the planned sales, we estimate annual diluted earnings per share, including stock compensation expense, to be in a range of $1.53 to $1.58 per diluted share.  Without adoption of FASB Statement 123(R), our guidance for annual diluted earnings per share for 2006 would have been $1.62 to $1.67, which management believes would be more comparable to 2005 diluted earnings per share which does not include any stock compensation expense.

Tuesday Morning management will review fourth quarter financial results in a teleconference call today, February 23, 2006, at 10:00 a.m. Eastern Time.

About Tuesday Morning

Tuesday Morning is the leading closeout retailer of upscale, decorative home accessories and famous-maker gifts in the United States. The Company opened its first store in 1974 and currently operates 732 stores in 46 states during periodic “sale events.” Tuesday Morning is nationally known for bringing its more than 8 million loyal customers a treasure hunt of high-end, first quality, brand name merchandise at prices 50% to 80% below department and specialty stores and catalogues.

This press release 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.  Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements.  Forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those projected or implied in the forward-looking statements.  Such risks and uncertainties include: the success of new store openings, competitive factors, access to merchandise and unanticipated changes in consumer demand and economic trends, as well as other risks detailed in the company’s filings with the Securities and Exchange Commission, including Forms 8-K, 10-Q and 10-K.  The Company undertakes no obligation to revise the forward-looking statements contained therein to reflect events or circumstances after the date hereof as a result of new information, future events or otherwise.

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Tuesday Morning Corporation

Consolidated Statement of Income

(In thousands, except per share data)

	Three Months Ended Dec. 31,						Full Year Ended Dec. 31,
	2005			2004			2005			2004
Net Sales	$	335,200		$	332,399		$	931,827		$	897,841
Cost of sales	206,595			202,206			574,546			556,623
Gross profit	128,605			130,193			357,281			341,218
Selling, general and administrative expenses	72,555			69,059			260,736			237,127
Operating income	56,050			61,134			96,545			104,091
Other income (expense):
Interest expense	(630		)	(1,429		)	(1,552		)	(3,180		)
Interest income	31			13			129			21
Other income (expense), net	264			247			897			884
Other income (expense)	(335		)	(1,169		)	(526		)	(2,275		)
Income before income taxes	55,715			59,965			96,019			101,816
Income tax expense	20,166			23,068			35,060			39,199
Net income	$	35,549		$	36,897		$	60,959		$	62,617
Earnings Per Share:
Net income per common share:
Basic	$	0.86		$	0.90		$	1.48		$	1.53
Diluted	$	0.85		$	0.88		$	1.46		$	1.50
Weighted average number of common shares:
Basic	41,369			41,094			41,264			41,046
Diluted	41,756			41,807			41,770			41,764
Reconciliation of Reported Amounts to Non-GAAP Items (See Note)
Net income, as reported	$	35,549		$	36,897		$	60,959		$	62,617
Add: Q1 GAAP rent adjustment, net of tax	—			—			2,438			—
Net income, ex GAAP rent	$	35,549		$	36,897		$	63,397		$	62,617
Net income per share, diluted, as reported	$	0.85		$	0.88		$	1.46		$	1.50
Add: Q1 GAAP rent, net of tax	—			—			0.06			—
Net income per share, diluted, ex GAAP rent	$	0.85		$	0.88		$	1.52		$	1.50

Note:

The above schedule reconciles the non-GAAP financial measures included in this press release to the most comparable GAAP financial measures.  Net income, excluding the GAAP rent adjustment, should not be considered as an alternative to net income or other GAAP financial measurements as an indicator of our operating performance.

The special item represents a cumulative adjustment to record GAAP rent in the first quarter of 2005 to properly reflect pre-opening or build-out periods of our stores prior to January 1, 2005.  This correction of accounting practices was made in light of the views of the Office of the Chief Accountant of the Securities and Exchange Commission expressed in a letter of February 7, 2005 to the American Institute of Certified Public Accountants regarding the application of generally accepted accounting principles to operating lease accounting matters.

Management believes comparative analysis of results can be enhanced by excluding the impact of this item.  Because this item is a one-time, non-cash, after-tax adjustment to conform our accounting policies to generally accepted accounting principles related to leased stores prior to January 1, 2005, we believe the adjustment is not indicative of the Company’s operating performance for the applicable period, nor should it be considered in developing trend analysis for future periods.

Consolidated Balance Sheets

(in thousands)

	Dec. 31,
	2005		2004
Assets
Current assets:
Cash and cash equivalents	$	43,547	$	45,067
Inventories	230,639		189,132
Prepaid expenses and other assets	7,258		5,169
Deferred income taxes	6,756		5,991
Total current assets	288,200		245,359
Property and Equipment, net	87,786		86,332
Other long-term assets:
Deferred financing costs	685		877
Other assets	4,941		3,552
Total Assets	$	381,612	$	336,120
Liabilities and Stockholders’ Equity
Current liabilities:
Revolving credit facility, current portion	$	—	$	—
Accounts payable	74,975		72,722
Accrued liabilities	42,372		39,549
Income taxes payable	16,520		17,483
Total current liabilities	133,867		129,754
Revolving credit facility, excl. current portion	—		—
Deferred rent	4,431		165
Deferred income taxes	7,952		9,051
Total Liabilities	146,250		138,970
Stockholders’ equity	235,362		197,150
Total Liabilities and Stockholders’ Equity	$	381,612	$	336,120

Consolidated Statement of Cash Flows

(in thousands)

	Twelve-Months Ended Dec.31,
	2005			2004
Net cash flows from operating activities:
Net income	$	60,959		$	62,617
Adjustments to reconcile net income to net cash (used in) operating activities:
Depreciation and amortization	14,606			11,570
Amortization of financing fees	171			1,295
Cumulative effect of lease accounting adj.	3,898			—
Other non-cash charges	(469		)	3,972
Net change in operating assets and liabilities	(40,483		)	(34,623		)
Net cash provided by operating activities	38,682			44,831
Net cash flows from investing activities:
Capital expenditures	(16,060		)	(23,027		)
Other	—			—
Net cash used in investing activities	(16,060		)	(23,027		)
Net cash flows from financing activities:
Net borrowings-revolving credit facility	—			—
Payment of cash dividend	(26,854		)	—
Other	2,712			(273		)
Net cash provided by (used in) financing act	(24,142		)	(273		)
Net (INCREASE, DECREASE) in cash and cash equivalents	(1,520		)	21,531
Cash and cash equivalents, beginning of period	45,067			23,536
Cash and cash equivalents, end of period	$	43,547		$	45,067