Introduces Fiscal 2022 Second Quarter
Outlook
Tilly’s, Inc. (NYSE: TLYS, the "Company") today announced
financial results for the first quarter of fiscal 2022 ended April
30, 2022.
"Our first quarter operating results were in line with our
outlook and were an improvement compared to our pre-pandemic
performance in the first quarter of fiscal 2019," commented Ed
Thomas, President and Chief Executive Officer. "We continue to
focus on growing and improving our business over time, despite the
near term challenges of the highly inflationary environment and
lapping last year’s record-breaking results, which were fueled by
unprecedented pandemic-related factors."
Fiscal 2022 First Quarter Operating Results Overview
The following comparisons refer to the Company's operating
results for the first quarter of fiscal 2022 ended April 30, 2022
versus the first quarter of fiscal 2021 ended May 1, 2021. For
additional context, the Company is also reporting select operating
results for the first quarter of fiscal 2022 relative to the same
period of fiscal 2019 due to the unique operating environment
resulting from the COVID-19 pandemic and the impact of government
stimulus payments during fiscal 2021.
- Total net sales were $145.8 million, a decrease of $(17.4)
million or (10.7)%, compared to a Company first quarter record of
$163.2 million last year. Total comparable net sales, including
both physical stores and e-commerce, decreased by (13.0)%. Last
year's results benefited from the impacts of pent-up customer
demand following the winding down of 2020 pandemic restrictions and
the pandemic-related federal stimulus payments.
- Net sales from physical stores were $117.5 million, a decrease
of $(10.2) million or (8.0)%, compared to $127.7 million last year
with a comparable store net sales decrease of (10.8)%. Net sales
from stores represented 80.6% of total net sales compared to 78.3%
of total net sales last year. The Company ended the first quarter
with 241 total stores compared to 238 total stores at the end of
the first quarter last year.
- Net sales from e-commerce were $28.3 million, a decrease of
$(7.2) million or (20.3)%, compared to $35.5 million last year.
E-commerce net sales represented 19.4% of total net sales compared
to 21.7% of total net sales last year.
- Relative to the pre-pandemic first quarter of fiscal 2019,
total net sales increased by $15.5 million, or 11.9%, from $130.3
million during that period. Total comparable net sales increased by
5.8% with a slight decline from physical stores of (0.7)% and an
increase from e-commerce of 42.3%, reflecting the general shift in
consumer behavior towards online shopping over the past three
years.
- Gross profit was $43.8 million, or 30.1% of net sales, compared
to $54.8 million, or 33.6% of net sales, last year. Buying,
distribution and occupancy costs deleveraged by 190 basis points
collectively, despite decreasing by $(1.0) million in total due to
carrying these costs against a lower level of net sales this year
compared to last year. Product margins declined by 160 basis points
versus last year primarily due to a more normalized markdown rate
compared to last year's elevated level of full-price selling.
Relative to the pre-pandemic first quarter of fiscal 2019, gross
margin was 270 basis points better than in 2019 with lower
occupancy costs and 10 basis points of improvement in product
margins.
- Selling, general and administrative ("SG&A") expenses were
$42.7 million, or 29.3% of net sales, compared to $40.0 million, or
24.5% of net sales, last year. Of the $2.7 million increase in
SG&A expenses, $2.0 million was due to higher store payroll and
related benefit costs, primarily from wage inflation. The Company's
average rate per store payroll hour increased by 6.5% over last
year's first quarter. Additionally, $1.6 million was attributable
to a credit from the reversal of a disputed California sales tax
assessment in last year's first quarter. Partially offsetting these
increases was a reduction in corporate bonus expense of $1.6
million due to the lack of a bonus accrual in fiscal 2022. Relative
to the pre-pandemic first quarter of fiscal 2019, SG&A was $7.2
million higher, primarily due to wage inflation, e-commerce
marketing and fulfillment costs associated with online net sales
growth, and increased insurance premiums.
- Operating income was $1.1 million, or 0.8% of net sales,
compared to $14.9 million, or 9.1% of net sales, last year.
Operating income was $146,000, or 0.1% of net sales, in the
pre-pandemic first quarter of fiscal 2019.
- Income tax expense was $0.3 million, or 26.9% of pre-tax
income, compared to $3.8 million, or 25.7% of pre-tax income, last
year.
- Net income was $0.8 million, or $0.03 per diluted share,
compared to a Company first quarter record of $11.0 million, or
$0.36 per diluted share, last year. Weighted average diluted shares
were 31.0 million this year compared to 30.5 million last year. Net
income was $0.7 million, or $0.02 per diluted share, in the
pre-pandemic first quarter of fiscal 2019.
Balance Sheet and Liquidity
As of April 30, 2022, the Company had $111.0 million of cash and
marketable securities and no debt outstanding. This compares to
$157.6 million at the end of the first quarter last year, and no
debt outstanding. Since the end of last year's first quarter, the
Company has paid aggregate special cash dividends to stockholders
of $61.6 million. During the first quarter of fiscal 2022, the
Company repurchased 892,033 shares of its common stock for a total
of $8.2 million pursuant to its previously announced stock
repurchase program.
The Company ended the first quarter with inventories per square
foot up 12.7% relative to the end of the first quarter of fiscal
2021, due in part to continuing supply chain challenges and ending
last year's first quarter with inventories below the prior year due
to the unanticipated net sales growth last year. The Company
expects its inventory levels to be more consistent with its sales
performance by the end of the third quarter.
Total capital expenditures for the first quarter were $2.6
million compared to $5.5 million last year, the decrease being
primarily due to earlier store openings last year. For fiscal 2022
as a whole, the Company expects its total capital expenditures to
be in the range of $23 million to $25 million.
Fiscal 2022 Second Quarter Outlook
As customers continue to suffer from high inflation and energy
costs, the Company's fiscal 2022 second quarter total comparable
net sales through May 30, 2022, including both physical stores and
e-commerce, decreased by 17.0% relative to the comparable period of
2021. Based on current and historical trends, the Company currently
estimates that its fiscal 2022 second quarter net sales will be in
the range of $170 million to $175 million with product margins
approximately 200-250 basis points below last year due to the
historically high level of full-price selling during fiscal 2021.
The Company expects the combination of buying, distribution and
occupancy costs to deleverage by approximately 270-320 basis points
relative to last year primarily due to carrying these costs against
a lower level of total net sales. The Company expects its SG&A
to be approximately $47 million to $48 million, its operating
income to be in the range of approximately $6.0 million to $8.5
million, and earnings per diluted share to be in the range of $0.14
to $0.20 with weighted average diluted shares of approximately 30.2
million for the second quarter of fiscal 2022. This compares to a
Company second quarter record for net sales of $202 million and
earnings per diluted share of $0.66 for the second quarter of
fiscal 2021, which doubled the previous Company record for second
quarter earnings per share. The Company expects to have 242 total
stores open at the end of the second quarter, a net decrease of two
stores from 244 total stores at the end of fiscal 2021's second
quarter.
The current business environment remains subject to many
unpredictable risks and uncertainties including with respect to,
among others, the COVID-19 pandemic, the current inflationary
environment, continuing supply chain difficulties, labor
challenges, geopolitical concerns, and how consumer behavior may
change relative to any of these factors as well as last year's
historic anomalies of pent-up demand coming out of pandemic-related
restrictions and federal stimulus payments. As a result, the
Company's estimates concerning its projected business performance
may change at any time and there can be no guarantee that the
Company's current estimates will be accurate.
Conference Call Information
A conference call to discuss these financial results is
scheduled for today, June 2, 2022, at 4:30 p.m. ET (1:30 p.m. PT).
Investors and analysts interested in participating in the call are
invited to dial (877) 407-4018 (domestic) or (201) 689-8471
(international). The conference call will also be available to
interested parties through a live webcast at www.tillys.com. Please
visit the website and select the “Investor Relations” link at least
15 minutes prior to the start of the call to register and download
any necessary software. A telephone replay of the call will be
available until June 9, 2022, by dialing (844) 512-2921 (domestic)
or (412) 317-6671 (international) and entering the conference
identification number: 13729765.
About Tillys
Tillys is a leading, destination specialty retailer of casual
apparel, footwear, accessories and hardgoods for young men, young
women, boys and girls with an extensive selection of iconic global,
emerging, and proprietary brands rooted in an active, outdoor and
social lifestyle. Tillys is headquartered in Irvine, California and
currently operates 240 total stores across 33 states, as well as
its website, www.tillys.com.
Forward-Looking Statements
Certain statements in this press release are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. In particular, statements regarding the overall
effect of the novel coronavirus (COVID-19) pandemic, including its
impacts on us, our operations, or our future financial condition or
operating results, our current operating expectations in light of
historical results, expectations regarding customer traffic, our
supply chain, and inflation, our ability to properly manage our
inventory levels, and any other statements about our future cash
position, financial flexibility, expectations, plans, intentions,
beliefs or prospects expressed by management are forward-looking
statements. These forward-looking statements are based on
management’s current expectations and beliefs, but they involve a
number of risks and uncertainties that could cause actual results
or events to differ materially from those indicated by such
forward-looking statements, including, but not limited to, the
effects of the COVID-19 pandemic (including any surges in the
number of cases related thereto, or other weather, epidemics,
pandemics, or other public health issues), supply chain
difficulties, and inflation on our business and operations, and our
ability to respond thereto, our ability to respond to changing
customer preferences and trends, attract customer traffic at our
stores and online, execute our growth and long-term strategies,
expand into new markets, grow our e-commerce business, effectively
manage our inventory and costs, effectively compete with other
retailers, attract talented employees, realize anticipated, enhance
awareness of our brand and brand image, general consumer spending
patterns and levels, the markets generally, our ability to satisfy
our financial obligations, including under our credit facility and
our leases, and other factors that are detailed in our Annual
Report on Form 10-K, filed with the Securities and Exchange
Commission (“SEC”), including those detailed in the section titled
“Risk Factors” and in our other filings with the SEC, which are
available from the SEC’s website at www.sec.gov and from our
website at www.tillys.com under the heading “Investor Relations”.
Readers are urged not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
press release. We do not undertake any obligation to update or
alter any forward-looking statements, whether as a result of new
information, future events or otherwise. This release should be
read in conjunction with our financial statements and notes thereto
contained in our Form 10-K.
Tilly’s, Inc.
Consolidated Balance
Sheets
(In thousands, except par
value)
(unaudited)
April 30,
2022
January 29,
2022
May 1,
2021
ASSETS
Current assets:
Cash and cash equivalents
$
59,954
$
42,201
$
81,015
Marketable securities
50,997
97,027
76,633
Receivables
8,209
6,705
9,701
Merchandise inventories
74,112
65,645
65,341
Prepaid expenses and other current
assets
14,769
16,400
4,591
Total current assets
208,041
227,978
237,281
Operating lease assets
218,163
216,508
222,209
Property and equipment, net
46,606
47,530
54,139
Deferred tax assets
11,594
11,446
11,664
Other assets
1,253
1,361
1,231
TOTAL ASSETS
$
485,657
$
504,823
$
526,524
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
27,193
$
28,144
$
35,860
Accrued expenses
16,741
19,073
29,110
Deferred revenue
15,150
17,096
12,913
Accrued compensation and benefits
8,707
17,056
14,489
Current portion of operating lease
liabilities
51,237
51,504
51,231
Current portion of operating lease
liabilities, related party
2,483
2,533
2,402
Other liabilities
674
761
763
Total current liabilities
122,185
136,167
146,768
Long-term liabilities:
Noncurrent portion of operating lease
liabilities
174,301
171,965
192,345
Noncurrent portion of operating lease
liabilities, related party
20,364
21,000
11,282
Other liabilities
872
978
1,528
Total long-term liabilities
195,537
193,943
205,155
Total liabilities
317,722
330,110
351,923
Stockholders’ equity:
Common stock (Class A)
23
24
23
Common stock (Class B)
7
7
7
Preferred stock
—
—
—
Additional paid-in capital
167,512
166,929
158,454
Retained earnings
391
7,754
16,094
Accumulated other comprehensive
income/(loss)
2
(1
)
23
Total stockholders’ equity
167,935
174,713
174,601
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
$
485,657
$
504,823
$
526,524
Tilly’s, Inc.
Consolidated Statements of
Operations
(In thousands, except per share
data)
(unaudited)
Thirteen Weeks Ended
April 30,
2022
May 1,
2021
Net sales
$
145,775
$
163,157
Cost of goods sold (includes buying,
distribution, and occupancy costs)
101,100
107,617
Rent expense, related party
860
701
Total cost of goods sold (includes
buying, distribution, and occupancy costs)
101,960
108,318
Gross profit
43,815
54,839
Selling, general and administrative
expenses
42,574
39,837
Rent expense, related party
133
128
Total selling, general and
administrative expenses
42,707
39,965
Operating income
1,108
14,874
Other income (expense), net
4
(115
)
Income before income taxes
1,112
14,759
Income tax expense
299
3,800
Net income
$
813
$
10,959
Basic earnings per share of Class A and
Class B common stock
$
0.03
$
0.37
Diluted earnings per share of Class A and
Class B common stock
$
0.03
$
0.36
Weighted average basic shares
outstanding
30,762
29,878
Weighted average diluted shares
outstanding
31,046
30,529
Tilly’s, Inc.
Consolidated Statements of
Cash Flows
(In thousands)
(unaudited)
Thirteen Weeks Ended
April 30,
2021
May 1,
2021
Cash flows from operating
activities
Net income
$
813
$
10,959
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization
3,508
4,324
Insurance proceeds from casualty loss
—
117
Stock-based compensation expense
563
366
Impairment of assets
13
—
Loss on disposal of assets
43
62
Gain on sales and maturities of marketable
securities
(26
)
(29
)
Deferred income taxes
(150
)
285
Changes in operating assets and
liabilities:
Receivables
(356
)
250
Merchandise inventories
(8,467
)
(9,760
)
Prepaid expenses and other assets
1,667
1,615
Accounts payable
(955
)
10,617
Accrued expenses
(2,357
)
(1,745
)
Accrued compensation and benefits
(8,349
)
4,590
Operating lease liabilities
(1,361
)
(2,103
)
Deferred revenue
(1,946
)
(579
)
Other liabilities
(193
)
308
Net cash (used in) provided by
operating activities
(17,553
)
19,277
Cash flows from investing
activities
Purchases of property and equipment
(2,598
)
(5,492
)
Proceeds from sale of property and
equipment
—
10
Insurance proceeds from casualty loss
—
29
Purchases of marketable securities
(4,967
)
(36,644
)
Proceeds from maturities of marketable
securities
51,028
25,000
Net cash provided by (used in)
investing activities
43,463
(17,097
)
Cash flows from financing
activities
Proceeds from exercise of stock
options
20
2,651
Share repurchases related to share
repurchase program
(8,177
)
—
Net cash (used in) provided by
financing activities
(8,157
)
2,651
Increase in cash and cash
equivalents
17,753
4,831
Cash and cash equivalents, beginning of
period
42,201
76,184
Cash and cash equivalents, end of
period
$
59,954
$
81,015
Tilly's, Inc.
Store Count and Square
Footage
Store Count at
Beginning of
Quarter
New Stores
Opened
During Quarter
Stores
Permanently
Closed
During Quarter
Store Count at
End of Quarter
Total Gross
Square Footage
End of Quarter
(in thousands)
2021 Q1
238
2
2
238
1,753
2021 Q2
238
6
—
244
1,788
2021 Q3
244
—
1
243
1,781
2021 Q4
243
1
3
241
1,764
2022 Q1
241
—
—
241
1,764
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version on businesswire.com: https://www.businesswire.com/news/home/20220602005849/en/
Investor Relations Contact: Michael
Henry, Executive Vice President, Chief Financial Officer (949)
609-5599, ext. 17000 irelations@tillys.com
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