TLYS

Tilly’s, Inc. (NYSE: TLYS, the "Company") today announced financial results for its fiscal 2022 fourth quarter and fiscal year ended January 28, 2023.

"Our fourth quarter results exceeded our revised outlook ranges provided in early January," commented Ed Thomas, President and Chief Executive Officer. "Despite a disappointing year overall, the ongoing impacts of the current inflationary environment, and potential recession concerns ahead, we remain cautiously optimistic that we will be well positioned to improve our operating results in fiscal 2023 compared to fiscal 2022."

Operating Results Overview

For context, the Company's operating results for the comparative periods last year were driven by significant pent-up consumer demand and the impact of stimulus payments resulting from the pandemic, producing Company-record results for net sales, gross margin, operating income and earnings per share for the fourth quarter and fifty-two weeks of fiscal 2021.

Fiscal 2022 Fourth Quarter Operating Results Overview

The following comparisons refer to the Company's operating results for the fourth quarter of fiscal 2022 ended January 28, 2023 versus the fourth quarter of fiscal 2021 ended January 29, 2022.

• Total net sales were $180.4 million, a decrease of $24.1 million or 11.8%, compared to $204.5 million last year. Total comparable net sales, including both physical stores and e-commerce ("e-com"), decreased by 13.7%.
  • Net sales from physical stores were $135.0 million, a decrease of $17.1 million or 11.3%, compared to $152.2 million last year with a comparable store net sales decrease of 14.1%. Net sales from physical stores represented 74.9% of total net sales compared to 74.4% of total net sales last year. The Company ended the fourth quarter with 249 total stores compared to 241 total stores at the end of the fourth quarter last year.
  • Net sales from e-com were $45.3 million, a decrease of $7.0 million or 13.4%, compared to $52.3 million last year. E-com net sales represented 25.1% of total net sales compared to 25.6% of total net sales last year.
• Gross profit, including buying, distribution, and occupancy costs, was $52.4 million, or 29.1% of net sales, compared to $70.4 million, or 34.4% of net sales, last year. Product margins declined by 290 basis points primarily due to an increased markdown rate compared to last year, during which we experienced record full-price selling with an abnormally low markdown rate. Buying, distribution and occupancy costs deleveraged by 240 basis points collectively, despite being $0.4 million lower than last year, due to carrying these costs against a significantly lower level of net sales compared to last year.
• Selling, general and administrative ("SG&A") expenses were $53.5 million, or 29.7% of net sales, compared to $53.1 million, or 25.9% of net sales, last year. The increase in SG&A dollars was primarily attributable to the impact of wage inflation on store, corporate and e-commerce fulfillment payroll expenses as well as operating 8 net additional stores compared to last year. These increases were partially offset by a $1.0 million reduction in bonus expense due to the lack of any bonus accrual this year.
• Operating loss was $(1.1) million, or (0.6)% of net sales, compared to operating income of $17.3 million, or 8.5% of net sales, last year, due to the combined impact of the factors noted above.
• Other income was $1.1 million compared to other expense of $(0.4) million last year primarily due to earning higher rates of return on our marketable securities investments and the absence of any costs associated with our former asset-backed credit facility which were included in last year's results.
• Income tax benefit was $0.3 million, compared to income tax expense of $4.9 million, or 28.7% of pre-tax income, last year. This quarter's income tax benefit was primarily attributable to certain allowable deductions and tax credits.
• Net income was $0.3 million, or $0.01 per diluted share, compared to net income of $12.1 million, or $0.38 per diluted share, last year. Weighted average diluted shares were 30.0 million this year compared to 31.4 million last year.

Fiscal 2022 Full Year Operating Results Overview

The following comparisons refer to the Company's operating results for the fifty-two weeks of fiscal 2022 ended January 28, 2023 versus the fifty-two weeks of fiscal 2021 ended January 29, 2022.

• Total net sales were $672.3 million, a decrease of $103.4 million or 13.3%, compared to $775.7 million last year. Total comparable net sales, including both physical stores and e-com, decreased by 14.6%.
  • Net sales from physical stores were $531.1 million, a decrease of $78.6 million or 12.9%, compared to $609.7 million last year with a comparable store net sales decrease of 14.5%. Net sales from stores represented 79.0% of total net sales compared to 78.6% of total net sales last year.
  • Net sales from e-com were $141.1 million, a decrease of $24.8 million or 15.0%, compared to $165.9 million last year. E-com net sales represented 21.0% of total net sales compared to 21.4% of total net sales last year.
• Gross profit including buying, distribution, and occupancy costs, was $202.8 million, or 30.2% of net sales, compared to $276.7 million, or 35.7% of net sales, last year. Buying, distribution and occupancy costs deleveraged by 280 basis points collectively despite being $1.2 million lower than last year due to carrying these costs against a significantly lower level of net sales compared to last year. Product margins declined by 270 basis points primarily due to an increased markdown rate compared to last year, during which we experienced record full-price selling with an abnormally low markdown rate.
• SG&A expenses were $191.3 million, or 28.5% of net sales, compared to $189.1 million, or 24.4% of net sales, last year. The increase in SG&A dollars was primarily attributable to the impact of wage inflation on store payroll and operating 8 net additional stores compared to last year, as well as increased software as a service cost. These increases were partially offset by a $7.1 million reduction in bonus expense due to the lack of any bonus accrual this year.
• Operating income was $11.5 million, or 1.7% of net sales, compared to 87.6 million, or 11.3% of net sales, last year.
• Other income was $2.0 million compared to other expense of $(0.6) million last year primarily due to earning higher rates of return on our marketable securities investments and the absence of any costs associated with our former asset-backed credit facility which were included in last year's results.
• Income tax expense was $3.3 million, or 24.9% of pre-tax income, compared to $22.8 million, or 26.2% of pre-tax income, last year. The decrease in the effective income tax rate was primarily attributable to a decrease in pre-tax income.
• Net income was $10.1 million, or $0.33 per diluted share, compared to 64.2 million, or 2.06 per diluted share, last year. Weighted average diluted shares were 30.3 million this year compared to 31.1 million last year.

Balance Sheet and Liquidity

As of January 28, 2023, the Company had $113.3 million of cash and marketable securities and no debt outstanding compared to $139.2 million and no debt outstanding as of January 29, 2022. During fiscal 2022, the Company repurchased 1,258,330 shares of its common stock for a total of $10.9 million pursuant to its previously-announced stock repurchase program.

The Company ended the fourth quarter with inventories per square foot down 8.2% compared to last year.

Total year-to-date capital expenditures at the end of the fourth quarter were $15.1 million this year compared to $13.4 million last year.

Fiscal 2023 First Quarter Outlook

Total comparable net sales through March 7, 2023, including both physical stores and e-com, decreased by 19.9% relative to the comparable period last year with a 21.0% decrease in fiscal February and a 17.3% decrease thus far in fiscal March. The Company believes its first quarter results have been adversely impacted by weather, particularly in California wherein approximately 40% of its stores reside and currently expects its comparable net sales trend to improve over the remainder of the quarter given easier prior year comparisons. Based on current and historical trends, the Company currently estimates that its fiscal 2023 first quarter net sales will be in the range of approximately $122 million to $133 million, translating to an estimated comparable net sales decrease of approximately 11% to 18.5% compared to the first quarter of fiscal 2022. The Company currently estimates its SG&A expenses for the first quarter of fiscal 2023 to be in the range of approximately $43 million to $44 million, pre-tax loss to be in the range of approximately $(11.0) million to $(16.7) million, and estimated income tax rate to be approximately 27%. The Company currently expects its loss per share for the first quarter of fiscal 2023 to be in the range of $(0.27) to $(0.41) based on estimated weighted average shares of approximately 29.9 million.

Fiscal 2023 Capital Expenditure Plans

The Company currently expects its total capital expenditures for fiscal 2023 to be in the range of approximately $15 million to $20 million, inclusive of up to 10 new stores and upgrades to certain distribution and information technology systems.

Conference Call Information

A conference call to discuss these financial results is scheduled for today, March 9, 2023, 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) 300-8521 (domestic) or (412) 317-6026 (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 March 16, 2023, by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) and entering the conference identification number: 10175683.

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 248 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 our current operating expectations in light of historical results, the impacts of inflation and potential recession on us and our customers, 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, expectations regarding customer traffic, our supply chain, 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, 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 on the SEC’s website at www.sec.gov and on 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)

 

 

January 28, 2023

 

January 29, 2022

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

73,526

 

$

42,201

 

Marketable securities

 

39,753

 

 

97,027

 

Receivables

 

9,240

 

 

6,705

 

Merchandise inventories

 

62,117

 

 

65,645

 

Prepaid expenses and other current assets

 

18,136

 

 

16,400

 

Total current assets

 

202,772

 

 

227,978

 

Operating lease assets

 

212,845

 

 

216,508

 

Property and equipment, net

 

50,635

 

 

47,530

 

Deferred tax assets

 

8,269

 

 

11,446

 

Other assets

 

1,377

 

 

1,361

 

TOTAL ASSETS

$

475,898

 

$

504,823

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

15,956

 

$

28,144

 

Accrued expenses

 

15,889

 

 

19,073

 

Deferred revenue

 

16,103

 

 

17,096

 

Accrued compensation and benefits

 

7,916

 

 

17,056

 

Current portion of operating lease liabilities

 

48,864

 

 

51,504

 

Current portion of operating lease liabilities, related party

 

2,839

 

 

2,533

 

Other liabilities

 

470

 

 

761

 

Total current liabilities

 

108,037

 

 

136,167

 

Long-term liabilities:

 

 

 

Noncurrent portion of operating lease liabilities

 

167,913

 

 

171,965

 

Noncurrent portion of operating lease liabilities, related party

 

22,388

 

 

21,000

 

Other liabilities

 

349

 

 

978

 

Total long-term liabilities

 

190,650

 

 

193,943

 

Total liabilities

 

298,687

 

 

330,110

 

Stockholders’ equity:

 

 

 

Common stock (Class A)

 

23

 

 

24

 

Common stock (Class B)

 

7

 

 

7

 

Preferred stock

 

—

 

 

—

 

Additional paid-in capital

 

170,033

 

 

166,929

 

Retained earnings

 

6,943

 

 

7,754

 

Accumulated other comprehensive income (loss)

 

205

 

 

(1

)

Total stockholders’ equity

 

177,211

 

 

174,713

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

475,898

 

$

504,823

 

 

Tilly’s, Inc.

Consolidated Statements of Income

(In thousands, except per share data)

(unaudited)

 

Thirteen Weeks Ended

Fifty-Two Weeks Ended

 

January 28, 2023

 

January 29, 2022

January 28, 2023

 

January 29, 2022

Net sales

$

180,350

 

 

$

204,489

 

$

672,280

 

$

775,694

 

 

 

 

 

 

 

 

Cost of goods sold (includes buying, distribution, and occupancy costs)

 

127,005

 

 

 

133,332

 

 

465,875

 

 

496,083

 

Rent expense, related party

 

936

 

 

 

799

 

 

3,616

 

 

2,948

 

Total cost of goods sold (includes buying, distribution, and occupancy costs)

 

127,941

 

 

 

134,131

 

 

469,491

 

 

499,031

 

Gross profit

 

52,409

 

 

 

70,358

 

 

202,789

 

 

276,663

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

53,397

 

 

 

52,919

 

 

190,802

 

 

188,527

 

Rent expense, related party

 

133

 

 

 

142

 

 

533

 

 

541

 

Total selling, general and administrative expenses

 

53,530

 

 

 

53,061

 

 

191,335

 

 

189,068

 

 

 

 

 

 

 

 

Operating (loss) income

 

(1,121

)

 

 

17,297

 

 

11,454

 

 

87,595

 

Other income (expense), net

 

1,118

 

 

 

(375

)

 

1,980

 

 

(594

)

(Loss) Income before income taxes

 

(3

)

 

 

16,922

 

 

13,434

 

 

87,001

 

Income tax (benefit) expense

 

(312

)

 

 

4,864

 

 

3,344

 

 

22,752

 

Net income

$

309

 

 

$

12,058

 

$

10,090

 

$

64,249

 

Basic earnings per share of Class A and Class B common stock

$

0.01

 

 

$

0.39

 

$

0.34

 

$

2.10

 

Diluted earnings per share of Class A and Class B common stock

$

0.01

 

 

$

0.38

 

$

0.33

 

$

2.06

 

Weighted average basic shares outstanding

 

29,785

 

 

 

30,953

 

 

30,115

 

 

30,560

 

Weighted average diluted shares outstanding

 

30,010

 

 

 

31,402

 

 

30,323

 

 

31,118

 

 

Tilly’s, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

 

 

Fifty-Two Weeks Ended

 

January 28, 2023

 

January 29, 2022

Cash flows from operating activities

 

 

 

Net income

$

10,090

 

 

$

64,249

 

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

 

 

 

Depreciation and amortization

 

14,134

 

 

 

16,836

 

Insurance proceeds from casualty loss

 

23

 

 

 

117

 

Stock-based compensation expense

 

2,267

 

 

 

1,920

 

Impairment of assets

 

17

 

 

 

136

 

Loss on disposal of assets

 

92

 

 

 

74

 

Gain on sales and maturities of marketable securities

 

(466

)

 

 

(132

)

Deferred income taxes

 

3,201

 

 

 

503

 

Changes in operating assets and liabilities:

 

 

 

Receivables

 

1,710

 

 

 

4,023

 

Merchandise inventories

 

3,505

 

 

 

(10,064

)

Prepaid expenses and other assets

 

(1,885

)

 

 

(10,275

)

Accounts payable

 

(12,194

)

 

 

3,168

 

Accrued expenses

 

(5,396

)

 

 

(10,194

)

Accrued compensation and benefits

 

(9,140

)

 

 

7,157

 

Operating lease liabilities

 

(5,231

)

 

 

(7,008

)

Deferred revenue

 

(993

)

 

 

3,604

 

Other liabilities

 

(1,149

)

 

 

(712

)

Net cash (used in) provided by operating activities

 

(1,415

)

 

 

63,402

 

 

 

 

 

Cash flows from investing activities

 

 

 

Proceeds from maturities of marketable securities

 

147,271

 

 

 

130,352

 

Purchases of marketable securities

 

(89,349

)

 

 

(162,321

)

Purchases of property and equipment

 

(15,123

)

 

 

(13,425

)

Proceeds from sale of property and equipment

 

6

 

 

 

37

 

Insurance proceeds from casualty loss

 

—

 

 

 

29

 

Net cash provided by (used in) investing activities

 

42,805

 

 

 

(45,328

)

 

 

 

 

Cash flows from financing activities

 

 

 

Share repurchases related to share repurchase program

 

(10,902

)

 

 

—

 

Proceeds from exercise of stock options

 

176

 

 

 

9,573

 

Short swing profit settlement

 

661

 

 

 

—

 

Dividends paid

 

—

 

 

 

(61,630

)

Net cash used in financing activities

 

(10,065

)

 

 

(52,057

)

 

 

 

 

Change in cash and cash equivalents

 

31,325

 

 

 

(33,983

)

Cash and cash equivalents, beginning of period

 

42,201

 

 

 

76,184

 

Cash and cash equivalents, end of period

$

73,526

 

 

$

42,201

 

 

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)

2022 Q1

241

 

—

 

—

 

241

 

1,764

2022 Q2

241

 

2

 

1

 

242

 

1,767

2022 Q3

242

 

5

 

—

 

247

 

1,800

2022 Q4

247

 

4

 

2

 

249

 

1,818

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230309005743/en/

Investor Relations Contact: Michael Henry, Executive Vice President, Chief Financial Officer (949) 609-5599, ext. 17000 irelations@tillys.com