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
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