Introduces Fiscal 2023 Second Quarter
Outlook
Tilly’s, Inc. (NYSE: TLYS, the "Company") today announced
financial results for the first quarter of fiscal 2023 ended April
29, 2023.
"We believe the highly uncertain and inflationary economic
environment continues to have a detrimental impact on our pre-teen,
teen, and young adult customer demographic," commented Ed Thomas,
President and Chief Executive Officer. "While we believe our
product assortments are trend right, the impact of inflation and
potential recessionary concerns remain a risk to our business over
the near term."
Operating Results Overview
Fiscal 2023 First Quarter Operating
Results Overview
The following comparisons refer to the Company's operating
results for the first quarter of fiscal 2023 ended April 29, 2023
versus the first quarter of fiscal 2022 ended April 30, 2022.
- Total net sales were $123.6 million, a decrease of $22.1
million or 15.2%, compared to $145.8 million last year. Total
comparable net sales, including both physical stores and e-commerce
("e-com"), decreased by 17.5%.
- Net sales from physical stores were $97.8 million, a decrease
of $19.7 million or 16.7%, compared to $117.5 million last year
with a comparable store net sales decrease of 19.7%. Net sales from
physical stores represented 79.1% of total net sales compared to
80.6% of total net sales last year. The Company ended the first
quarter with 248 total stores compared to 241 total stores at the
end of the first quarter last year.
- Net sales from e-com were $25.8 million, a decrease of $2.5
million or 8.7%, compared to $28.3 million last year. E-com net
sales represented 20.9% of total net sales compared to 19.4% of
total net sales last year.
- Gross profit, including buying, distribution, and occupancy
costs, was $25.9 million, or 21.0% of net sales, compared to $43.8
million, or 30.1% of net sales, last year. Buying, distribution,
and occupancy costs deleveraged by 620 basis points and increased
by $2.4 million collectively, largely due to occupancy costs, as a
result of operating 7 net additional stores. Product margins
declined by 290 basis points primarily due to increased markdowns
utilized to manage inventory levels.
- Selling, general and administrative ("SG&A") expenses were
$43.2 million, or 34.9% of net sales, compared to $42.7 million, or
29.3% of net sales, last year. The $0.5 million increase in
SG&A was primarily due to increases in corporate payroll, due
to the impact of wage inflation, software as a service and
recruiting expenses. Partially offsetting these increases was a
$0.8 million reduction in store payroll and related benefits,
despite operating 7 net additional stores and absorbing an average
8% hourly wage rate increase, compared to last year.
- Operating loss was $(17.3) million, or (14.0)% of net sales,
compared to operating income of $1.1 million, or 0.8% of net sales,
last year, due to the combined impact of the factors noted
above.
- Other income was $1.1 million compared to break-even last year,
primarily due to earning significantly higher rates of return on
our marketable securities compared to last year.
- Income tax benefit was $(4.2) million, or 26.1% of pre-tax
loss, compared to income tax expense of $0.3 million, or 26.9% 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 loss was $(12.0) million, or $(0.40) per share, compared to
net income of $0.8 million, or $0.03 per diluted share, last year.
Weighted average shares were 29.8 million this year compared to
31.0 million diluted shares last year.
Balance Sheet and Liquidity
As of April 29, 2023, the Company had $93.4 million of cash and
marketable securities and no debt outstanding compared to $111.0
million and no debt outstanding at the end of the first quarter
last year. Since the end of last year's first quarter, the Company
repurchased 366,297 shares of its common stock for a total of $2.7
million pursuant to its stock repurchase program, which expired on
March 14, 2023.
The Company ended the first quarter with inventories at cost up
1.6% per square foot while unit inventories were down 5.8% per
square foot compared to last year.
Total year-to-date capital expenditures at the end of the first
quarter were $4.3 million this year compared to $2.6 million last
year. For fiscal 2023 as a whole, the Company expects its total
capital expenditures to be approximately $15 million, inclusive of
7 new stores and upgrades to certain distribution and information
technology systems.
Fiscal 2023 Second Quarter Outlook
Total comparable net sales through May 30, 2023, including both
physical stores and e-com, decreased by 11.5% relative to the
comparable period last year. Based on current and historical
trends, the Company currently estimates that its fiscal 2023 second
quarter net sales will be in the range of approximately $148
million to $158 million, translating to an estimated comparable net
sales decrease of approximately 10% to 15% for the second quarter
of fiscal 2023 compared to last year. The Company currently
estimates its SG&A expenses for the second quarter of fiscal
2023 to be in the range of approximately $49 million to $50
million, pre-tax loss to be in the range of approximately $(5)
million to $(11) million, and estimated income tax rate to be
approximately 26%. The Company currently expects its loss per share
for the second quarter of fiscal 2023 to be in the range of $(0.13)
to $(0.27) based on estimated weighted average shares of
approximately 29.9 million. The Company expects to have 248 stores
open at the end of the second quarter, a net increase of six stores
from the end of last year's second quarter.
Conference Call Information
A conference call to discuss these financial results is
scheduled for today, June 1, 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 June 8, 2023, by dialing (844) 512-2921 (domestic)
or (412) 317-6671 (international) and entering the conference
identification number: 10178210.
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,
including on 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 impact of inflation on consumer behavior and our
business and operations, supply chain difficulties, 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)
April 29, 2023
January 28,
2023
April 30, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
43,686
$
73,526
$
59,954
Marketable securities
49,695
39,753
50,997
Receivables
12,973
9,240
8,209
Merchandise inventories
77,182
62,117
74,112
Prepaid expenses and other current
assets
9,332
17,762
14,769
Total current assets
192,868
202,398
208,041
Operating lease assets
216,385
212,845
218,163
Property and equipment, net
49,438
50,635
46,606
Deferred tax assets
12,728
8,497
11,594
Other assets
1,765
1,377
1,253
TOTAL ASSETS
$
473,184
$
475,752
$
485,657
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
24,730
$
15,956
$
27,193
Accrued expenses
14,253
15,889
16,741
Deferred revenue
14,792
16,103
15,150
Accrued compensation and benefits
9,056
8,183
8,707
Current portion of operating lease
liabilities
49,567
48,864
51,237
Current portion of operating lease
liabilities, related party
2,908
2,839
2,483
Other liabilities
446
470
674
Total current liabilities
115,752
108,304
122,185
Long-term liabilities:
Noncurrent portion of operating lease
liabilities
169,791
167,913
174,301
Noncurrent portion of operating lease
liabilities, related party
21,633
22,388
20,364
Other liabilities
487
349
872
Total long-term liabilities
191,911
190,650
195,537
Total liabilities
307,663
298,954
317,722
Stockholders’ equity:
Common stock (Class A)
23
23
23
Common stock (Class B)
7
7
7
Preferred stock
—
—
—
Additional paid-in capital
170,608
170,033
167,512
(Accumulated deficit) retained
earnings
(5,438
)
6,530
391
Accumulated other comprehensive income
321
205
2
Total stockholders’ equity
165,521
176,798
167,935
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
$
473,184
$
475,752
$
485,657
Tilly’s, Inc.
Consolidated Statements of
Operations
(In thousands, except per share
data)
(unaudited)
Thirteen Weeks Ended
April 29, 2023
April 30, 2022
Net sales
$
123,637
$
145,775
Cost of goods sold (includes buying,
distribution, and occupancy costs)
96,768
101,100
Rent expense, related party
931
860
Total cost of goods sold (includes
buying, distribution, and occupancy costs)
97,699
101,960
Gross profit
25,938
43,815
Selling, general and administrative
expenses
43,066
42,574
Rent expense, related party
133
133
Total selling, general and
administrative expenses
43,199
42,707
Operating (loss) income
(17,261
)
1,108
Other income, net
1,064
4
(Loss) income before income
taxes
(16,197
)
1,112
Income tax (benefit) expense
(4,229
)
299
Net (loss) income
$
(11,968
)
$
813
Basic (loss) earnings per share of Class A
and Class B common stock
$
(0.40
)
$
0.03
Diluted (loss) earnings per share of Class
A and Class B common stock
$
(0.40
)
$
0.03
Weighted average basic shares
outstanding
29,798
30,762
Weighted average diluted shares
outstanding
29,798
31,046
Tilly’s, Inc.
Consolidated Statements of
Cash Flows
(In thousands)
(unaudited)
Thirteen Weeks Ended
April 29, 2023
April 30, 2022
Cash flows from operating
activities
Net (loss) income
$
(11,968
)
$
813
Adjustments to reconcile net (loss) income
to net cash used in operating activities:
Depreciation and amortization
3,214
3,508
Stock-based compensation expense
522
563
Impairment of assets
154
13
Loss on disposal of assets
16
43
Gain on sales and maturities of marketable
securities
(295
)
(26
)
Deferred income taxes
(4,231
)
(150
)
Changes in operating assets and
liabilities:
Receivables
(3,683
)
(356
)
Merchandise inventories
(15,065
)
(8,467
)
Prepaid expenses and other assets
8,162
1,667
Accounts payable
8,765
(955
)
Accrued expenses
441
(2,357
)
Accrued compensation and benefits
873
(8,349
)
Operating lease liabilities
(1,616
)
(1,361
)
Deferred revenue
(1,311
)
(1,946
)
Other liabilities
(173
)
(193
)
Net cash used in operating
activities
(16,195
)
(17,553
)
Cash flows from investing
activities
Proceeds from maturities of marketable
securities
15,081
51,028
Purchases of marketable securities
(24,524
)
(4,967
)
Purchases of property and equipment
(4,255
)
(2,598
)
Net cash (used in) provided by
investing activities
(13,698
)
43,463
Cash flows from financing
activities
Share repurchases related to share
repurchase program
—
(8,177
)
Proceeds from exercise of stock
options
53
20
Net cash provided by (used in)
financing activities
53
(8,157
)
Change in cash and cash
equivalents
(29,840
)
17,753
Cash and cash equivalents, beginning of
period
73,526
42,201
Cash and cash equivalents, end of
period
$
43,686
$
59,954
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
2023 Q1
249
1
2
248
1,809
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version on businesswire.com: https://www.businesswire.com/news/home/20230601005914/en/
Investor Relations Contact: Michael
Henry, Executive Vice President, Chief Financial Officer (949)
609-5599, ext. 17000 irelations@tillys.com
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