Tilly’s, Inc. (NYSE: TLYS, the "Company") today announced
financial results for the second quarter of fiscal 2024 ended
August 3, 2024.
"While the macro environment remains challenging for our
customer demographic, we believe that our new pricing strategies
are gaining traction as evidenced by our second consecutive quarter
of improved product margins, and that we are beginning to drive
improved customer engagement through our refocused marketing
efforts," commented Hezy Shaked, Co-Founder and Interim President
and Chief Executive Officer. "We are encouraged to have started the
third quarter with a positive comp in fiscal August, representing
our first positive monthly comparable net sales result since
February 2022. However, we remain cautious in our third quarter
outlook as our business has begun to slow down following the peak
of the back-to-school season, consistent with the trend pattern in
recent years."
Operating Results Overview
Fiscal 2024 Second Quarter Operating
Results Overview
The following comparisons refer to the Company's operating
results for the second quarter of fiscal 2024 ended August 3, 2024
versus the second quarter of fiscal 2023 ended July 29, 2023.
- Total net sales were $162.9 million, an increase of $2.9
million or 1.8%, compared to $160.0 million last year, primarily
due to the calendar shift impact of last year's 53rd week in the
retail calendar, which caused a portion of the back-to-school
season's sales volume to shift into the latter stages of the second
quarter from the beginning of the third quarter last year. Total
comparable net sales, including both physical stores and e-commerce
("e-com"), decreased by 7.8% relative to the shifted 13-week period
ended August 5, 2023.
- Net sales from physical stores were $132.3 million, an increase
of $2.5 million or 2.0%, compared to $129.8 million last year, with
a comparable store net sales decrease of 7.9%. Net sales from
physical stores represented 81.3% of total net sales this year
compared to 81.1% of total net sales last year. The Company ended
the second quarter with 247 total stores compared to 246 total
stores at the end of the second quarter last year.
- Net sales from e-com were $30.5 million, an increase of $0.4
million or 1.3%, compared to $30.2 million last year. E-com net
sales represented 18.7% of total net sales this year compared to
18.9% of total net sales last year.
- Gross profit, including buying, distribution, and occupancy
costs, was $49.9 million, or 30.7% of net sales, compared to $44.3
million, or 27.7% of net sales, last year. Product margins improved
by 270 basis points primarily due to the combination of improved
initial markups and lower total markdowns. Buying, distribution,
and occupancy costs improved by 30 basis points collectively,
primarily due to carrying these costs against a higher level of net
sales this year.
- Selling, general and administrative ("SG&A") expenses were
$50.8 million, or 31.2% of net sales, compared to $47.0 million, or
29.4% of net sales, last year. The $3.8 million increase in
SG&A was primarily attributable to increases in store payroll
and related benefits of $1.5 million due primarily to average wage
rate increases, digital marketing expenses of $0.7 million,
software as a service expense of $0.6 million, and corporate
payroll and related benefits of $0.5 million.
- Operating loss was $0.9 million, or 0.5% of net sales, compared
to an operating loss of $2.7 million, or 1.7% of net sales, last
year, due to the combined impact of the factors noted above.
- Pre-tax loss was $0.1 million, or break-even as a percentage of
net sales, compared to a pre-tax loss of $1.5 million, or 0.9% of
net sales, last year.
- Income tax benefit was $4.5 thousand or 6.2% of pre-tax loss,
compared to an income tax benefit of $0.3 million, or 23.2% of
pre-tax loss, last year. The decrease in the effective income tax
rate was due to an immaterial state tax benefit arising in a
quarter with a nearly break-even pre-tax loss.
- Net loss was $0.1 million, or $0.00 net loss per share,
compared to a net loss of $1.1 million, or $0.04 net loss per
share, last year. Weighted average shares were 30.0 million this
year compared to 29.8 million shares last year.
Fiscal 2024 First Half Operating Results
Overview
The following comparisons refer to the Company's operating
results for the first half of fiscal 2024 ended August 3, 2024
versus the first half of fiscal 2023 ended July 29, 2023.
- Total net sales were $278.7 million, a decrease of $4.9 million
or 1.7%, compared to $283.6 million last year, primarily due to a
decline in comparable net sales partially offset by the calendar
shift impact of last year's 53rd week in the retail calendar, which
caused a portion of the back-to-school season's sales volume to
shift into the second quarter this year from the beginning of the
third quarter last year. Total comparable net sales, including both
physical stores and e-commerce ("e-com"), decreased by 8.4%
relative to the shifted 26-week period ended August 5, 2023.
- Net sales from physical stores were $225.2 million, a decrease
of $2.5 million or 1.1%, compared to $227.6 million last year, with
a comparable store net sales decrease of 8.2%. Net sales from
physical stores represented 80.8% of total net sales this year
compared to 80.3% of total net sales last year.
- Net sales from e-com were $53.6 million, a decrease of $2.4
million or 4.3%, compared to $56.0 million last year. E-com net
sales represented 19.2% of total net sales this year compared to
19.7% of total net sales last year.
- Gross profit, including buying, distribution, and occupancy
costs, was $74.2 million, or 26.6% of net sales, compared to $70.3
million, or 24.8% of net sales, last year. Product margins improved
by 210 basis points primarily due to the combination of improved
initial markups and lower total markdowns. Buying, distribution,
and occupancy costs deleveraged by 30 basis points collectively,
despite being $0.6 million lower than last year, primarily due to
carrying these costs against lower net sales this year.
- Selling, general and administrative ("SG&A") expenses were
$95.9 million, or 34.4% of net sales, compared to $90.2 million, or
31.8% of net sales, last year. The $5.7 million increase in
SG&A was primarily attributable to increases in store payroll
and related benefits of $2.5 million due primarily to average wage
rate increases, non-cash store asset impairment charges of $1.5
million, corporate payroll and related benefits of $1.0 million,
and software as a service expense of $0.9 million. These increases
were partially offset by a variety of smaller expense
decreases.
- Operating loss was $21.6 million, or 7.8% of net sales,
compared to an operating loss of $19.9 million, or 7.0% of net
sales, last year, due to the combined impact of the factors noted
above.
- Pre-tax loss was $19.7 million, or 7.1% of net sales, compared
to a pre-tax loss of $17.7 million, or 6.2% of net sales, last
year.
- Income tax benefit was $17.2 thousand or 0.1% of pre-tax loss,
compared to an income tax benefit of $4.6 million, or 25.9% of
pre-tax loss, last year. The decrease in the effective income tax
rate was primarily attributable to the continuing impact of the
valuation allowance.
- Net loss was $19.7 million, or $0.66 net loss per share,
compared to a net loss of $13.1 million, or $0.44 net loss per
share, last year. Weighted average shares were 30.0 million this
year compared to 29.8 million shares last year.
Balance Sheet and Liquidity
As of August 3, 2024, the Company had $76.7 million of cash,
cash equivalents and marketable securities and no debt outstanding,
compared to $104.3 million and no debt outstanding as of July 29,
2023. Total inventories increased 4.1% as of August 3, 2024
compared to July 29, 2023. Total year-to-date capital expenditures
at the end of the second quarter were $4.6 million this year
compared to $6.3 million last year.
Fiscal 2024 Third Quarter Outlook
Total comparable net sales for fiscal August ended August 31,
2024, increased by 1.0% relative to the comparable four-week period
last year. Due to the impact of the 53rd week in last year's retail
calendar, total net sales for this year's third quarter will start
with an $18.4 million deficit in net sales compared to last year's
third quarter as a result of a large back-to-school net sales week
shifting into the end of the second quarter this year from what was
in the beginning of the third quarter last year. Based on this
timing shift, current quarter-to-date comparable net sales results
and current and historical trends, the Company currently estimates
the following for the third quarter of fiscal 2024:
- Net sales to be in the range of approximately $140 million to
$146 million, translating to an estimated comparable net sales
decrease in the range of approximately (6)% to (2)%, respectively,
relative to the comparable 13-week period last year;
- SG&A expenses to be approximately $49 million before
factoring in any potential non-cash store asset impairment charges
which may arise;
- Pre-tax loss and net loss to be in the range of approximately
$(11.6) million to $(8.7) million, respectively, with a near-zero
effective income tax rate due to the continuing impact of a full,
non-cash valuation allowance on deferred tax assets; and
- Per share results to be in the range of a net loss of $(0.39)
to $(0.29), respectively, with estimated weighted average shares of
approximately 30 million.
The Company currently expects to have 246 total stores open at
the end of the third quarter of fiscal 2024 compared to 249 at the
end of last year's third quarter.
Conference Call Information
A conference call to discuss these financial results is
scheduled for today, September 5, 2024, 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 September 12, 2024, by dialing (844) 512-2921
(domestic) or (412) 317-6671 (international) and entering the
conference identification number: 10191499.
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 247 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 changes in the macro-economic environment,
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, or enhance awareness of our brand and
brand image, general consumer spending patterns and levels,
including changes in historical spending patterns, 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)
August 3, 2024
February 3,
2024
July 29, 2023
ASSETS
Current assets:
Cash and cash equivalents
$
36,749
$
47,027
$
54,578
Marketable securities
39,947
48,021
49,700
Receivables
13,176
5,947
10,922
Merchandise inventories
95,011
63,159
91,251
Prepaid expenses and other current
assets
9,539
11,905
9,209
Total current assets
194,422
176,059
215,660
Operating lease assets
188,711
203,825
224,537
Property and equipment, net
44,612
48,063
48,353
Deferred tax assets, net
—
—
12,973
Other assets
1,452
1,598
1,764
TOTAL ASSETS
$
429,197
$
429,545
$
503,287
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
42,961
$
14,506
$
44,763
Accrued expenses
20,011
13,063
18,972
Deferred revenue
13,615
14,957
14,012
Accrued compensation and benefits
11,488
9,902
8,358
Current portion of operating lease
liabilities
51,414
48,672
51,243
Current portion of operating lease
liabilities, related party
3,269
3,121
2,977
Other liabilities
270
336
425
Total current liabilities
143,028
104,557
140,750
Long-term liabilities:
Noncurrent portion of operating lease
liabilities
141,565
160,531
176,310
Noncurrent portion of operating lease
liabilities, related party
17,596
19,267
20,865
Other liabilities
235
321
447
Total long-term liabilities
159,396
180,119
197,622
Total liabilities
302,424
284,676
338,372
Stockholders’ equity:
Common stock (Class A)
23
23
23
Common stock (Class B)
7
7
7
Preferred stock
—
—
—
Additional paid-in capital
173,939
172,478
171,195
Accumulated deficit
(47,652
)
(27,962
)
(6,563
)
Accumulated other comprehensive income
456
323
253
Total stockholders’ equity
126,773
144,869
164,915
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
$
429,197
$
429,545
$
503,287
Tilly’s, Inc.
Consolidated Statements of
Operations
(In thousands, except per share
data)
(unaudited)
Thirteen Weeks Ended
Twenty-Six Weeks Ended
August 3, 2024
July 29, 2023
August 3, 2024
July 29, 2023
Net sales
$
162,867
$
159,951
$
278,723
$
283,588
Cost of goods sold (includes buying,
distribution, and occupancy costs)
112,013
114,704
202,625
211,472
Rent expense, related party
934
931
1,865
1,862
Total cost of goods sold (includes
buying, distribution, and occupancy costs)
112,947
115,635
204,490
213,334
Gross profit
49,920
44,316
74,233
70,254
Selling, general and administrative
expenses
50,648
46,868
95,616
89,934
Rent expense, related party
131
133
264
266
Total selling, general and
administrative expenses
50,779
47,001
95,880
90,200
Operating loss
(859
)
(2,685
)
(21,647
)
(19,946
)
Other income, net
786
1,220
1,940
2,284
Loss before income taxes
(73
)
(1,465
)
(19,707
)
(17,662
)
Income tax benefit
(4
)
(340
)
(17
)
(4,569
)
Net loss
$
(69
)
$
(1,125
)
$
(19,690
)
$
(13,093
)
Basic net loss per share of Class A and
Class B common stock
$
(0.00
)
$
(0.04
)
$
(0.66
)
$
(0.44
)
Diluted net loss per share of Class A and
Class B common stock
$
(0.00
)
$
(0.04
)
$
(0.66
)
$
(0.44
)
Weighted average basic shares
outstanding
30,029
29,831
29,995
29,815
Weighted average diluted shares
outstanding
30,029
29,831
29,995
29,815
Tilly’s, Inc.
Consolidated Statements of
Cash Flows
(In thousands)
(unaudited)
Twenty-Six Weeks Ended
August 3, 2024
July 29, 2023
Cash flows from operating
activities
Net loss
$
(19,690
)
$
(13,093
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
6,305
6,457
Insurance proceeds from casualty loss
131
—
Stock-based compensation expense
1,167
1,078
Impairment of assets
2,499
955
(Gain) loss on disposal of assets
(35
)
28
Gain on maturities of marketable
securities
(1,121
)
(961
)
Deferred income taxes
—
(4,476
)
Changes in operating assets and
liabilities:
Receivables
(6,863
)
(801
)
Merchandise inventories
(31,983
)
(29,134
)
Prepaid expenses and other assets
3,003
8,230
Accounts payable
28,436
28,768
Accrued expenses
7,048
4,274
Accrued compensation and benefits
1,586
175
Operating lease liabilities
(4,112
)
(2,994
)
Deferred revenue
(1,342
)
(2,091
)
Other liabilities
(232
)
(314
)
Net cash used in operating
activities
(15,203
)
(3,899
)
Cash flows from investing
activities
Purchases of marketable securities
(39,290
)
(53,904
)
Purchases of property and equipment
(4,625
)
(6,310
)
Proceeds from maturities of marketable
securities
48,500
45,081
Insurance proceeds from casualty loss
23
—
Proceeds from sale of property and
equipment
23
—
Net cash provided by (used in)
investing activities
4,631
(15,133
)
Cash flows from financing
activities
Proceeds from exercise of stock
options
294
84
Net cash provided by financing
activities
294
84
Change in cash and cash
equivalents
(10,278
)
(18,948
)
Cash and cash equivalents, beginning of
period
47,027
73,526
Cash and cash equivalents, end of
period
$
36,749
$
54,578
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)
2023 Q1
249
1
2
248
1,809
2023 Q2
248
—
2
246
1,792
2023 Q3
246
3
—
249
1,810
2023 Q4
249
3
4
248
1,801
2024 Q1
248
2
4
246
1,784
2024 Q2
246
1
—
247
1,791
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240905293019/en/
Investor Relations Contact: Michael
Henry, Executive Vice President, Chief Financial Officer (949)
609-5599, ext. 17000 irelations@tillys.com
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