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Tilly’s, Inc. Announces Third Quarter Fiscal 2015 Results
Introduces Fourth Quarter Fiscal 2015 Outlook
-
Third Quarter Net Sales Increased 7.9% to
$142 million ;Comp Store Sales Increased 3.9% -
Third Quarter GAAP EPS of
$0.10 ; Non-GAAP EPS of$0.16
“I am pleased with the comparable store sales performance we achieved in the third quarter. We expect to end the fiscal year with appropriate inventory levels while maintaining healthy product margins in the fourth quarter.”
Third Quarter Results Overview
The following comparisons refer to operating results for the third
quarter of fiscal 2015 versus the third quarter of fiscal 2014 ended
-
Total net sales increased 7.9% to
$142 million from$131 million . - Comparable store sales, which include e-commerce sales, increased 3.9%.
-
Gross profit increased 10.1% to
$44.6 million from$40.5 million . Gross margin, or gross profit as a percentage of net sales, increased to 31.5% from 30.9%. The 60 basis point increase was primarily due to a 40 basis point improvement in buying, distribution and occupancy costs and a 20 basis point increase in merchandise margins. -
Operating income was
$5.4 million compared to$8.6 million , and included an aggregate of$2.4 million in non-comparable charges related to separation obligations for the Company’s former CEO and non-cash store asset impairment charges. Operating expenses also included a timing shift in marketing expenses from the second quarter last year into the third quarter this year when compared to the prior year period. -
The Company’s effective tax rate was 48.0% compared to 40.2% in the
prior year period primarily due to the impact of stock option
expirations, which resulted in the write-off of certain previously
recognized deferred tax assets. This rate difference increased income
tax expense for the third quarter of fiscal 2015 by approximately
$0.4 million utilizing fiscal 2014’s third quarter tax rate for comparability purposes. -
Net income was
$2.8 million , or$0.10 per diluted share, inclusive of the non-comparable charges and tax rate impact noted above. This compares to$5.1 million , or$0.18 per diluted share, in the prior year period. Excluding the non-comparable charges and tax rate impact noted above, non-GAAP net income was$4.5 million , or$0.16 per diluted share.
First Nine Months Results Overview
The following comparisons refer to operating results for the first nine
months of fiscal 2015 versus the first nine months of fiscal 2014 ended
-
Total net sales increased 7.2% to
$392 million from$365 million . - Comparable store sales, which include e-commerce sales, increased 2.1%.
-
Gross profit increased 10.1% to
$117 million from$107 million . Gross margin increased to 29.9% from 29.1%. This 80 basis point increase was primarily due to a 60 basis point improvement in buying, distribution and occupancy costs and a 20 basis point increase in merchandise margins. -
Operating income was
$8.6 million compared to$12.0 million , and included an aggregate of$3.3 million in non-comparable charges related to non-cash store asset impairments, separation obligations for the Company’s former CEO, and a legal settlement accrual. -
The Company’s effective tax rate was 46.2% compared to 41.7% in the
prior year period primarily due to the impact of stock option
expirations, which resulted in the write-off of certain previously
recognized deferred tax assets. This rate difference increased income
tax expense for fiscal 2015 by approximately
$0.4 million utilizing fiscal 2014’s year-to-date tax rate for comparability purposes. -
Net income was
$4.7 million , or$0.16 per diluted share, inclusive of the non-comparable charges and tax rate impacts noted above. This compares to$7.0 million , or$0.25 per diluted share in the prior year period. Excluding the non-comparable charges and tax rate impact noted above, non-GAAP net income was$6.8 million , or$0.24 per diluted share.
Balance Sheet and Liquidity
As of
Fourth Quarter 2015 Outlook
The Company expects fourth quarter comparable store sales to be in the
range of -2% to -4%, operating income to be in the range of
Non-GAAP Financial Measures
In addition to reporting financial measures in accordance with
accounting principles generally accepted in
For a description of these non-GAAP financial measures and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP, please see the accompanying table titled “Supplemental Information - Consolidated Statements of Income; Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures” contained in this press release.
Conference Call Information
A conference call to discuss the financial results is scheduled for
today,
A telephone replay of the call will be available until
About Tillys
Tillys is a leading destination specialty retailer of
Forward Looking Statements
Certain statements in this press release and oral statements made from
time to time by our representatives are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of
1995. In particular, statements regarding our future financials and
operating results, including but not limited to future comparable store
sales, future operating income, future net income, future earnings per
share, future gross, operating or product margins, anticipated tax rate,
future inventory levels, and market share and our business and strategy,
including but not limited to expected store openings and closings,
expansion of brands and exclusive relationships, development and growth
of our ecommerce platform and business, promotional strategy, and any
other statements about our future 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, 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 ecommerce business, effectively manage our inventory
and costs, effectively compete with other retailers, enhance awareness
of our brand and brand image, general consumer spending patterns and
levels, the effect of weather, and other factors that are detailed in
our Annual Report on Form 10-K, filed with the
Tilly’s, Inc. | ||||||
Consolidated Balance Sheets | ||||||
(In thousands, except par value and per share data) |
||||||
(unaudited) |
||||||
October 31, |
January 31, |
|||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 46,335 | $ | 49,789 | ||
Marketable securities | 29,951 | 34,957 | ||||
Receivables | 6,491 | 4,682 | ||||
Merchandise inventories | 70,110 | 51,507 | ||||
Prepaid expenses and other current assets | 13,255 | 12,349 | ||||
Total current assets | 166,142 | 153,284 | ||||
Property and equipment, net | 102,547 | 101,335 | ||||
Other assets | 3,703 | 2,932 | ||||
Total assets | $ | 272,392 | $ | 257,551 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 24,770 | $ | 23,109 | ||
Accrued expenses | 17,860 | 12,325 | ||||
Deferred revenue | 5,212 | 7,075 | ||||
Accrued compensation and benefits | 4,278 | 5,911 | ||||
Current portion of deferred rent | 6,533 | 6,070 | ||||
Current portion of capital lease obligation | 845 | 806 | ||||
Total current liabilities | 59,498 | 55,296 | ||||
Long-term portion of deferred rent | 42,141 | 41,875 | ||||
Long-term portion of capital lease obligation | 1,055 | 1,694 | ||||
Total long-term liabilities | 43,196 | 43,569 | ||||
Total liabilities | 102,694 | 98,865 | ||||
Stockholders' equity: | ||||||
Common stock (Class A), $0.001 par value; October 31, 2015 - 100,000 shares authorized, 12,305 |
||||||
shares issued and outstanding; January 31, 2015 - 100,000 shares authorized, 11,546 shares issued and outstanding |
12 | 11 | ||||
Common stock (Class B), $0.001 par value; October 31, 2015 - 35,000 shares authorized, 16,169 shares | ||||||
issued and outstanding; January 31, 2015 - 35,000 shares authorized, 16,544 shares issued and outstanding |
16 | 17 | ||||
Preferred stock, $0.001 par value; October 31, 2015 and January 31, 2015 - 10,000 shares authorized, | ||||||
no shares issued or outstanding | - | - | ||||
Additional paid-in capital | 132,937 | 126,565 | ||||
Retained earnings | 36,729 | 32,072 | ||||
Accumulated other comprehensive income | 4 | 21 | ||||
Total stockholders' equity | 169,698 | 158,686 | ||||
Total liabilities and stockholders' equity | $ | 272,392 | $ | 257,551 | ||
Tilly’s, Inc. | ||||||||||||||
Consolidated Statements of Income | ||||||||||||||
(In thousands, except per share data) |
||||||||||||||
(unaudited) |
||||||||||||||
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||
October 31, |
November 1, |
October 31, |
November 1, |
|||||||||||
Net sales | $ | 141,692 | $ | 131,283 | $ | 391,905 | $ | 365,477 | ||||||
Cost of goods sold (includes buying, distribution, and occupancy costs) | 97,051 | 90,735 | 274,616 | 258,947 | ||||||||||
Gross profit | 44,641 | 40,548 | 117,289 | 106,530 | ||||||||||
Selling, general and administrative expenses | 39,254 | 31,971 | 108,669 | 94,548 | ||||||||||
Operating income | 5,387 | 8,577 | 8,620 | 11,982 | ||||||||||
Other income (expense), net | 21 | (22 | ) | 40 | (18 | ) | ||||||||
Income before income taxes | 5,408 | 8,555 | 8,660 | 11,964 | ||||||||||
Income tax expense | 2,594 | 3,442 | 4,003 | 4,994 | ||||||||||
Net income | $ | 2,814 | $ | 5,113 | $ | 4,657 | $ | 6,970 | ||||||
Basic earnings per share of Class A and Class B common stock | $ | 0.10 | $ | 0.18 | $ | 0.16 | $ | 0.25 | ||||||
Diluted earnings per share of Class A and Class B common stock | $ | 0.10 | $ | 0.18 | $ | 0.16 | $ | 0.25 | ||||||
Weighted average basic shares outstanding | 28,408 | 28,024 | 28,305 | 28,007 | ||||||||||
Weighted average diluted shares outstanding | 28,419 | 28,046 | 28,403 | 28,082 | ||||||||||
Tilly's, Inc. | ||||||||
Supplemental Information - Consolidated Statements of Income | ||||||||
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures | ||||||||
(unaudited) | ||||||||
Thirteen Weeks Ended October 31, 2015: |
Net Income |
Earnings per |
||||||
As reported | $ | 2,814 | $ | 0.099 | ||||
Add back: | ||||||||
Non-cash store asset impairment charges, tax effected at 48.0% | 705 | 0.025 | ||||||
Former CEO separation obligations, tax effected at 48.0% | 569 | 0.020 | ||||||
Income tax difference due to stock option expirations | 418 | 0.015 | ||||||
As adjusted for non-GAAP items | $ | 4,506 | $ | 0.159 | ||||
Thirty-Nine Weeks Ended October 31, 2015: |
Net Income |
Earnings per |
||||||
As reported | $ | 4,657 | $ | 0.164 | ||||
Add back: | ||||||||
Legal Settlement, tax effected at 46.2% | 263 | 0.009 | ||||||
Non-cash store asset impairment charges, tax effected at 46.2% | 926 | 0.033 | ||||||
Former CEO separation obligations, tax effected at 46.2% | 588 | 0.021 | ||||||
Income tax difference due to stock option expirations | 388 | 0.014 | ||||||
As adjusted for non-GAAP items | $ | 6,822 | $ | 0.240 | ||||
Tilly’s, Inc. | ||||||||
Consolidated Statements of Cash Flows | ||||||||
(In thousands) |
||||||||
(unaudited) |
||||||||
Thirty-Nine Weeks Ended | ||||||||
October 31, |
November 1, |
|||||||
Cash flows from operating activities | ||||||||
Net income | $ | 4,657 | $ | 6,970 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 16,991 | 15,630 | ||||||
Stock-based compensation expense | 3,313 | 2,710 | ||||||
Impairment of assets | 1,721 | - | ||||||
Loss on disposal of assets | 245 | 79 | ||||||
Gain on sales and maturities of marketable securities | (96 | ) | (86 | ) | ||||
Deferred income taxes | 733 | 598 | ||||||
Excess tax benefit from stock-based compensation | (95 | ) | - | |||||
Changes in operating assets and liabilities: | ||||||||
Receivables | (1,809 | ) | 2,689 | |||||
Merchandise inventories | (18,603 | ) | (15,930 | ) | ||||
Prepaid expenses and other assets | (2,398 | ) | (2,085 | ) | ||||
Accounts payable | 1,401 | 8,155 | ||||||
Accrued expenses | 3,110 | 4,436 | ||||||
Accrued compensation and benefits | (1,633 | ) | (1,138 | ) | ||||
Deferred rent | 729 | 521 | ||||||
Deferred revenue | (1,863 | ) | (1,489 | ) | ||||
Net cash provided by operating activities | 6,403 | 21,060 | ||||||
Cash flows from investing activities | ||||||||
Purchase of property and equipment | (17,491 | ) | (19,806 | ) | ||||
Proceeds from sale of property and equipment | 7 | 14 | ||||||
Purchases of marketable securities | (49,927 | ) | (34,939 | ) | ||||
Maturities of marketable securities | 55,000 | 40,000 | ||||||
Net cash used in investing activities | (12,411 | ) | (14,731 | ) | ||||
Cash flows from financing activities | ||||||||
Proceeds from exercise of stock options | 3,094 | 181 | ||||||
Payment of capital lease obligation | (600 | ) | (564 | ) | ||||
Taxes paid in lieu of shares issued for share based compensation | (35 | ) | - | |||||
Excess tax benefit from stock-based compensation | 95 | - | ||||||
Net cash provided by (used in) financing activities | 2,554 | (383 | ) | |||||
Change in cash and cash equivalents | (3,454 | ) | 5,946 | |||||
Cash and cash equivalents, beginning of period | 49,789 | 25,412 | ||||||
Cash and cash equivalents, end of period | $ | 46,335 | $ | 31,358 | ||||
Tilly's, Inc. |
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Store Count and Square Footage |
|||||||||||
Total Gross | |||||||||||
Stores | Stores | Stores | Stores | Square Footage | |||||||
Open at | Opened | Closed | Open at | End of Qtr | |||||||
Beg of Qtr | During Qtr | During Qtr | End of Qtr | (in thousands) | |||||||
2014 Q1 | 195 | 3 | 0 | 198 | 1,535 | ||||||
2014 Q2 | 198 | 6 | 1 | 203 | 1,563 | ||||||
2014 Q3 | 203 | 5 | 1 | 207 | 1,589 | ||||||
2014 Q4 | 207 | 5 | 0 | 212 | 1,622 | ||||||
2015 Q1 | 212 | 2 | 1 | 213 | 1,630 | ||||||
2015 Q2 | 213 | 3 | 0 | 216 | 1,655 | ||||||
2015 Q3 | 216 | 4 | 0 | 220 | 1,681 | ||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20151202006106/en/
Source: Tilly’s, Inc.
Investor Relations:
ICR, Inc.
Anne
Rakunas/Joseph Teklits
310-954-1113
anne.rakunas@icrinc.com