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Tilly’s, Inc. Announces Fiscal 2018 Second Quarter Results
Second Quarter Comp Store Net Sales Increase 4.4%
EPS of
Introduces Fiscal 2018 Third Quarter Outlook
“Tillys delivered its strongest comparable store net sales result since
the third quarter of fiscal 2016, and we believe we have our e-com
business back on track," commented
Second Quarter Results Overview
The following comparisons refer to operating results for the second
quarter of fiscal 2018 versus the second quarter of fiscal 2017 ended
-
Total net sales were
$157.4 million , an increase of$18.6 million , or 13.4%, from$138.8 million last year. As a result of the calendar shift impact of last year's 53rd week in the retail calendar, which caused a portion of the back-to-school season to shift into the second quarter, approximately$12.3 million of comparable net sales were realized in the second quarter this year rather than in the third quarter. The remaining net sales increase of approximately$6.3 million was primarily attributable to increased comparable store net sales and net sales from five net new stores. - Comparable store net sales, which includes e-commerce net sales, increased 4.4% in total. Comparable store net sales in physical stores increased 3.8%. E-commerce net sales increased 8.1%. Comparable store net sales increased 2.1% in the second quarter last year.
-
Gross profit was
$50.1 million , an increase of 22.4% from$40.9 million last year, primarily due to the calendar shift noted above and increased comparable store net sales. Gross margin, or gross profit as a percentage of net sales, increased to 31.8% from 29.5% last year. This 230 basis point improvement in gross margin was primarily attributable to leveraging lower total occupancy costs on higher total net sales. Product margins were approximately flat. -
Selling, general and administrative expenses ("SG&A") were
$37.6 million , or 23.9% of net sales, compared to$42.2 million , or 30.4% of net sales, last year. Last year's SG&A included an estimated$6.2 million provision related to a legal matter. This year's SG&A includes a$1.5 million reduction to this same provision as a result of the final settlement of the related legal matter in earlyAugust 2018 . Taken together, these legal matter impacts accounted for 540 basis points of the total 650 basis point improvement in SG&A. The remaining 110 basis point improvement in SG&A was primarily due to leveraging store and corporate payroll costs against higher total net sales. On a non-GAAP basis, excluding the noted legal matter impacts from both years, SG&A increased to$39.1 million , or 24.8% of net sales, compared to$36.0 million , or 25.9% of net sales, last year. Primary dollar increases in SG&A were attributable to certain marketing and other selling expenses associated with a portion of the back-to-school season shifting from the third quarter to the second quarter, store payroll increases due to higher net sales and minimum wage increases, and corporate bonus provision increases due to improved year-over-year operations. -
Operating income was
$12.5 million , or 7.9% of net sales, compared to an operating loss of$(1.2) million , or (0.9)% of net sales, last year. Of this$13.7 million improvement in year-over-year operating income, approximately$7.6 million was attributable to the aggregate year-over-year impact of the legal matter noted above, approximately$4.2 million was attributable to the retail calendar shift impact noted earlier, and approximately$1.9 million was attributable to increased comparable store net sales results. On a non-GAAP basis, excluding the legal matter impacts from both years, operating income was$11.0 million , or 7.0% of net sales, compared to$4.9 million , or 3.5% of net sales, last year. -
Income tax expense was
$3.3 million , or 25.3% of pre-tax income, compared to income tax benefit of$(0.4) million , or 42.8% of pre-tax loss last year. Income tax expense/(benefit) includes certain discrete items associated with employee stock-based award activity in both periods. -
Net income was
$9.7 million , or$0.33 per diluted share, compared to a net loss of$(0.6) million , or$(0.02) per share, last year. Of the$0.35 improvement in year-over-year earnings per share, approximately$0.17 was attributable to the aggregate legal matter impacts noted above, approximately$0.10 was attributable to the retail calendar shift impact noted earlier, and the remaining$0.08 was due to improved operating results. On a non-GAAP basis, excluding the impacts of the legal matter from both years, net income was$8.6 million , or$0.29 per diluted share, compared to net income of$3.1 million , or$0.11 per diluted share, last year.
First Half Results Overview
The following comparisons refer to operating results for the first half
of fiscal 2018 versus the first half of fiscal 2017 ended
-
Total net sales were
$281.0 million , an increase of$21.3 million , or 8.2%, from$259.8 million last year. As a result of the calendar shift impact of last year's 53rd week in the retail calendar, a net increase of approximately$15.2 million of comparable net sales were realized in the first half. The remaining net sales increase of$6.1 million was primarily attributable to increased comparable store net sales and net sales from five net new stores. - Comparable store net sales, which includes e-commerce net sales, increased 2.4% in total. Comparable store net sales in physical stores increased 2.7%. E-commerce net sales increased 0.9%. Comparable store net sales increased 1.4% in the first half last year.
-
Gross profit was
$85.1 million , an increase of 15.2% from$73.8 million last year, primarily due to the calendar shift noted above and increased comparable store net sales. Gross margin increased to 30.3% from 28.4% last year. This 190 basis point improvement in gross margin was primarily attributable to leveraging lower total occupancy costs on higher total net sales. Product margins were flat. -
SG&A was
$71.3 million , or 25.4% of net sales, compared to$75.4 million , or 29.0% of net sales, last year. Last year's SG&A included an estimated$6.2 million provision related to a legal matter. This year's SG&A includes a$1.5 million reduction to this same provision as a result of the final settlement of the related legal matter in earlyAugust 2018 . Taken together, these legal matter impacts accounted for 290 basis points of the total 360 basis point improvement in SG&A. The remaining 70 basis point improvement in SG&A was primarily due to leveraging store and corporate payroll costs against higher total net sales. On a non-GAAP basis, excluding the legal matter impacts from both years, SG&A increased to$72.7 million , or 25.8% of net sales, compared to$69.2 million , or 26.7% of net sales, last year. Primary dollar increases in SG&A were attributable to store payroll increases due to higher net sales and minimum wage increases, certain marketing and other selling expenses associated with a portion of the back-to-school season shifting from the third quarter to the second quarter, and corporate bonus provision increases due to improved year-over-year operations. -
Operating income was
$13.8 million , or 4.9% of net sales, compared to an operating loss of$(1.6) million , or (0.6)% of net sales, last year. Of this$15.4 million improvement in year-over-year operating income, approximately$7.6 million was attributable to the aggregate year-over-year impact of the legal matter noted above, approximately$5.2 million was attributable to the retail calendar shift impact noted earlier, and approximately$2.6 million was attributable to increased comparable store net sales results. On a non-GAAP basis, excluding the legal matter impacts from both years, operating income was$12.4 million , or 4.4% of net sales, compared to$4.6 million , or 1.8% of net sales, last year. -
Income tax expense was
$3.8 million , or 25.7% of pre-tax income, compared to income tax benefit of$(0.4) million , or 33.2% of pre-tax loss, last year. Income tax expense/(benefit) includes certain discrete items associated with employee stock-based award activity in both periods. -
Net income was
$10.9 million , or$0.37 per diluted share, compared to a net loss of$(0.8) million , or$(0.03) per share, last year. Of the$0.40 improvement in year-over-year earnings per share, approximately$0.17 was attributable to the aggregate legal matter impacts noted above, approximately$0.13 was attributable to the retail calendar shift impact noted earlier, and the remaining$0.10 was due to improved operating results. On a non-GAAP basis, excluding the impact of the legal matter from both years, net income was$9.8 million , or$0.33 per diluted share, compared to$3.0 million , or$0.10 per diluted share, last year.
Balance Sheet and Liquidity
As of
Fiscal 2018 Third Quarter Outlook
As a result of the calendar shift impact of last year's 53rd week in the
retail calendar, the Company expects its third quarter total net sales
to range from approximately
Pursuant to the settlement terms of the previously noted legal matter,
the Company will be issuing non-transferable discount coupons to
approximately 612,000 existing Tillys customers in early
Non-GAAP Financial Measures
In addition to reporting financial measures in accordance with GAAP, the Company is providing certain non-GAAP financial measures including “non-GAAP SG&A," "non-GAAP operating income,” "non-GAAP income tax expense," "non-GAAP net income," and “non-GAAP income per diluted share.” These amounts are not in accordance with, or an alternative to, the corresponding financial measures reported in accordance with GAAP. The Company’s management believes that these measures help provide investors with insight into the underlying comparable financial results, excluding items that may not be indicative of, or are unrelated to, the Company’s core day-to-day operating results.
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 Financial Information; Reconciliation of Select GAAP Financial Measures to Non-GAAP Financial Measures” contained in this press release.
Conference Call Information
A conference call to discuss these financial results is scheduled for
today,
A telephone replay of the call will be available until
About Tillys
Tillys is a leading specialty retailer of casual apparel, footwear and
accessories for young men, young women, boys and girls with an extensive
assortment of iconic global, emerging, and proprietary brands rooted in
an active and social lifestyle. Tillys is headquartered in
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 financial 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 impacts of legal settlements, 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 e-commerce 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 e-commerce
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) |
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(unaudited) |
|||||||||||||
August 4, 2018 |
February 3, 2018 |
July 29, |
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ASSETS | |||||||||||||
Current assets: | |||||||||||||
Cash and cash equivalents | $ | 45,638 | $ | 53,202 | $ | 43,567 | |||||||
Marketable securities | 78,588 | 82,750 | 66,064 | ||||||||||
Receivables | 11,182 | 4,352 | 6,829 | ||||||||||
Merchandise inventories | 74,815 | 53,216 | 75,033 | ||||||||||
Prepaid expenses and other current assets | 9,062 | 9,534 | 9,391 | ||||||||||
Total current assets | 219,285 | 203,054 | 200,884 | ||||||||||
Property and equipment, net | 78,906 | 83,321 | 89,130 | ||||||||||
Other assets | 3,391 | 3,736 | 6,843 | ||||||||||
Total assets | $ | 301,582 | $ | 290,111 | $ | 296,857 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||
Current liabilities: | |||||||||||||
Accounts payable | $ | 42,786 | $ | 21,615 | $ | 41,729 | |||||||
Accrued expenses | 29,521 | 22,731 | 29,097 | ||||||||||
Deferred revenue | 7,193 | 10,879 | 9,277 | ||||||||||
Accrued compensation and benefits | 7,392 | 6,119 | 7,834 | ||||||||||
Dividends payable | — | 29,067 | — | ||||||||||
Current portion of deferred rent | 5,868 | 5,220 | 5,836 | ||||||||||
Current portion of capital lease obligation | — | — | 386 | ||||||||||
Total current liabilities | 92,760 | 95,631 | 94,159 | ||||||||||
Long-term portion of deferred rent | 31,239 | 31,340 | 33,080 | ||||||||||
Other | 2,236 | 2,715 | — | ||||||||||
Total liabilities | 126,235 | 129,686 | 127,239 | ||||||||||
Stockholders’ equity: | |||||||||||||
Common stock (Class A), $0.001 par value; 100,000 shares authorized; 15,599, 14,927 and 13,864 shares issued and outstanding, respectively | 15 | 15 | 14 | ||||||||||
Common stock (Class B), $0.001 par value; 35,000 shares authorized; 13,708, 14,188 and 14,958 shares issued and outstanding, respectively | 14 | 14 | 15 | ||||||||||
Preferred stock, $0.001 par value; 10,000 shares authorized; no shares issued or outstanding | — | — | — | ||||||||||
Additional paid-in capital | 146,476 | 143,984 | 139,479 | ||||||||||
Retained earnings | 28,756 | 16,398 | 30,008 | ||||||||||
Accumulated other comprehensive income | 86 | 14 | 102 | ||||||||||
Total stockholders’ equity | 175,347 | 160,425 | 169,618 | ||||||||||
Total liabilities and stockholders’ equity | $ | 301,582 | $ | 290,111 | $ | 296,857 | |||||||
Tilly’s, Inc. | ||||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||||
(In thousands, except per share data) |
||||||||||||||||||
(unaudited) |
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Three Months Ended | Six Months Ended | |||||||||||||||||
August 4, 2018 |
July 29, 2017 |
August 4, 2018 |
July 29, 2017 |
|||||||||||||||
Net sales | $ | 157,406 | $ | 138,810 | $ | 281,040 | $ | 259,757 | ||||||||||
Cost of goods sold (includes buying, distribution, and occupancy costs) | 107,301 | 97,881 | 195,957 | 185,923 | ||||||||||||||
Gross profit | 50,105 | 40,929 | 85,083 | 73,834 | ||||||||||||||
Selling, general and administrative expenses | 37,627 | 42,168 | 71,275 | 75,402 | ||||||||||||||
Operating income/(loss) | 12,478 | (1,239 | ) | 13,808 | (1,568 | ) | ||||||||||||
Other income, net | 490 | 197 | 873 | 435 | ||||||||||||||
Income/(loss) before income taxes | 12,968 | (1,042 | ) | 14,681 | (1,133 | ) | ||||||||||||
Income tax expense/(benefit) | 3,279 | (446 | ) | 3,770 | (376 | ) | ||||||||||||
Net income/(loss) | $ | 9,689 | $ | (596 | ) | $ | 10,911 | $ | (757 | ) | ||||||||
Basic income/(loss) per share of Class A and Class B common stock | $ | 0.33 | $ | (0.02 | ) | $ | 0.37 | $ | (0.03 | ) | ||||||||
Diluted income/(loss) per share of Class A and Class B common stock | $ | 0.33 | $ | (0.02 | ) | $ | 0.37 | $ | (0.03 | ) | ||||||||
Weighted average basic shares outstanding | 29,209 | 28,751 | 29,145 | 28,728 | ||||||||||||||
Weighted average diluted shares outstanding | 29,681 | 28,751 | 29,567 | 28,728 | ||||||||||||||
Tilly’s, Inc. | ||||||||||||||||||
Supplemental Financial Information | ||||||||||||||||||
Reconciliation of Select GAAP Financial Measures to Non-GAAP Financial Measures | ||||||||||||||||||
(In thousands, except per share data) |
||||||||||||||||||
(unaudited) |
||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||
August 4, 2018 |
July 29, 2017 |
August 4, 2018 |
July 29, 2017 |
|||||||||||||||
Selling, general and administrative expenses, as reported | $ | 37,627 | $ | 42,168 | $ | 71,275 | $ | 75,402 | ||||||||||
Adjustment for legal settlement benefit/(provision) | 1,458 | (6,166 | ) | 1,458 | (6,166 | ) | ||||||||||||
Non-GAAP selling, general and administrative expenses | $ | 39,085 | $ | 36,002 | $ | 72,733 | $ | 69,236 | ||||||||||
Operating income/(loss), as reported | $ | 12,478 | $ | (1,239 | ) | $ | 13,808 | $ | (1,568 | ) | ||||||||
Adjustment for legal settlement (benefit)/provision | (1,458 | ) | 6,166 | (1,458 | ) | 6,166 | ||||||||||||
Non-GAAP operating income | $ | 11,020 | $ | 4,927 | $ | 12,350 | $ | 4,598 | ||||||||||
Income tax expense/(benefit), as reported | $ | 3,279 | $ | (446 | ) | $ | 3,770 | $ | (376 | ) | ||||||||
Adjustment for income tax effect of legal settlement (benefit)/provision (1) | (385 | ) | 2,447 | (385 | ) | 2,447 | ||||||||||||
Non-GAAP income tax expense | $ | 2,894 | $ | 2,001 | $ | 3,385 | $ | 2,071 | ||||||||||
Net income/(loss), as reported | $ | 9,689 | $ | (596 | ) | $ | 10,911 | $ | (757 | ) | ||||||||
Adjustment for legal settlement (benefit)/provision | (1,458 | ) | 6,166 | (1,458 | ) | 6,166 | ||||||||||||
Adjustment for income tax effect of legal settlement benefit/(provision) (1) | 385 | (2,447 | ) | 385 | (2,447 | ) | ||||||||||||
Non-GAAP net income | $ | 8,616 | $ | 3,123 | $ | 9,838 | $ | 2,962 | ||||||||||
Diluted income/(loss) per share, as reported | $ | 0.33 | $ | (0.02 | ) | $ | 0.37 | $ | (0.03 | ) | ||||||||
Adjustment for legal settlement (benefit)/provision, net of taxes (1) | (0.04 | ) | 0.13 | (0.04 | ) | 0.13 | ||||||||||||
Non-GAAP diluted income per share | $ | 0.29 | $ | 0.11 | $ | 0.33 | $ | 0.10 | ||||||||||
Weighted average basic shares outstanding | 29,209 | 28,751 | 29,145 | 28,728 | ||||||||||||||
Weighted average diluted shares outstanding | 29,681 | 28,923 | 29,567 | 28,912 |
(1) | The effective tax rate applied for the three and six months ended August 4, 2018 was 26.4%. The effective tax rate applied for the three and six months ended July 29, 2017 was 39.7%. | |
Tilly’s, Inc. | ||||||||||
Consolidated Statements of Cash Flows | ||||||||||
(In thousands) |
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(unaudited) |
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Six Months Ended | ||||||||||
August 4, 2018 |
July 29, 2017 |
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Cash flows from operating activities | ||||||||||
Net income/(loss) | $ | 10,911 | $ | (757 | ) | |||||
Adjustments to reconcile net income/(loss) to net cash provided by operating activities: | ||||||||||
Depreciation and amortization | 11,503 | 11,904 | ||||||||
Stock-based compensation expense | 1,127 | 1,195 | ||||||||
Impairment of assets | 786 | 451 | ||||||||
Loss on disposal of assets | 17 | 16 | ||||||||
Gain on sales and maturities of marketable securities | (599 | ) | (266 | ) | ||||||
Deferred income taxes | (203 | ) | (364 | ) | ||||||
Changes in operating assets and liabilities: | ||||||||||
Receivables | (6,830 | ) | (2,840 | ) | ||||||
Merchandise inventories | (21,789 | ) | (27,265 | ) | ||||||
Prepaid expenses and other assets | 461 | (280 | ) | |||||||
Accounts payable | 21,571 | 24,116 | ||||||||
Accrued expenses | 4,688 | (74 | ) | |||||||
Accrued compensation and benefits | 1,273 | 575 | ||||||||
Deferred rent | 547 | (2,617 | ) | |||||||
Deferred revenue | (1,513 | ) | (926 | ) | ||||||
Net cash provided by operating activities | 21,950 | 2,868 | ||||||||
Cash flows from investing activities | ||||||||||
Purchase of property and equipment | (6,668 | ) | (6,954 | ) | ||||||
Purchases of marketable securities | (79,822 | ) | (62,898 | ) | ||||||
Proceeds from marketable securities | 84,678 | 52,082 | ||||||||
Net cash used in investing activities | (1,812 | ) | (17,770 | ) | ||||||
Cash flows from financing activities | ||||||||||
Dividends paid | (29,067 | ) | (20,080 | ) | ||||||
Proceeds from exercise of stock options | 1,476 | 105 | ||||||||
Taxes paid in lieu of shares issued for stock-based compensation | (111 | ) | (101 | ) | ||||||
Payment of capital lease obligation | — | (449 | ) | |||||||
Net cash used in financing activities | (27,702 | ) | (20,525 | ) | ||||||
Change in cash and cash equivalents | (7,564 | ) | (35,427 | ) | ||||||
Cash and cash equivalents, beginning of period | 53,202 | 78,994 | ||||||||
Cash and cash equivalents, end of period | $ | 45,638 | $ | 43,567 | ||||||
Tilly's, Inc. | ||||||||||||
Store Count and Square Footage | ||||||||||||
Stores |
Stores |
Stores |
Stores |
Total Gross |
||||||||
2017 Q2 | 222 | — | 1 | 221 | 1,690 | |||||||
2017 Q3 | 221 |
— |
1 | 220 | 1,681 | |||||||
2017 Q4 | 220 | 2 | 3 | 219 | 1,668 | |||||||
2018 Q1 | 219 | 4 | 1 | 222 | 1,675 | |||||||
2018 Q2 | 222 | 4 | — | 226 | 1,698 |
Note: Total stores opened during the first quarter of fiscal 2018 includes three RSQ-branded, pop-up stores. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20180829005715/en/
Source: Tilly’s, Inc.
Investor Relations:
Tilly’s, Inc.
Michael
Henry, (949) 609-5599, ext. 17000
Chief Financial Officer
irelations@tillys.com