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Tilly’s, Inc. Announces Fiscal 2018 Fourth Quarter and Full Year Results
4th Quarter Comp Store Net Sales Increase of 6.4% and EPS of
Introduces Fiscal 2019 First Quarter Outlook
“Tillys finished fiscal 2018 with its strongest single-quarter comp
sales result since the third quarter of fiscal 2011, and its best
consecutive three-quarter run of comp sales results since becoming a
public company in 2012," commented
Fourth Quarter Results Overview
The following comparisons refer to operating results for the fourth
quarter of fiscal 2018 (13 weeks) versus the fourth quarter of fiscal
2017 (14 weeks) ended
-
Total net sales were
$170.6 million , an increase of 3.8% from$164.3 million last year, despite last year's fourth quarter containing an extra week of net sales worth approximately$7.1 million to the quarter. The Company ended fiscal 2018 with 229 total stores, including four RSQ-branded pop-up stores, compared to 219 full-size stores last year. - Comparable store net sales, which includes e-commerce net sales, increased 6.4% compared to flat comparable store net sales during last year's fourth quarter. E-commerce net sales increased 49.6% and represented approximately 20% of total net sales this year, compared to a decrease of 12% and a 14% share of total net sales last year. Comparable store net sales in physical stores decreased 0.9% and represented approximately 80% of total net sales, compared to an increase of 2.3% and an 86% share of total net sales last year.
-
Gross profit was
$52.2 million , an increase of 1.4% from$51.4 million last year. Gross margin, or gross profit as a percentage of net sales, decreased to 30.6% from 31.3% last year. This 70 basis point decrease in gross margin was due to a 120 basis point increase in distribution costs primarily as a result of higher e-commerce shipping costs associated with strong e-commerce net sales growth. This cost increase was partially offset by a 20 basis point decrease in occupancy costs and a 20 basis point improvement in product margins. While occupancy costs were approximately$0.5 million higher in total dollars due to having 10 net new stores compared to last year, they were lower as a percentage of net sales due to the Company's net sales increase. Product margins improved primarily due to lower total markdowns as a percentage of net sales, partially offset by lower initial markups attributable to a product mix shift toward branded merchandise. -
Selling, general and administrative expenses ("SG&A") were
$41.2 million , or 24.2% of net sales, compared to$40.0 million , or 24.3% of net sales, last year. The$1.2 million increase in SG&A was primarily attributable to higher corporate bonus provisions of approximately$1.1 million associated with improved operating results for fiscal 2018 as a whole. This year's SG&A included approximately$0.9 million in expense reductions related to negotiated resolutions of certain vendor disputes. On a non-GAAP basis, excluding these negotiated expense reductions, non-GAAP SG&A was$42.1 million , or 24.7% of net sales, compared to$40.0 million , or 24.3% of net sales, last year. -
Operating income was
$10.9 million , or 6.4% of net sales, compared to$11.4 million , or 7.0% of net sales, last year. The decrease in our operating results was attributable to last year's fourth quarter containing an extra week of net sales worth approximately$7.1 million , which helped create greater leverage of our relatively fixed expense base last year. On a non-GAAP basis, excluding the negotiated expense reductions noted above, non-GAAP operating income was$10.1 million , or 5.9% of net sales, compared to$11.4 million , or 7.0% of net sales, last year. -
Income tax expense was
$3.1 million , or 26.4% of pre-tax income, compared to$5.2 million , or 43.5% of pre-tax income, last year. The reduction in this year's income tax rate was attributable to the new corporate tax rates that went into effect for 2018. On a non-GAAP basis, excluding the negotiated expense reductions noted above, non-GAAP income tax expense was$2.9 million , or 26.4% of non-GAAP pre-tax income, compared to$5.2 million , or 43.5% of non-GAAP tax income, last year. -
Net income was
$8.7 million , or$0.29 per diluted share, compared to$6.7 million , or$0.23 per diluted share, last year. On a non-GAAP basis, excluding the negotiated expense reductions noted above, non-GAAP net income was$8.0 million , or$0.27 per diluted share, compared to$6.7 million , or$0.23 per diluted share, last year.
Fiscal 2018 Full Year Results Overview
The following comparisons refer to operating results for fiscal 2018 (52
weeks) versus fiscal 2017 (53 weeks) ended
-
Total net sales were
$598.5 million , an increase of 3.7% from$576.9 million last year, despite fiscal 2017 containing an extra week of net sales worth approximately$5.8 million to the year. - Comparable store net sales increased 4.0% in fiscal 2018, following a 1.0% increase in fiscal 2017. Comparable store net sales in physical stores increased 1.4% and represented approximately 85% of total net sales, compared to an increase of 1.6% and a 87% share of total net sales last year. E-commerce net sales increased 21.7% and represented approximately 15% of total net sales, compared to a decrease of 2.5% and a 13% share of total net sales last year.
-
Gross profit was
$180.9 million , an increase of 3.2% from$175.4 million last year. Gross margin was 30.2%, compared to 30.4% last year. This 20 basis point decrease in gross margin was primarily attributable to a 50 basis point increase in distribution costs and a 30 basis point decrease in product margins, partially offset by a 70 basis point decrease in occupancy costs. Distribution costs increased primarily as a result of higher e-commerce shipping costs associated with e-commerce net sales growth. Product margins declined primarily due to lower initial markups associated with a product mix shift towards branded merchandise. Total occupancy expenses were approximately$0.4 million lower than last year, despite having 10 net new stores, primarily due to reductions in lease costs. -
SG&A was
$149.4 million , or 25.0% of net sales, compared to$151.4 million , or 26.2% of net sales, last year. Last year's SG&A included$6.8 million in legal matter provisions. This year's SG&A included a$1.5 million reduction to such provisions as a result of the final settlement of a legal matter in earlyAugust 2018 , and$0.7 million in costs associated with our secondary offering completed in earlySeptember 2018 . The net year-over-year impact of these legal matter provisions, partially offset by our secondary offering costs, accounted for the improvement in SG&A as a percentage of net sales. On a non-GAAP basis, excluding the impact of the legal provisions from both years, and the secondary offering costs and the negotiated expense reductions noted above, non-GAAP SG&A was$151.0 million , or 25.2% of net sales, compared to$144.6 million , or 25.1% of net sales, last year. Primary dollar increases in SG&A were attributable to store payroll of$1.9 million primarily due to minimum wage increases and higher comparable store net sales, online marketing costs of$1.7 million associated with e-commerce net sales growth, corporate bonus provisions of$1.7 million due to improved operating results, and e-commerce fulfillment costs of$0.9 million due to e-commerce net sales growth. -
Operating income was
$31.5 million , or 5.3% of net sales, compared to$24.0 million , or 4.2% of net sales, last year. This 110 basis point improvement in operating income was primarily due to the reduction in legal provisions compared to last year described above. On a non-GAAP basis, excluding the impact of the legal provisions from both years, and the secondary offering costs and the negotiated expense reductions noted above, non-GAAP operating income was$29.9 million , or 5.0% of net sales, compared to$30.8 million , or 5.3% of net sales, last year. This decrease in our non-GAAP operating results was primarily attributable to the extra week of net sales in fiscal 2017 worth approximately$5.8 million , which helped leverage our relatively fixed expense base last year. -
Income tax expense was
$8.9 million , or 26.2% of pre-tax income, compared to$10.5 million , or 41.7% of pre-tax income, last year. The reduction in this year's income tax rate was attributable to the new corporate tax rates that went into effect in 2018. On a non-GAAP basis, excluding the impact of legal provisions from both years, and the secondary offering costs and the negotiated expense reductions noted above, non-GAAP income tax expense was$8.3 million , or 25.8% of non-GAAP pre-tax income, compared to$13.1 million , or 41.0% of non-GAAP pre-tax income, last year. -
Net income was
$24.9 million , or$0.84 per diluted share, compared to$14.7 million , or$0.51 per diluted share, last year. Of the$0.33 improvement in year-over-year earnings per diluted share, approximately$0.18 was attributable to the aggregate impact of legal matters, the secondary offering costs and the negotiated expense reductions noted above, and approximately$0.15 was attributable to improved operating results. On a non-GAAP basis, excluding the impact of legal provisions from both years, and the secondary offering costs and the negotiated expense reductions noted above, non-GAAP net income was$23.9 million , or$0.80 per diluted share, compared to$18.9 million , or$0.65 per diluted shared, last year.
Balance Sheet and Liquidity
As of
Fiscal 2019 First Quarter Outlook
Based on current and historical trends, particularly with respect to
years in which Easter occurred later in the year, as in fiscal 2019, the
Company expects total net sales for the first quarter of fiscal 2019 to
range from approximately
Regarding the legal settlement coupons we issued 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 diluted income per share." These amounts are not in accordance with, or an alternative to, 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 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) (unaudited) |
|||||||
February 2, | February 3, | ||||||
2019 | 2018 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 68,160 | $ | 53,202 | |||
Marketable securities | 75,919 | 82,750 | |||||
Receivables | 6,082 | 4,352 | |||||
Merchandise inventories | 55,809 | 53,216 | |||||
Prepaid expenses and other current assets | 11,171 | 9,534 | |||||
Total current assets | 217,141 | 203,054 | |||||
Property and equipment, net | 73,842 | 83,321 | |||||
Other assets | 2,185 | 3,736 | |||||
Total assets | $ | 293,168 | $ | 290,111 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 24,207 | $ | 21,615 | |||
Accrued expenses | 18,756 | 22,731 | |||||
Deferred revenue | 10,373 | 10,879 | |||||
Accrued compensation and benefits | 8,930 | 6,119 | |||||
Dividends payable | 29,453 | 29,067 | |||||
Current portion of deferred rent | 5,540 | 5,220 | |||||
Total current liabilities | 97,259 | 95,631 | |||||
Long-term portion of deferred rent | 30,825 | 31,340 | |||||
Other | 1,757 | 2,715 | |||||
Total liabilities | 129,841 | 129,686 | |||||
Stockholders’ equity: | |||||||
Common stock (Class A), $0.001 par value; 100,000 shares authorized; 21,642 and 14,927 shares issued and outstanding, respectively | 21 | 15 | |||||
Common stock (Class B), $0.001 par value; 35,000 shares authorized; 7,844 and 14,188 shares issued and outstanding, respectively | 8 | 14 | |||||
Preferred stock, $0.001 par value; 10,000 shares authorized; no shares issued or outstanding | — | — | |||||
Additional paid-in capital | 149,737 | 143,984 | |||||
Retained earnings | 13,335 | 16,398 | |||||
Accumulated other comprehensive income | 226 | 14 | |||||
Total stockholders’ equity | 163,327 | 160,425 | |||||
Total liabilities and stockholders’ equity | $ | 293,168 | $ | 290,111 | |||
Tilly’s, Inc. Consolidated Statements of Income (In thousands, except per share data) (unaudited) |
|||||||||||||||
13 Weeks | 14 Weeks | 52 Weeks | 53 Weeks | ||||||||||||
Ended | Ended | Ended | Ended | ||||||||||||
February 2, | February 3, | February 2, | February 3, | ||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net sales | $ | 170,612 | $ | 164,317 | $ | 598,478 | $ | 576,899 | |||||||
Cost of goods sold (includes buying, distribution, and occupancy costs) | 118,455 | 112,877 | 417,582 | 401,529 | |||||||||||
Gross profit | 52,157 | 51,440 | 180,896 | 175,370 | |||||||||||
Selling, general and administrative expenses | 41,223 | 39,999 | 149,416 | 151,384 | |||||||||||
Operating income | 10,934 | 11,441 | 31,480 | 23,986 | |||||||||||
Other income, net | 856 | 414 | 2,313 | 1,223 | |||||||||||
Income before income taxes | 11,790 | 11,855 | 33,793 | 25,209 | |||||||||||
Income tax expense | 3,113 | 5,156 | 8,850 | 10,509 | |||||||||||
Net income | $ | 8,677 | $ | 6,699 | $ | 24,943 | $ | 14,700 | |||||||
Basic income per share of Class A and Class B common stock | $ | 0.29 | $ | 0.23 | $ | 0.85 | $ | 0.51 | |||||||
Diluted income per share of Class A and Class B common stock | $ | 0.29 | $ | 0.23 | $ | 0.84 | $ | 0.51 | |||||||
Weighted average basic shares outstanding | 29,451 | 28,965 | 29,278 | 28,804 | |||||||||||
Weighted average diluted shares outstanding | 29,836 | 29,471 | 29,768 | 29,074 | |||||||||||
Tilly’s, Inc. Supplemental Financial Information Reconciliation of Select GAAP Financial Measures to Non-GAAP Financial Measures (In thousands, except per share data) (unaudited) |
||||||||||||||||
13 Weeks | 14 Weeks | 52 Weeks | 53 Weeks | |||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||
February 2, | February 3, | February 2, | February 3, | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Selling, general and administrative, as reported | $ | 41,223 | $ | 39,999 | $ | 149,416 | $ | 151,384 | ||||||||
Legal settlement | — | — | 1,458 | (6,816 | ) | |||||||||||
Negotiated expense reductions | 878 | — | 878 | — | ||||||||||||
Secondary offering costs | — | — | (714 | ) | — | |||||||||||
Non-GAAP selling, general and administrative | $ | 42,101 | $ | 39,999 | $ | 151,038 | $ | 144,568 | ||||||||
Operating income, as reported | $ | 10,934 | $ | 11,441 | $ | 31,480 | $ | 23,986 | ||||||||
Legal settlement | — | — | (1,458 | ) | 6,816 | |||||||||||
Negotiated expense reductions | (878 | ) | — | (878 | ) | — | ||||||||||
Secondary offering costs | — | — | 714 | — | ||||||||||||
Non-GAAP operating income | $ | 10,056 | $ | 11,441 | $ | 29,858 | $ | 30,802 | ||||||||
Income tax expense, as reported | $ | 3,113 | $ | 5,156 | $ | 8,850 | $ | 10,509 | ||||||||
Income tax effect of legal settlement (1) | — | — | (389 | ) | 2,631 | |||||||||||
Income tax effect of negotiated expense reductions (1) | (234 | ) | — | (234 | ) | — | ||||||||||
Income tax effect of secondary offering costs (1) | — | — | 191 | — | ||||||||||||
Income tax effect of non-deductibility of a portion of secondary offering costs (1) | — | — | (130 | ) | — | |||||||||||
Non-GAAP income tax expense | $ | 2,879 | $ | 5,156 | $ | 8,288 | $ | 13,140 | ||||||||
Net income, as reported | $ | 8,677 | $ | 6,699 | $ | 24,943 | $ | 14,700 | ||||||||
Legal settlement | — | — | (1,458 | ) | 6,816 | |||||||||||
Negotiated expense reductions | (878 | ) | — | (878 | ) | — | ||||||||||
Secondary offering costs | — | — | 714 | — | ||||||||||||
Less: Income tax effects (1) | 234 | — | 562 | (2,631 | ) | |||||||||||
Non-GAAP net income | $ | 8,033 | $ | 6,699 | $ | 23,883 | $ | 18,885 | ||||||||
Diluted income per share, as reported | $ | 0.29 | $ | 0.23 | $ | 0.84 | $ | 0.51 | ||||||||
Legal settlement, net of taxes (1) | — | — | (0.04 | ) | 0.14 | |||||||||||
Negotiated expense reductions, net of taxes (1) | (0.02 | ) | — | (0.02 | ) | — | ||||||||||
Secondary offering costs, net of taxes (1) | — | — | 0.02 | — | ||||||||||||
Non-GAAP diluted income per share | $ | 0.27 | $ | 0.23 | $ | 0.80 | $ | 0.65 | ||||||||
Weighted average basic shares outstanding | 29,451 | 28,965 | 29,278 | 28,804 | ||||||||||||
Weighted average diluted shares outstanding | 29,836 | 29,471 | 29,768 | 29,074 |
(1) The effective tax rate applied for the 13 weeks and 52 weeks ended February 2, 2019 was 26.7%. The effective tax rate applied for the 14 weeks and 53 weeks ended February 3, 2018 was 38.6%. |
Tilly’s, Inc. Consolidated Statements of Cash Flows (In thousands) (unaudited) |
||||||||||||
Fiscal Year Ended | ||||||||||||
February 2, | February 3, | January 28, | ||||||||||
2019 | 2018 | 2017 | ||||||||||
Cash flows from operating activities | ||||||||||||
Net income | $ | 24,943 | $ | 14,700 | $ | 11,410 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 22,485 | 23,389 | 23,266 | |||||||||
Stock-based compensation expense | 2,212 | 2,411 | 2,572 | |||||||||
Impairment of assets | 786 | 848 | 2,352 | |||||||||
Loss on disposal of assets | 30 | 192 | 16 | |||||||||
Gain on sales and maturities of marketable securities | (1,552 | ) | (782 | ) | (251 | ) | ||||||
Deferred income taxes | 953 | 2,933 | (1,174 | ) | ||||||||
Changes in operating assets and liabilities: | ||||||||||||
Receivables | (1,730 | ) | (363 | ) | 1,395 | |||||||
Merchandise inventories | (2,783 | ) | (5,448 | ) | 3,589 | |||||||
Prepaid expenses and other assets | (1,641 | ) | (562 | ) | (449 | ) | ||||||
Accounts payable | 3,195 | 3,559 | 1,623 | |||||||||
Accrued expenses | (4,438 | ) | (2,732 | ) | 6,562 | |||||||
Accrued compensation and benefits | 2,811 | (1,140 | ) | 1,508 | ||||||||
Deferred rent | (195 | ) | (4,973 | ) | (5,464 | ) | ||||||
Deferred revenue | 1,667 | 676 | 1,554 | |||||||||
Net cash provided by operating activities | 46,743 | 32,708 | 48,509 | |||||||||
Cash flows from investing activities | ||||||||||||
Purchase of property and equipment | (14,923 | ) | (13,753 | ) | (17,047 | ) | ||||||
Proceeds from sale of property and equipment | 3 | — | 43 | |||||||||
Purchases of marketable securities | (136,198 | ) | (152,389 | ) | (99,675 | ) | ||||||
Proceeds from marketable securities | 144,859 | 125,264 | 95,021 | |||||||||
Net cash used in investing activities | (6,259 | ) | (40,878 | ) | (21,658 | ) | ||||||
Cash flows from financing activities | ||||||||||||
Dividends paid | (29,067 | ) | (20,080 | ) | — | |||||||
Proceeds from exercise of stock options | 3,652 | 3,394 | 2,080 | |||||||||
Payment of capital lease obligation | — | (835 | ) | (858 | ) | |||||||
Taxes paid in lieu of shares issued for stock-based compensation | (111 | ) | (101 | ) | (99 | ) | ||||||
Net cash (used in) provided by financing activities | (25,526 | ) | (17,622 | ) | 1,123 | |||||||
Change in cash and cash equivalents | 14,958 | (25,792 | ) | 27,974 | ||||||||
Cash and cash equivalents, beginning of period | 53,202 | 78,994 | 51,020 | |||||||||
Cash and cash equivalents, end of period | $ | 68,160 | $ | 53,202 | $ | 78,994 | ||||||
Tilly's, Inc. Store Count and Square Footage |
||||||||||
Stores
Open at Beginning of Quarter |
Stores
Opened During Quarter |
Stores
Closed During Quarter |
Stores
Open at End of Quarter |
Total Gross
Square Footage End of Quarter (in thousands) |
||||||
2017 Q4 | 220 | 2 | 3 | 219 | 1,668 | |||||
2018 Q1 | 219 | 4 | 1 | 222 | 1,675 | |||||
2018 Q2 | 222 | 4 | — | 226 | 1,698 | |||||
2018 Q3 | 226 | 5 | 4 | 227 | 1,693 | |||||
2018 Q4 | 227 | 2 | — | 229 | 1,703 |
Note: Total stores opened during fiscal 2018 includes four RSQ-branded, pop-up stores.
View source version on businesswire.com: https://www.businesswire.com/news/home/20190314005661/en/
Source: Tilly’s, Inc.
Investor Relations:
Michael Henry,
Chief Financial Officer
(949) 609-5599, ext. 17000
irelations@tillys.com