Introduces Fourth Quarter Fiscal 2016
Outlook
Third Quarter Net Sales of $152.1 Million;
Comp Store Sales Increased 4.4%
Third Quarter Net Income per Diluted Share
of $0.22
Tilly’s, Inc. (NYSE:TLYS) today announced financial results for
the third quarter (thirteen weeks) and first nine months (39 weeks)
of fiscal 2016 ended October 29, 2016.
“We are encouraged by the 4.4% comp increase we delivered in the
third quarter on top of last year's 3.9% increase," stated Ed
Thomas, President and Chief Executive Officer. "A promising Black
Friday weekend and Cyber Monday have us off to a decent start to
the fourth quarter, and we believe our merchandise assortment is
well positioned for the holiday season. We remain focused on
improving profitability for the long term."
Third Quarter Results Overview
The following comparisons refer to operating results for the
third quarter of fiscal 2016 versus the third quarter of fiscal
2015 ended October 31, 2015:
- Total net sales were $152.1 million, a
7.3% increase from $141.7 million last year.
- Comparable store sales, which include
e-commerce sales, increased 4.4%. Comparable store sales increased
3.9% in the third quarter last year.
- Gross margin, or gross profit as a
percentage of net sales, was flat at 31.5% compared to last year. A
110 basis point increase due to lower buying, distribution and
occupancy costs was offset by a 110 basis point decline in product
margins from increased markdowns.
- Selling, general and administrative
expenses ("SG&A") were $37.3 million, a decrease of $2.0
million from $39.3 million last year. As a percentage of net sales,
SG&A improved 320 basis points to 24.5% from 27.7% last year.
The combination of more efficient marketing spend, lower non-cash
store impairment charges, corporate payroll savings, and several
other smaller expense reductions resulted in 240 basis points of
this improvement. The remaining 80 basis points of improvement was
attributable to severance obligations of $1.1 million recorded in
last year's results.
- Operating income was $10.7 million, or
7.0% of net sales, compared to $5.4 million, or 3.8% of net sales,
last year. The 320 basis point increase in our operating margin was
primarily attributable to the reductions in SG&A noted
above.
- Our effective tax rate was 40.4%
compared to 48.0% last year. Last year's tax rate was higher
primarily due to increased discrete items related to restricted
stock and stock option expirations.
- Net income was $6.4 million, or $0.22
per diluted share, compared to $2.8 million, or $0.10 per diluted
share, last year.
First Nine Months Results Overview
The following comparisons refer to operating results for the
first nine months of fiscal 2016 versus the first nine months of
fiscal 2015 ended October 31, 2015:
- Total net sales were $408.7 million, an
increase of 4.3% from $391.9 million last year.
- Comparable store sales, which include
e-commerce sales, increased 0.7%. Comparable store sales increased
2.1% for the same time period last year.
- Gross margin, or gross profit as a
percentage of net sales, was 29.2% compared to 29.9% last year.
This 70 basis point decrease was attributable to a decline in
product margins as a result of increased markdowns.
- SG&A was $110.5 million, an
increase of $1.8 million from $108.7 million last year. As a
percentage of net sales, SG&A improved 70 basis points to 27.0%
from 27.7% last year. The combination of more efficient marketing
spend, lower stock-based compensation, and corporate payroll
savings resulted in 40 basis points of this improvement. The
remaining 30 basis points of improvement was attributable to
severance obligations of $1.1 million recorded in last year's
results.
- Operating income was $8.9 million, an
increase of $0.3 million from $8.6 million last year. Operating
margin was flat at 2.2% of net sales compared to last year.
- Income tax expense was $4.1 million, or
44.5% of pre-tax income, compared to $4.0 million, or 46.2% of
pre-tax income, last year.
- Net income was $5.1 million, or $0.18
per diluted share, compared to $4.7 million, or $0.16 per diluted
share, last year.
Balance Sheet and Liquidity
As of October 29, 2016, the Company had $105 million of cash and
marketable securities and no debt outstanding under its revolving
credit facility. This compares to $76 million of cash and
marketable securities and no debt outstanding as of October 31,
2015.
Fourth Quarter 2016 Outlook
Based on current trends, the Company expects fourth quarter
comparable store sales to be in the range of flat to +2%, operating
income to be in the range of $7.5 million to $9.5 million, and
earnings per diluted share to be in the range of $0.15 to $0.20
compared to $0.10 for the fourth quarter of fiscal 2015. This
assumes an anticipated effective tax rate of approximately 40% and
weighted average diluted shares of approximately 28.7 million.
Conference Call Information
A conference call to discuss the financial results is scheduled
for today, November 30, 2016, 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) 407-4018 at 4:25 p.m. ET (1:25 p.m. PT). 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 December
14, 2016, by dialing (844) 512-2921 (domestic) or (412) 317-6671
(international) and entering the conference identification number:
13649242. Please note participants must enter the conference
identification number in order to access the replay.
About Tillys
Tillys is a leading destination specialty retailer of West Coast
inspired apparel, footwear and accessories with an extensive
assortment of the most relevant and sought-after brands rooted in
action sports, music, art and fashion. Tillys is headquartered in
Irvine, California and, as of October 29, 2016, operated 225 stores
and its website, www.tillys.com.
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 Securities and
Exchange Commission (“SEC”) on March 30, 2016, including those
detailed in the section titled “Risk Factors” and in our other
filings with the SEC, which are available from the SEC’s website at
www.sec.gov and from 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 and per
share data)
(unaudited)
October 29, January 30, 2016
2016 ASSETS Current assets: Cash and cash equivalents
$ 43,382 $ 51,020 Marketable securities 61,915 49,932 Receivables
5,873 5,397 Merchandise inventories 65,016 51,357 Prepaid expenses
and other current assets 9,965 9,071 Total current assets
186,151 166,777 Property and equipment, net 93,206 99,026 Other
assets 5,414 4,948 Total assets $ 284,771 $ 270,751
LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities:
Accounts payable $ 26,613 $ 16,022 Accrued expenses 22,017 18,901
Deferred revenue 6,247 8,174 Accrued compensation and benefits
5,480 5,751 Current portion of deferred rent 6,146 6,106 Current
portion of capital lease obligation 899 858 Total current
liabilities 67,402 55,812 Long-term portion of deferred rent 36,940
40,891 Long-term portion of capital lease obligation 155 835
Total long-term liabilities 37,095 41,726 Total liabilities
104,497 97,538 Stockholders’ equity: Common stock (Class A), $0.001
par value; October 29, 2016 - 100,000 shares authorized, 12,672
shares issued and outstanding; January 30, 2016 - 100,000 shares
authorized, 12,305 shares issued and outstanding 13 12 Common stock
(Class B), $0.001 par value; October 29, 2016 - 35,000 shares
authorized, 15,879 shares issued and outstanding; January 30, 2016
- 35,000 shares authorized, 16,169 shares issued and outstanding 16
16 Preferred stock, $0.001 par value; October 29, 2016 and January
30, 2016 - 10,000 shares authorized, no shares issued or
outstanding — — Additional paid-in capital 135,469 133,550 Retained
earnings 44,719 39,613 Accumulated other comprehensive income 57
22 Total stockholders’ equity 180,274 173,213 Total
liabilities and stockholders’ equity $ 284,771 $ 270,751
Tilly’s, Inc.
Consolidated Statements of
Income
(In thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
October 29,2016 October
31,2015 October 29,2016
October 31,2015 Net sales $ 152,106 $ 141,692 $
408,736 $ 391,905 Cost of goods sold (includes buying,
distribution, and occupancy costs) 104,137 97,051
289,343 274,616 Gross profit 47,969 44,641 119,393 117,289
Selling, general and administrative expenses 37,302 39,254
110,460 108,669 Operating income 10,667 5,387 8,933
8,620 Other income, net 103 21 270 40 Income
before income taxes 10,770 5,408 9,203 8,660 Income tax expense
4,353 2,594 4,097 4,003 Net income $ 6,417
$ 2,814 $ 5,106 $ 4,657 Basic earnings per
share of Class A and Class B common stock $ 0.23 $ 0.10 $ 0.18 $
0.16 Diluted earnings per share of Class A and Class B common stock
$ 0.22 $ 0.10 $ 0.18 $ 0.16 Weighted average basic shares
outstanding 28,482 28,408 28,456 28,305 Weighted average diluted
shares outstanding 28,527 28,419 28,476 28,403
Tilly’s, Inc.
Consolidated Statements of Cash
Flows
(In thousands)
(unaudited)
Nine Months Ended October
29,2016 October 31,
2015
Cash flows from operating activities Net income $ 5,106 $
4,657 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 17,498 16,991
Stock-based compensation expense 1,995 3,313 Impairment of assets
1,963 1,721 Loss on disposal of assets 6 245 Gain on sales and
maturities of marketable securities (164 ) (96 ) Deferred income
taxes (298 ) (733 ) Excess tax benefit from stock-based
compensation — (95 ) Changes in operating assets and liabilities:
Receivables (476 ) (1,809 ) Merchandise inventories (13,659 )
(18,603 ) Prepaid expenses and other assets (1,084 ) (932 )
Accounts payable 10,667 1,401 Accrued expenses 4,144 3,110 Accrued
compensation and benefits (271 ) (1,633 ) Deferred rent (3,911 )
729 Deferred revenue (1,927 ) (1,863 ) Net cash provided by
operating activities 19,589 6,403
Cash
flows from investing activities Purchase of property and
equipment (14,794 ) (17,491 ) Proceeds from sale of property and
equipment 43 7 Purchases of marketable securities (81,762 ) (49,927
) Maturities of marketable securities 70,000 55,000
Net cash used in investing activities (26,513 ) (12,411 )
Cash
flows from financing activities Proceeds from exercise of stock
options 24 3,094 Payment of capital lease obligation (639 ) (600 )
Taxes paid in lieu of shares issued for stock-based compensation
(99 ) (35 ) Excess tax benefit from stock-based compensation —
95 Net cash (used in) provided by financing
activities (714 ) 2,554 Change in cash and cash equivalents
(7,638 ) (3,454 ) Cash and cash equivalents, beginning of period
51,020 49,789 Cash and cash equivalents, end of
period $ 43,382 $ 46,335
Tilly's, Inc.
Store Count and Square Footage
Stores
Open at
Beg 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)
2015 Q3 216 4 — 220 1,681
2015 Q4 220 6 2 224 1,704
2016 Q1 224 — — 224 1,704
2016 Q2 224 2 1 225 1,713
2016 Q3 225 1 1 225 1,716
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version on businesswire.com: http://www.businesswire.com/news/home/20161130006221/en/
Investor Relations:Tilly's,
Inc.Michael Henry, 949-609-5599, ext. 17000Chief Financial
Officerirelations@tillys.com
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