Introduces Fiscal 2017 Third Quarter
Outlook
Second Quarter Net Sales of $138.8 Million;
Comp Store Sales Increase 2.1%;
GAAP Net Loss per Share of $(0.02),
Including $6.2 Million Legal Provision;
Non-GAAP Net Income per Share of $0.11,
Excluding Legal Provision, Exceeds Outlook Range
Tilly’s, Inc. (NYSE:TLYS) today announced financial results for
the second quarter and first half of fiscal 2017 ended July 29,
2017.
“We believe the combination of our merchandising, marketing and
operating initiatives is gaining traction, as evidenced by our
positive comps and improved store traffic," commented Ed Thomas,
President and Chief Executive Officer. "Our early back-to-school
results are encouraging, and we believe we are well positioned to
continue the momentum we have been building over recent
quarters."
Second Quarter Results Overview
The following comparisons refer to operating results for the
second quarter of fiscal 2017 versus the second quarter of fiscal
2016 ended July 30, 2016:
- Total net sales were $138.8 million, an
increase of 1.8% from $136.4 million last year.
- Comparable store sales, which includes
e-commerce sales, increased 2.1%. Comparable store sales increased
0.9% in the second quarter last year.
- Gross profit was $40.9 million, an
increase of 5.4% from $38.8 million last year. Gross margin, or
gross profit as a percentage of net sales, increased to 29.5% from
28.5% last year. The 100 basis point increase in gross margin was
attributable to a 60 basis point increase in product margins as a
result of reduced markdowns, and a 40 basis point improvement in
buying, distribution and occupancy costs due to leveraging these
costs against higher total sales.
- Measured in accordance with accounting
principles generally accepted in the United States ("GAAP"),
selling, general and administrative expenses ("SG&A") were
$42.2 million, or 30.4% of net sales, compared to $36.6 million, or
26.8% of net sales, last year. This increase was attributable to a
previously disclosed $6.2 million legal provision. On a non-GAAP
basis, excluding the legal provision, SG&A decreased to $36.0
million, or 25.9% of net sales, primarily due to reduced marketing
spend and lower non-cash store impairment charges, partially offset
by expenses related to ongoing system implementations and increased
store payroll as a result of minimum wage increases.
- On a GAAP basis, operating loss was
$(1.2) million, or (0.9)% of net sales, compared to operating
income of $2.2 million, or 1.6% of net sales, last year. The
decline in operating results was attributable to the previously
noted $6.2 million legal provision, offset by the combination of
our comparable store sales growth, gross margin increase, and other
SG&A reductions noted above. On a non-GAAP basis, excluding the
legal provision, operating income was $4.9 million, or 3.5% of net
sales.
- On a GAAP basis, income tax benefit was
$(0.4) million, or 42.8% of pre-tax loss, compared to income tax
expense of $0.9 million, or 38.3% of pre-tax income last year. On a
non-GAAP basis, excluding the impact of the legal provision, income
tax expense was $2.0 million, or 39.1% of pre-tax income.
- On a GAAP basis, net loss was $(0.6)
million, or $(0.02) per share, compared to net income of $1.4
million, or $0.05 per diluted share, last year. On a non-GAAP
basis, excluding the impact of the legal provision, net income was
$3.1 million, or $0.11 per diluted share.
First Half Results Overview
The following comparisons refer to operating results for the
first half of fiscal 2017 versus the first half of fiscal 2016
ended July 30, 2016:
- Total net sales were $259.8 million, an
increase of 1.2% from $256.6 million last year.
- Comparable store sales, which includes
e-commerce sales, increased 1.4%. Comparable store sales decreased
1.4% in the first half of last year.
- Gross profit was $73.8 million, a 3.4%
increase from $71.4 million last year. Gross margin was 28.4%
compared to 27.8% last year. This 60 basis point increase in gross
margin was primarily attributable to a $0.7 million reduction in
total buying, distribution and occupancy costs. Product margins
were flat to last year.
- On a GAAP basis, SG&A was $75.4
million, or 29.0% of net sales, compared to $73.2 million, or 28.5%
of net sales, last year. SG&A includes legal provisions of $6.2
million in the second quarter of this year compared to $1.7 million
in the first quarter of last year. On a non-GAAP basis, excluding
these legal provisions from both years, SG&A decreased to $69.2
million, or 26.6% of net sales, from $71.5 million, or 27.8% of net
sales, last year. This $2.3 million decrease in non-GAAP SG&A
was primarily due to reduced marketing and non-cash store
impairment charges.
- On a GAAP basis, operating loss was
$(1.6) million, or (0.6)% of net sales, compared to $(1.7) million,
or (0.7)% of net sales, last year. On a non-GAAP basis, excluding
the impact of legal provisions from both years, operating income
was $4.6 million, or 1.8% of net sales, compared to $(0.0) million
last year.
- On a GAAP basis, income tax benefit was
$0.4 million, or 33.2% of pre-tax loss, compared to $0.3 million,
or 16.3% of pre-tax loss, last year. These tax rates were
attributable to discrete income tax impacts related to restricted
stock and stock option expirations. On a non-GAAP basis, excluding
the impact of legal provisions from both years, income tax expense
was $2.1 million, or 41.2% of pre-tax income, compared to $0.4
million last year.
- On a GAAP basis, net loss was $(0.8)
million, or $(0.03) per share, compared to $(1.3) million, or
$(0.05) per share, last year. On a non-GAAP basis, excluding the
impact of legal provisions from both years, net income was $3.0
million, or $0.10 per diluted share, compared to net loss of $(0.3)
million, or $(0.01) per share, last year.
Balance Sheet and Liquidity
As of July 29, 2017, the Company had $109.6 million of cash and
marketable securities and no debt outstanding under its revolving
credit facility. In February 2017, the Company paid a first-ever
special cash dividend to its stockholders of approximately $20.1
million in the aggregate. This compares to $96.4 million of cash
and marketable securities and no debt outstanding as of July 30,
2016.
Fiscal 2017 Third Quarter Outlook
Based on current and historical trends, the Company expects its
third quarter comparable store sales to be in the range of flat to
up low single-digits on a percentage basis, operating income to be
in the range of approximately $9.0 million to $11.5 million, and
income per diluted share to be in the range of $0.19 to $0.24. This
compares to operating income of $10.7 million and income per
diluted share of $0.22 for the third quarter of fiscal 2016. This
assumes an anticipated effective tax rate of approximately 40% and
weighted average shares of approximately 29 million.
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, 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 the financial results is scheduled
for today, August 23, 2017, 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 September
7, 2017, by dialing (844) 512-2921 (domestic) or (412) 317-6671
(international) and entering the conference identification number:
13667130. Please note participants must enter the conference
identification number in order to access the replay.
About Tillys
Tillys is a leading destination youth culture specialty retailer
of casual apparel, footwear and accessories for young men, young
women, boys and girls with an extensive assortment of the most
relevant and sought-after brands rooted in the action sports, team
sports, music, art and fashion inherent in the active and outdoor
West Coast lifestyle. Tillys is headquartered in Irvine, California
and currently operates 221 total stores across 31 states 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”), 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)
(unaudited)
July 29, January 28, July 30,
2017 2017 2016 ASSETS Current assets:
Cash and cash equivalents $ 43,567 $ 78,994 $ 56,466 Marketable
securities 66,064 54,923 39,926 Receivables 6,829 3,989 8,940
Merchandise inventories 75,033 47,768 76,820 Prepaid expenses and
other current assets 9,391 9,541 11,131 Total current
assets 200,884 195,215 193,283 Property and equipment, net 89,130
89,219 97,424 Other assets 6,843 6,072 5,258 Total
assets $ 296,857 $ 290,506 $ 295,965
LIABILITIES
AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable
$ 41,729 $ 17,584 $ 41,408 Accrued expenses 29,097 23,872 21,269
Deferred revenue 9,277 10,203 7,390 Accrued compensation and
benefits 7,834 7,259 6,755 Current portion of deferred rent 5,836
5,643 6,237 Current portion of capital lease obligation 386
835 885 Total current liabilities 94,159 65,396 83,944
Long-term portion of deferred rent 33,080 35,890 38,365 Long-term
portion of capital lease obligation — — 386 Total
liabilities 127,239 101,286 122,695 Stockholders’ equity:
Common stock (Class A), $0.001 par value; July 29, 2017 - 100,000
shares authorized, 13,864 shares issued and outstanding; January
28, 2017 - 100,000 shares authorized, 13,434 shares issued and
outstanding; July 30, 2016 - 100,000 shares authorized, 12,479
shares issued and outstanding 14 14 12 Common stock (Class B),
$0.001 par value; July 29, 2017 - 35,000 shares authorized, 14,958
shares issued and outstanding; January 28, 2017 - 35,000 shares
authorized, 15,329 shares issued and outstanding; July 30, 2016 -
35,000 shares authorized, 16,069 shares issued and outstanding 15
15 16 Preferred stock, $0.001 par value; July 29, 2017, January 28,
2017 and July 30, 2016 - 10,000 shares authorized, no shares issued
or outstanding — — — Additional paid-in capital 139,479 138,102
134,910 Retained earnings 30,008 51,023 38,301 Accumulated other
comprehensive income 102 66 31 Total stockholders’
equity 169,618 189,220 173,270 Total liabilities and
stockholders’ equity $ 296,857 $ 290,506 $ 295,965
Tilly’s, Inc.
Consolidated Statements of (Loss)
Income
(In thousands, except per share data)
(unaudited)
Second Quarter Ended First Half Ended July
29,2017 July 30,2016 July
29,2017 July 30,2016 Net
sales $ 138,810 $ 136,412 $ 259,757 $ 256,630 Cost of goods sold
(includes buying, distribution, and occupancy costs) 97,881
97,575 185,923 185,206 Gross profit 40,929
38,837 73,834 71,424 Selling, general and administrative expenses
42,168 36,605 75,402 73,159 Operating
(loss) income (1,239 ) 2,232 (1,568 ) (1,735 ) Other income, net
197 91 435 167 (Loss) Income before
income taxes (1,042 ) 2,323 (1,133 ) (1,568 ) Income tax (benefit)
expense (446 ) 890 (376 ) (256 ) Net (loss) income $ (596 )
$ 1,433 $ (757 ) $ (1,312 ) Basic (loss) income per share of
Class A and Class B common stock $ (0.02 ) $ 0.05 $ (0.03 ) $ (0.05
) Diluted (loss) income per share of Class A and Class B common
stock $ (0.02 ) $ 0.05 $ (0.03 ) $ (0.05 ) Weighted average basic
shares outstanding 28,751 28,462 28,728 28,443 Weighted average
diluted shares outstanding 28,751 28,466 28,728 28,443
Tilly’s, Inc.
Supplemental Financial
Information
Reconciliation of Select GAAP Financial
Measures to Non-GAAP Financial Measures
(In thousands, except per share data)
(unaudited)
Second Quarter Ended First Half Ended July
29,2017 July 30,2016 July
29,2017 July 30,2016
Selling, general and administrative, as reported $ 42,168 $ 36,605
$ 75,402 $ 73,159 Legal settlement (6,166 ) — (6,166 )
(1,700 ) Selling, general and administrative, as adjusted $ 36,002
$ 36,605 $ 69,236 $ 71,459
Operating (loss) income, as reported $ (1,239 ) $ 2,232 $ (1,568 )
$ (1,735 ) Legal settlement 6,166 — 6,166
1,700 Operating income (loss), as adjusted $ 4,927 $
2,232 $ 4,598 $ (35 ) Income tax (benefit)
expense, as reported $ (446 ) $ 890 $ (376 ) $ (256 ) Income tax
effect of legal settlement (1) 2,447 — 2,447
664 Income tax expense, as adjusted $ 2,001 $ 890
$ 2,071 $ 408 Net (loss) income, as
reported $ (596 ) $ 1,433 $ (757 ) $ (1,312 ) Legal settlement
6,166 — 6,166 1,700 Less: Income tax effect (1) (2,447 ) —
(2,447 ) (664 ) Net income (loss), as adjusted $ 3,123 $
1,433 $ 2,962 $ (276 ) Diluted (loss) income
per share, as reported $ (0.02 ) $ 0.05 $ (0.03 ) $ (0.05 ) Legal
settlement, net of taxes (1) 0.13 — 0.13 0.04
Diluted income (loss) per share, as adjusted $ 0.11 $
0.05 $ 0.10 $ (0.01 ) Weighted average basic
shares outstanding 28,751 28,462 28,728 28,443 Weighted average
diluted shares outstanding 28,923 28,466 28,912 28,443
(1) The effective tax rate applied for the second quarter and
first half ended July 29, 2017 was 39.7%. The effective tax rate
applied for the first half ended July 30, 2016 was 39.1%.
Tilly’s, Inc.
Consolidated Statements of Cash
Flows
(In thousands)
(unaudited)
First Half Ended July 29,2017
July 30,2016 Cash flows from operating
activities Net loss $ (757 ) $ (1,312 ) Adjustments to
reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 11,904 11,650 Stock-based
compensation expense 1,195 1,459 Impairment of assets 451 1,523
Loss (Gain) on disposal of assets 16 (16 ) Gain on sales and
maturities of marketable securities (266 ) (106 ) Deferred income
taxes (364 ) (226 ) Changes in operating assets and liabilities:
Receivables (2,840 ) (3,543 ) Merchandise inventories (27,265 )
(25,463 ) Prepaid expenses and other assets (280 ) (2,150 )
Accounts payable 24,116 25,100 Accrued expenses (74 ) 1,946 Accrued
compensation and benefits 575 1,004 Deferred rent (2,617 ) (2,395 )
Deferred revenue (926 ) (1,259 ) Net cash provided by operating
activities 2,868 6,212
Cash flows from
investing activities Purchase of property and equipment (6,954
) (10,415 ) Proceeds from sale of property and equipment — 43
Purchases of marketable securities (62,898 ) (39,873 ) Proceeds
from marketable securities 52,082 50,000 Net cash
used in investing activities (17,770 ) (245 )
Cash flows from
financing activities Dividends paid (20,080 ) — Proceeds from
exercise of stock options 105 — Payment of capital lease obligation
(449 ) (422 ) Taxes paid in lieu of shares issued for stock-based
compensation (101 ) (99 ) Net cash used in financing activities
(20,525 ) (521 ) Change in cash and cash equivalents (35,427 )
5,446 Cash and cash equivalents, beginning of period 78,994
51,020 Cash and cash equivalents, end of period $ 43,567
$ 56,466
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)
2016 Q3 225 1 1 225 1,716
2016 Q4 225 — 2 223 1,703
2017 Q1 223 — 1 222 1,697
2017 Q2 222 — 1 221 1,690
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version on businesswire.com: http://www.businesswire.com/news/home/20170823005749/en/
Investor Relations:Michael Henry,
949-609-5599, ext. 17000Chief Financial
Officerirelations@tillys.com
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