Introduces Fiscal 2017 Fourth Quarter
Outlook and Fiscal 2018 Store Opening Plans
Third Quarter Comp Store Sales Increase
1.5%, Operating Income Increases 32%
Tilly’s, Inc. (NYSE:TLYS) today announced financial results for
the third quarter and first nine months of fiscal 2017 ended
October 28, 2017.
“In the third quarter, we delivered a 32% improvement in
year-over-year operating income, largely driven by our sixth
consecutive quarter of comp store sales growth, our fourth
consecutive quarter of store traffic growth, and our continued
strict inventory and expense management," commented Ed Thomas,
President and Chief Executive Officer. "Having turned the operating
margin trend of our business around over the past year and a half,
we now believe it is the appropriate time to plan for moderate
growth by targeting to open approximately 10 to 15 new stores
during fiscal 2018."
Third Quarter Results Overview
The following comparisons refer to operating results for the
third quarter of fiscal 2017 versus the third quarter of fiscal
2016 ended October 29, 2016:
- Total net sales were $152.8 million, an
increase of 0.5% from $152.1 million last year, despite ending the
quarter with five fewer stores than a year ago (220 total stores
vs. 225 last year).
- Comparable store sales, which includes
e-commerce sales, increased 1.5%. Comparable store sales increased
4.4% in the third quarter last year.
- Gross profit was $50.1 million, an
increase of 4.4% from $48.0 million last year. Gross margin, or
gross profit as a percentage of net sales, increased to 32.8% from
31.5% last year. This 130 basis-point increase in gross margin was
attributable to a 100 basis-point reduction in buying, distribution
and occupancy costs, and a 30 basis-point improvement in product
margins as a result of reduced markdowns.
- Selling, general and administrative
expenses ("SG&A") were $36.0 million, or 23.5% of net sales,
compared to $37.3 million, or 24.5% of net sales, last year. This
100 basis-point decrease was primarily attributable to reduced
marketing spend and lower corporate payroll costs.
- Operating income was $14.1 million, or
9.2% of net sales, a 32.3% increase compared to $10.7 million, or
7.0% of net sales, last year. This 220 basis-point increase in our
operating margin was attributable to the combination of comparable
store sales growth, improved gross margins, and reduced SG&A,
each as explained above.
- Income tax expense was $5.7 million, or
39.6% of pre-tax income, compared to $4.4 million, or 40.4% of
pre-tax income, last year.
- Net income was $8.8 million, or $0.30
per diluted share, a 36.5% increase compared to $6.4 million, or
$0.22 per diluted share, last year.
First Nine Months Results Overview
The following comparisons refer to operating results for the
first nine months of fiscal 2017 versus the first nine months of
fiscal 2016 ended October 29, 2016:
- Total net sales were $412.6 million, an
increase of 0.9% from $408.7 million last year.
- Comparable store sales, which includes
e-commerce sales, increased 1.5%. Comparable store sales increased
0.7% in the first nine months of last year.
- Gross profit was $123.9 million, a 3.8%
increase from $119.4 million last year. Gross margin was 30.0%
compared to 29.2% last year. This 80 basis-point increase in gross
margin was primarily attributable to a 70 basis-point reduction in
total buying, distribution and occupancy costs and a 10 basis-point
improvement in product margins.
- SG&A was $111.4 million, or 27.0%
of net sales, compared to $110.5 million, or 27.0% of net sales,
last year. SG&A includes legal provisions of $6.8 million this
year compared to $1.7 million last year. After consideration of
legal provisions, SG&A decreased by $4.2 million. Primary
expense reductions were from marketing, non-cash store impairment
charges, corporate payroll costs, and several other smaller
expenses.
- Operating income was $12.5 million, or
3.0% of net sales, a 40.4% increase compared to $8.9 million, or
2.2% of net sales, last year.
- Income tax expense was $5.4 million, or
40.1% of pre-tax income, compared to $4.1 million, or 44.5% of
pre-tax income, last year.
- Net income was $8.0 million, or $0.28
per diluted share, a 56.7% increase compared to $5.1 million, or
$0.18 per diluted share, last year.
Balance Sheet and Liquidity
As of October 28, 2017, the Company had $121.9 million of cash
and marketable securities and no debt outstanding under its
revolving credit facility. This compares to $105.3 million of cash
and marketable securities and no debt outstanding under its
revolving credit facility as of October 29, 2016. In February 2017,
the Company paid a first-ever special cash dividend to its
stockholders of approximately $20.1 million in the aggregate.
Fiscal 2017 Fourth Quarter Outlook
Based on current and historical trends, the Company expects its
fourth quarter comparable store sales to increase by a low
single-digit percentage, operating income to be in the range of
approximately $10.5 million to $13.0 million, and income per
diluted share to be in the range of $0.22 to $0.26. This compares
to operating income of $10.4 million and income per diluted share
of $0.22 for the fourth quarter of fiscal 2016. This assumes an
anticipated effective tax rate of approximately 40% and weighted
average shares of approximately 29.2 million.
Conference Call Information
A conference call to discuss these financial results is
scheduled for today, November 29, 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 December
13, 2017, by dialing (844) 512-2921 (domestic) or (412) 317-6671
(international) and entering the conference identification number:
13672925. Please note participants must enter the conference
identification number in order to access the replay.
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 Irvine, California and currently operates 221
total stores across 32 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)
October 28,2017 January 28,2017
October 29, 2016
ASSETS Current assets: Cash and cash equivalents $ 38,912 $
78,994 $ 43,382 Marketable securities 82,961 54,923 61,915
Receivables 3,647 3,989 5,873 Merchandise inventories 62,242 47,768
65,016 Prepaid expenses and other current assets 9,759 9,541
9,965 Total current assets 197,521 195,215 186,151 Property
and equipment, net 87,576 89,219 93,206 Other assets 7,805
6,072 5,414 Total assets $ 292,902 $ 290,506 $
284,771
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities: Accounts payable $ 27,329 $ 17,584 $ 26,613 Accrued
expenses 31,854 23,872 20,449 Deferred revenue 8,335 10,203 7,815
Accrued compensation and benefits 6,005 7,259 5,480 Current portion
of deferred rent 5,762 5,643 6,146 Current portion of capital lease
obligation 155 835 899 Total current liabilities
79,440 65,396 67,402 Long-term portion of deferred rent 31,377
35,890 36,940 Other 2,955 — 155 Total liabilities
113,772 101,286 104,497 Stockholders’ equity: Common stock (Class
A), $0.001 par value; 100,000 shares authorized; 14,357, 13,434 and
12,672 shares issued and outstanding, respectively 14 14 13 Common
stock (Class B), $0.001 par value; 35,000 shares authorized;
14,488, 15,329 and 15,879 shares issued and outstanding,
respectively 15 15 16 Preferred stock, $0.001 par value; 10,000
shares authorized; no shares issued or outstanding — — — Additional
paid-in capital 140,240 138,102 135,469 Retained earnings 38,765
51,023 44,719 Accumulated other comprehensive income 96 66
57 Total stockholders’ equity 179,130 189,220
180,274 Total liabilities and stockholders’ equity $ 292,902
$ 290,506 $ 284,771
Tilly’s, Inc.
Consolidated Statements of
Income
(In thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
October 28,2017 October
29,2016 October 28,2017
October 29,2016 Net sales $ 152,824 $ 152,106 $
412,581 $ 408,736 Cost of goods sold (includes buying,
distribution, and occupancy costs) 102,730 104,137
288,653 289,343 Gross profit 50,094 47,969 123,928 119,393
Selling, general and administrative expenses 35,982 37,302
111,384 110,460 Operating income 14,112 10,667 12,544
8,933 Other income, net 375 103 810 270 Income
before income taxes 14,487 10,770 13,354 9,203 Income tax expense
5,730 4,353 5,354 4,097 Net income $ 8,757
$ 6,417 $ 8,000 $ 5,106 Basic income per share
of Class A and Class B common stock $ 0.30 $ 0.23 $ 0.28 $ 0.18
Diluted income per share of Class A and Class B common stock $ 0.30
$ 0.22 $ 0.28 $ 0.18 Weighted average basic shares outstanding
28,782 28,482 28,746 28,456 Weighted average diluted shares
outstanding 29,031 28,527 28,954 28,476
Consolidated Statements of Cash
Flows
(In thousands)
(unaudited)
Nine Months Ended October 28,2017
October 29,2016 Cash flows from
operating activities Net income $ 8,000 $ 5,106 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization 17,644 17,498 Stock-based
compensation expense 1,773 1,995 Impairment of assets 848 1,963
Loss on disposal of assets 170 6 Gain on sales and maturities of
marketable securities (510 ) (164 ) Deferred income taxes (1,194 )
(298 ) Changes in operating assets and liabilities: Receivables 342
(476 ) Merchandise inventories (14,474 ) (13,659 ) Prepaid expenses
and other assets (777 ) (1,084 ) Accounts payable 9,177 10,667
Accrued expenses 4,202 2,576 Accrued compensation and benefits
(1,254 ) (271 ) Deferred rent (4,394 ) (3,911 ) Deferred revenue
(1,868 ) (359 ) Net cash provided by operating activities 17,685
19,589
Cash flows from investing
activities Purchase of property and equipment (9,716 ) (14,794
) Proceeds from sale of property and equipment — 43 Purchases of
marketable securities (112,612 ) (81,762 ) Proceeds from marketable
securities 85,134 70,000 Net cash used in investing
activities (37,194 ) (26,513 )
Cash flows from financing
activities Dividends paid (20,080 ) — Proceeds from exercise of
stock options 288 24 Payment of capital lease obligation (680 )
(639 ) Taxes paid in lieu of shares issued for stock-based
compensation (101 ) (99 ) Net cash used in financing activities
(20,573 ) (714 ) Change in cash and cash equivalents (40,082 )
(7,638 ) Cash and cash equivalents, beginning of period 78,994
51,020 Cash and cash equivalents, end of period $
38,912 $ 43,382
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 Q4 225 — 2 223 1,703
2017 Q1 223 — 1 222 1,697
2017 Q2 222 — 1 221 1,690
2017 Q3 221 — 1 220 1,681
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version on businesswire.com: http://www.businesswire.com/news/home/20171129005738/en/
Investor Relations:Tilly’s,
Inc.Michael Henry, 949-609-5599, ext. 17000Chief Financial
Officerirelations@tillys.com
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