Tilly's, Inc. Reports Fiscal 2024 Second Quarter Operating Results

IRVINE, Calif.--(BUSINESS WIRE)--Sep. 5, 2024-- Tilly’s, Inc. (NYSE: TLYS, the "Company") today announced financial results for the second quarter of fiscal 2024 ended August 3, 2024.

"While the macro environment remains challenging for our customer demographic, we believe that our new pricing strategies are gaining traction as evidenced by our second consecutive quarter of improved product margins, and that we are beginning to drive improved customer engagement through our refocused marketing efforts," commented Hezy Shaked, Co-Founder and Interim President and Chief Executive Officer. "We are encouraged to have started the third quarter with a positive comp in fiscal August, representing our first positive monthly comparable net sales result since February 2022. However, we remain cautious in our third quarter outlook as our business has begun to slow down following the peak of the back-to-school season, consistent with the trend pattern in recent years."

Operating Results Overview

Fiscal 2024 Second Quarter Operating Results Overview

The following comparisons refer to the Company's operating results for the second quarter of fiscal 2024 ended August 3, 2024 versus the second quarter of fiscal 2023 ended July 29, 2023.

  • Total net sales were $162.9 million, an increase of $2.9 million or 1.8%, compared to $160.0 million last year, primarily due to the calendar shift impact of last year's 53rd week in the retail calendar, which caused a portion of the back-to-school season's sales volume to shift into the latter stages of the second quarter from the beginning of the third quarter last year. Total comparable net sales, including both physical stores and e-commerce ("e-com"), decreased by 7.8% relative to the shifted 13-week period ended August 5, 2023.
    • Net sales from physical stores were $132.3 million, an increase of $2.5 million or 2.0%, compared to $129.8 million last year, with a comparable store net sales decrease of 7.9%. Net sales from physical stores represented 81.3% of total net sales this year compared to 81.1% of total net sales last year. The Company ended the second quarter with 247 total stores compared to 246 total stores at the end of the second quarter last year.
    • Net sales from e-com were $30.5 million, an increase of $0.4 million or 1.3%, compared to $30.2 million last year. E-com net sales represented 18.7% of total net sales this year compared to 18.9% of total net sales last year.
  • Gross profit, including buying, distribution, and occupancy costs, was $49.9 million, or 30.7% of net sales, compared to $44.3 million, or 27.7% of net sales, last year. Product margins improved by 270 basis points primarily due to the combination of improved initial markups and lower total markdowns. Buying, distribution, and occupancy costs improved by 30 basis points collectively, primarily due to carrying these costs against a higher level of net sales this year.
  • Selling, general and administrative ("SG&A") expenses were $50.8 million, or 31.2% of net sales, compared to $47.0 million, or 29.4% of net sales, last year. The $3.8 million increase in SG&A was primarily attributable to increases in store payroll and related benefits of $1.5 million due primarily to average wage rate increases, digital marketing expenses of $0.7 million, software as a service expense of $0.6 million, and corporate payroll and related benefits of $0.5 million.
  • Operating loss was $0.9 million, or 0.5% of net sales, compared to an operating loss of $2.7 million, or 1.7% of net sales, last year, due to the combined impact of the factors noted above.
  • Pre-tax loss was $0.1 million, or break-even as a percentage of net sales, compared to a pre-tax loss of $1.5 million, or 0.9% of net sales, last year.
  • Income tax benefit was $4.5 thousand or 6.2% of pre-tax loss, compared to an income tax benefit of $0.3 million, or 23.2% of pre-tax loss, last year. The decrease in the effective income tax rate was due to an immaterial state tax benefit arising in a quarter with a nearly break-even pre-tax loss.
  • Net loss was $0.1 million, or $0.00 net loss per share, compared to a net loss of $1.1 million, or $0.04 net loss per share, last year. Weighted average shares were 30.0 million this year compared to 29.8 million shares last year.

Fiscal 2024 First Half Operating Results Overview

The following comparisons refer to the Company's operating results for the first half of fiscal 2024 ended August 3, 2024 versus the first half of fiscal 2023 ended July 29, 2023.

  • Total net sales were $278.7 million, a decrease of $4.9 million or 1.7%, compared to $283.6 million last year, primarily due to a decline in comparable net sales partially offset by the calendar shift impact of last year's 53rd week in the retail calendar, which caused a portion of the back-to-school season's sales volume to shift into the second quarter this year from the beginning of the third quarter last year. Total comparable net sales, including both physical stores and e-commerce ("e-com"), decreased by 8.4% relative to the shifted 26-week period ended August 5, 2023.
    • Net sales from physical stores were $225.2 million, a decrease of $2.5 million or 1.1%, compared to $227.6 million last year, with a comparable store net sales decrease of 8.2%. Net sales from physical stores represented 80.8% of total net sales this year compared to 80.3% of total net sales last year.
    • Net sales from e-com were $53.6 million, a decrease of $2.4 million or 4.3%, compared to $56.0 million last year. E-com net sales represented 19.2% of total net sales this year compared to 19.7% of total net sales last year.
  • Gross profit, including buying, distribution, and occupancy costs, was $74.2 million, or 26.6% of net sales, compared to $70.3 million, or 24.8% of net sales, last year. Product margins improved by 210 basis points primarily due to the combination of improved initial markups and lower total markdowns. Buying, distribution, and occupancy costs deleveraged by 30 basis points collectively, despite being $0.6 million lower than last year, primarily due to carrying these costs against lower net sales this year.
  • Selling, general and administrative ("SG&A") expenses were $95.9 million, or 34.4% of net sales, compared to $90.2 million, or 31.8% of net sales, last year. The $5.7 million increase in SG&A was primarily attributable to increases in store payroll and related benefits of $2.5 million due primarily to average wage rate increases, non-cash store asset impairment charges of $1.5 million, corporate payroll and related benefits of $1.0 million, and software as a service expense of $0.9 million. These increases were partially offset by a variety of smaller expense decreases.
  • Operating loss was $21.6 million, or 7.8% of net sales, compared to an operating loss of $19.9 million, or 7.0% of net sales, last year, due to the combined impact of the factors noted above.
  • Pre-tax loss was $19.7 million, or 7.1% of net sales, compared to a pre-tax loss of $17.7 million, or 6.2% of net sales, last year.
  • Income tax benefit was $17.2 thousand or 0.1% of pre-tax loss, compared to an income tax benefit of $4.6 million, or 25.9% of pre-tax loss, last year. The decrease in the effective income tax rate was primarily attributable to the continuing impact of the valuation allowance.
  • Net loss was $19.7 million, or $0.66 net loss per share, compared to a net loss of $13.1 million, or $0.44 net loss per share, last year. Weighted average shares were 30.0 million this year compared to 29.8 million shares last year.

Balance Sheet and Liquidity

As of August 3, 2024, the Company had $76.7 million of cash, cash equivalents and marketable securities and no debt outstanding, compared to $104.3 million and no debt outstanding as of July 29, 2023. Total inventories increased 4.1% as of August 3, 2024 compared to July 29, 2023. Total year-to-date capital expenditures at the end of the second quarter were $4.6 million this year compared to $6.3 million last year.

Fiscal 2024 Third Quarter Outlook

Total comparable net sales for fiscal August ended August 31, 2024, increased by 1.0% relative to the comparable four-week period last year. Due to the impact of the 53rd week in last year's retail calendar, total net sales for this year's third quarter will start with an $18.4 million deficit in net sales compared to last year's third quarter as a result of a large back-to-school net sales week shifting into the end of the second quarter this year from what was in the beginning of the third quarter last year. Based on this timing shift, current quarter-to-date comparable net sales results and current and historical trends, the Company currently estimates the following for the third quarter of fiscal 2024:

  • Net sales to be in the range of approximately $140 million to $146 million, translating to an estimated comparable net sales decrease in the range of approximately (6)% to (2)%, respectively, relative to the comparable 13-week period last year;
  • SG&A expenses to be approximately $49 million before factoring in any potential non-cash store asset impairment charges which may arise;
  • Pre-tax loss and net loss to be in the range of approximately $(11.6) million to $(8.7) million, respectively, with a near-zero effective income tax rate due to the continuing impact of a full, non-cash valuation allowance on deferred tax assets; and
  • Per share results to be in the range of a net loss of $(0.39) to $(0.29), respectively, with estimated weighted average shares of approximately 30 million.

The Company currently expects to have 246 total stores open at the end of the third quarter of fiscal 2024 compared to 249 at the end of last year's third quarter.

Conference Call Information

A conference call to discuss these financial results is scheduled for today, September 5, 2024, 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) 300-8521 (domestic) or (412) 317-6026 (international). 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 12, 2024, by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) and entering the conference identification number: 10191499.

About Tillys

Tillys is a leading, destination specialty retailer of casual apparel, footwear, accessories and hardgoods for young men, young women, boys and girls with an extensive selection of iconic global, emerging, and proprietary brands rooted in an active, outdoor and social lifestyle. Tillys is headquartered in Irvine, California and currently operates 247 total stores across 33 states, as well as its website, www.tillys.com.

Forward-Looking Statements

Certain statements in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, statements regarding our current operating expectations in light of historical results, the impacts of inflation and potential recession on us and our customers, including on our future financial condition or operating results, expectations regarding changes in the macro-economic environment, customer traffic, our supply chain, our ability to properly manage our inventory levels, and any other statements about our future cash position, financial flexibility, 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 the impact of inflation on consumer behavior and our business and operations, supply chain difficulties, and our ability to respond thereto, 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, attract talented employees, or enhance awareness of our brand and brand image, general consumer spending patterns and levels, including changes in historical spending patterns, the markets generally, our ability to satisfy our financial obligations, including under our credit facility and our leases, 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 on the SEC’s website at www.sec.gov and on 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)

 

 

August 3,
2024

 

February 3,
2024

 

July 29,
2023

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

36,749

 

 

$

47,027

 

 

$

54,578

 

Marketable securities

 

39,947

 

 

 

48,021

 

 

 

49,700

 

Receivables

 

13,176

 

 

 

5,947

 

 

 

10,922

 

Merchandise inventories

 

95,011

 

 

 

63,159

 

 

 

91,251

 

Prepaid expenses and other current assets

 

9,539

 

 

 

11,905

 

 

 

9,209

 

Total current assets

 

194,422

 

 

 

176,059

 

 

 

215,660

 

Operating lease assets

 

188,711

 

 

 

203,825

 

 

 

224,537

 

Property and equipment, net

 

44,612

 

 

 

48,063

 

 

 

48,353

 

Deferred tax assets, net

 

 

 

 

 

 

 

12,973

 

Other assets

 

1,452

 

 

 

1,598

 

 

 

1,764

 

TOTAL ASSETS

$

429,197

 

 

$

429,545

 

 

$

503,287

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

42,961

 

 

$

14,506

 

 

$

44,763

 

Accrued expenses

 

20,011

 

 

 

13,063

 

 

 

18,972

 

Deferred revenue

 

13,615

 

 

 

14,957

 

 

 

14,012

 

Accrued compensation and benefits

 

11,488

 

 

 

9,902

 

 

 

8,358

 

Current portion of operating lease liabilities

 

51,414

 

 

 

48,672

 

 

 

51,243

 

Current portion of operating lease liabilities, related party

 

3,269

 

 

 

3,121

 

 

 

2,977

 

Other liabilities

 

270

 

 

 

336

 

 

 

425

 

Total current liabilities

 

143,028

 

 

 

104,557

 

 

 

140,750

 

Long-term liabilities:

 

 

 

 

 

Noncurrent portion of operating lease liabilities

 

141,565

 

 

 

160,531

 

 

 

176,310

 

Noncurrent portion of operating lease liabilities, related party

 

17,596

 

 

 

19,267

 

 

 

20,865

 

Other liabilities

 

235

 

 

 

321

 

 

 

447

 

Total long-term liabilities

 

159,396

 

 

 

180,119

 

 

 

197,622

 

Total liabilities

 

302,424

 

 

 

284,676

 

 

 

338,372

 

Stockholders’ equity:

 

 

 

 

 

Common stock (Class A)

 

23

 

 

 

23

 

 

 

23

 

Common stock (Class B)

 

7

 

 

 

7

 

 

 

7

 

Preferred stock

 

 

 

 

 

 

 

 

Additional paid-in capital

 

173,939

 

 

 

172,478

 

 

 

171,195

 

Accumulated deficit

 

(47,652

)

 

 

(27,962

)

 

 

(6,563

)

Accumulated other comprehensive income

 

456

 

 

 

323

 

 

 

253

 

Total stockholders’ equity

 

126,773

 

 

 

144,869

 

 

 

164,915

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

429,197

 

 

$

429,545

 

 

$

503,287

 

 

Tilly’s, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(unaudited)

 

 

Thirteen Weeks Ended

 

Twenty-Six Weeks Ended

 

August 3,
2024

 

July 29,
2023

 

August 3,
2024

 

July 29,
2023

Net sales

$

162,867

 

 

$

159,951

 

 

$

278,723

 

 

$

283,588

 

 

 

 

 

 

 

 

 

Cost of goods sold (includes buying, distribution, and occupancy costs)

 

112,013

 

 

 

114,704

 

 

 

202,625

 

 

 

211,472

 

Rent expense, related party

 

934

 

 

 

931

 

 

 

1,865

 

 

 

1,862

 

Total cost of goods sold (includes buying, distribution, and occupancy costs)

 

112,947

 

 

 

115,635

 

 

 

204,490

 

 

 

213,334

 

Gross profit

 

49,920

 

 

 

44,316

 

 

 

74,233

 

 

 

70,254

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

50,648

 

 

 

46,868

 

 

 

95,616

 

 

 

89,934

 

Rent expense, related party

 

131

 

 

 

133

 

 

 

264

 

 

 

266

 

Total selling, general and administrative expenses

 

50,779

 

 

 

47,001

 

 

 

95,880

 

 

 

90,200

 

 

 

 

 

 

 

 

 

Operating loss

 

(859

)

 

 

(2,685

)

 

 

(21,647

)

 

 

(19,946

)

Other income, net

 

786

 

 

 

1,220

 

 

 

1,940

 

 

 

2,284

 

Loss before income taxes

 

(73

)

 

 

(1,465

)

 

 

(19,707

)

 

 

(17,662

)

Income tax benefit

 

(4

)

 

 

(340

)

 

 

(17

)

 

 

(4,569

)

Net loss

$

(69

)

 

$

(1,125

)

 

$

(19,690

)

 

$

(13,093

)

Basic net loss per share of Class A and Class B common stock

$

(0.00

)

 

$

(0.04

)

 

$

(0.66

)

 

$

(0.44

)

Diluted net loss per share of Class A and Class B common stock

$

(0.00

)

 

$

(0.04

)

 

$

(0.66

)

 

$

(0.44

)

Weighted average basic shares outstanding

 

30,029

 

 

 

29,831

 

 

 

29,995

 

 

 

29,815

 

Weighted average diluted shares outstanding

 

30,029

 

 

 

29,831

 

 

 

29,995

 

 

 

29,815

 

 

Tilly’s, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

 

 

Twenty-Six Weeks Ended

 

August 3,
2024

 

July 29,
2023

Cash flows from operating activities

 

 

 

Net loss

$

(19,690

)

 

$

(13,093

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

Depreciation and amortization

 

6,305

 

 

 

6,457

 

Insurance proceeds from casualty loss

 

131

 

 

 

 

Stock-based compensation expense

 

1,167

 

 

 

1,078

 

Impairment of assets

 

2,499

 

 

 

955

 

(Gain) loss on disposal of assets

 

(35

)

 

 

28

 

Gain on maturities of marketable securities

 

(1,121

)

 

 

(961

)

Deferred income taxes

 

 

 

 

(4,476

)

Changes in operating assets and liabilities:

 

 

 

Receivables

 

(6,863

)

 

 

(801

)

Merchandise inventories

 

(31,983

)

 

 

(29,134

)

Prepaid expenses and other assets

 

3,003

 

 

 

8,230

 

Accounts payable

 

28,436

 

 

 

28,768

 

Accrued expenses

 

7,048

 

 

 

4,274

 

Accrued compensation and benefits

 

1,586

 

 

 

175

 

Operating lease liabilities

 

(4,112

)

 

 

(2,994

)

Deferred revenue

 

(1,342

)

 

 

(2,091

)

Other liabilities

 

(232

)

 

 

(314

)

Net cash used in operating activities

 

(15,203

)

 

 

(3,899

)

 

 

 

 

Cash flows from investing activities

 

 

 

Purchases of marketable securities

 

(39,290

)

 

 

(53,904

)

Purchases of property and equipment

 

(4,625

)

 

 

(6,310

)

Proceeds from maturities of marketable securities

 

48,500

 

 

 

45,081

 

Insurance proceeds from casualty loss

 

23

 

 

 

 

Proceeds from sale of property and equipment

 

23

 

 

 

 

Net cash provided by (used in) investing activities

 

4,631

 

 

 

(15,133

)

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from exercise of stock options

 

294

 

 

 

84

 

Net cash provided by financing activities

 

294

 

 

 

84

 

 

 

 

 

Change in cash and cash equivalents

 

(10,278

)

 

 

(18,948

)

Cash and cash equivalents, beginning of period

 

47,027

 

 

 

73,526

 

Cash and cash equivalents, end of period

$

36,749

 

 

$

54,578

 

 

Tilly's, Inc.

Store Count and Square Footage

 

 

Store

Count at

Beginning of

Quarter

 

New Stores

Opened

During Quarter

 

Stores

Permanently

Closed

During Quarter

 

Store Count at

End of Quarter

 

Total Gross

Square Footage

End of Quarter

(in thousands)

2023 Q1

249

 

1

 

2

 

248

 

1,809

2023 Q2

248

 

 

2

 

246

 

1,792

2023 Q3

246

 

3

 

 

249

 

1,810

2023 Q4

249

 

3

 

4

 

248

 

1,801

2024 Q1

248

 

2

 

4

 

246

 

1,784

2024 Q2

246

 

1

 

 

247

 

1,791

 

Investor Relations Contact:
Michael Henry, Executive Vice President, Chief Financial Officer
(949) 609-5599, ext. 17000
irelations@tillys.com

Source: Tilly’s, Inc.