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Tilly's, Inc. Announces Fiscal 2021 First Quarter Operating Results

June 3, 2021 at 4:05 PM EDT

Reports Record First Quarter Net Sales and Earnings Per Share

IRVINE, Calif.--(BUSINESS WIRE)--Jun. 3, 2021-- Tilly’s, Inc. (NYSE: TLYS, the "Company") today announced financial results for the first quarter of fiscal 2021 ended May 1, 2021.

"Fiscal 2021 is off to a record-setting start with our best first quarter net sales and best earnings per share of any quarter since becoming a public company in May 2012," commented Ed Thomas, President and Chief Executive Officer. "The second quarter is also off to a great start with a 30% increase in comparable net sales compared to fiscal 2019's pre-pandemic second quarter. We believe these results are being driven by a compelling merchandise offering and excellent execution by our corporate and store teams, as well as several favorable environmental factors, including increased consumer activity generally, the impact of federal stimulus checks on consumer spending, a return to in-person learning in many schools, and the reopening of public venues."

First Quarter Results Overview

The following comparisons refer to operating results for the first quarter of fiscal 2021 versus the first quarter of fiscal 2020 ended May 2, 2020:

  1. Total net sales were $163.2 million, a record for a first quarter, which represented an increase of $85.9 million or 111.1%, compared to $77.3 million last year.

    1. Net sales from physical stores were $127.7 million, an increase of $80.7 million or 171.9%, compared to $47.0 million last year, primarily due to the closure of all stores during the latter half of the first quarter last year as a result of the COVID-19 pandemic. Net sales from stores represented 78.3% of total net sales compared to 60.8% of total net sales last year. The Company ended the first quarter with 238 total stores compared to 239 total stores at the end of the first quarter last year. During the first quarter of fiscal 2021, the Company opened two new stores and permanently closed two stores.

    2. Net sales from e-commerce were $35.5 million, an increase of $5.1 million or 17.0%, compared to $30.3 million last year. E-commerce net sales represented 21.7% of total net sales compared to 39.2% of total net sales last year.

    3. For further context as to how the Company's fiscal 2021 first quarter business performance compared to pre-pandemic levels during which it was not subject to mandatory store closures, total comparable net sales for the first quarter of fiscal 2021 compared to the first quarter of fiscal 2019 increased 21.9% with comparable net sales from physical stores up 11.7% and e-commerce net sales up 80.4%. In the first quarter of fiscal 2019, total net sales from physical stores represented 84.9% of total net sales while net sales from e-commerce represented 15.1% of total net sales.

  2. Gross profit was $54.8 million, or 33.6% of net sales, compared to $1.6 million, or 2.1% of net sales, last year. Product margins improved 930 basis points as a percentage of net sales primarily due to the prior year impact of an estimated inventory reserve of $4.7 million recorded during last year's store shutdown period which represented 600 basis points of the comparative increase. Setting aside the prior year inventory reserve impact, the remaining product margin improvement of 330 basis points was primarily attributable to a lower total markdown rate. Buying, distribution and occupancy costs improved by 2220 basis points collectively, despite increasing by $1.5 million in total, due to leveraging these costs against a much higher level of net sales this year compared to last year's store shutdown period. Occupancy costs improved by 1700 basis points as a percentage of net sales and were reduced by $0.5 million compared to last year. Distribution expenses improved by 450 basis points as a percentage of net sales despite increasing by $1.6 million. Buying costs improved by 70 basis points as a percentage of net sales despite increasing by $0.5 million.

  3. Selling, general and administrative expenses ("SG&A") were $40.0 million or 24.5% of net sales, compared to $30.0 million, or 38.8% of net sales, last year. The 1430 basis point improvement in SG&A as a percentage of net sales was primarily due to leveraging the higher level of expenses against a much higher level of net sales as a result of all stores being in operation for the entirety of the first quarter compared to only half of last year’s first quarter. Of the $10.0 million increase in SG&A, $6.2 million was attributable to store payroll and related benefits due to operating all stores for the entirety of this year’s first quarter, $1.5 million was attributable to corporate bonus accruals due to exceeding budgeted targets thus far in fiscal 2021, $1.2 million was attributable to increased e-com marketing costs, $1.2 million was attributable to increased corporate payroll and related benefits due to being fully staffed this year compared to significant furloughs and temporary management pay reductions during last year’s store shutdown period, $0.8 million was attributable to increased credit card fees associated with significantly higher net sales, and $0.5 million was due to increased insurance premiums. These increases were partially offset by a $1.6 million reversal of a disputed California sales tax assessment originally recorded during the third quarter of fiscal 2020 which the Company was able to successfully resolve in its favor.

  4. Operating income improved to $14.9 million, or 9.1% of net sales, compared to an operating loss of $(28.4) million, or (36.7)% of net sales, last year as a result of the combined impact of the factors described above.

  5. Other expense was $0.1 million compared to other income of $0.4 million last year, primarily due to earning lower interest rates on investments and approximately $0.2 million in costs associated with the ABL credit facility.

  6. Income tax expense was $3.8 million, or 25.7% of pre-tax income, compared to an income tax benefit of $(10.6) million, or 37.9% of pre-tax loss, last year.

  7. Net income improved to $11.0 million, or $0.36 per diluted share, records for a first quarter since the Company became publicly-traded, compared to a net loss of $(17.4) million, or $(0.59) per share, last year. Weighted average shares were 30.5 million this year compared to 29.7 million last year.

Balance Sheet and Liquidity

As of May 1, 2021, the Company had $157.6 million of cash and marketable securities, including $0.8 million of withheld store lease payments and no debt outstanding. This compared to $111.1 million at the end of the first quarter last year, which included $13.3 million in withheld store lease payments and $23.7 million of borrowed cash under the Company's then-existing credit facility. The Company ended the first quarter with inventories per square foot down 2.6% relative to last year, but up 8.0% relative to fiscal 2019, which the Company believes is a reasonable position relative to the current performance of its business. Total capital expenditures for the first quarter were $5.5 million compared to $3.5 million last year, the increase being primarily due to new store openings this year.

Fiscal 2021 Second Quarter Business Update

At this time, the Company cannot predict with any certainty what future customer traffic or comparable store net sales results will be. However, based on current trends, the Company believes that its fiscal 2021 second quarter net sales and earnings per share will be improved compared to the second quarters of both fiscal 2020 and fiscal 2019 as long as its stores and e-commerce can remain in full operation throughout the quarter. The Company expects to end the second quarter of fiscal 2021 with 244 total stores compared to 238 and 229 total stores at the end of the second quarters of fiscal 2020 and 2019, respectively. The Company is providing the following updates regarding its fiscal 2021 second quarter business in comparison to fiscal 2020 and fiscal 2019:

  1. The Company's total net sales for the second quarter of fiscal 2021 through May 31, 2021, were $58.0 million, an increase of $29.7 million, or 104.7%, compared to the comparable period of fiscal 2020 ended June 1, 2020, and an increase of $15.9 million, or 37.7%, compared to the comparable period of fiscal 2019 ended June 3, 2019.

  2. Net sales from physical stores for the second quarter of fiscal 2021 through May 31, 2021, were $47.1 million, an increase of $38.7 million, or 462.6% compared to the comparable period of fiscal 2020 ended June 1, 2020, and an increase of $10.9 million, or 30.0%, compared to the comparable period of fiscal 2019 ended June 3, 2019.

  3. Net sales from e-commerce for the second quarter of fiscal 2021 through May 31, 2021, were $11.0 million, a decrease of $9.0 million, or 45.2%, compared to the comparable period of fiscal 2020 ended June 1, 2020, and an increase of $5.0 million, or 84.6%, compared to the comparable period of fiscal 2019 ended June 3, 2019.

  4. As of June 1, 2021, the Company had $166.2 million of cash and marketable securities, including $0.5 million of withheld store lease payments and no debt outstanding. This compares to $115.2 million of total cash and marketable securities with $15.0 million of withheld store lease payments and $23.7 million borrowed under its then existing credit facility as of June 2, 2020, the comparable fiscal date last year. As of June 4, 2019, the comparable fiscal date of fiscal 2019, the Company had $114.6 million of cash and marketable securities with no withheld store lease payments and no debt outstanding. In February of each of 2020 and 2019, the Company paid aggregate cash dividends to its stockholders of $29.7 million and $29.5 million, respectively. Based on all currently available information, the Company believes the combination of its cash, marketable securities, and credit facility availability will be sufficient to support its operations for at least the next twelve months.

The Company emphasizes that drawing specific conclusions from comparative financial performance against last year’s results can be misleading given the various impacts of the COVID-19 pandemic, and it is challenging to predict future performance trends with any certainty due to many continuing unknowable factors in the current environment. These factors include but are not limited to: how the pandemic may continue to impact consumer habits; how the continuation or cessation of federal or state/local stimulus payments may continue to impact consumer spending; how store performance will compare relative to fiscal 2020 and fiscal 2019 over a longer period of time, particularly against last year’s strong results upon the initial reopening of stores which occurred on a staggered basis over several months beginning in mid-May; how e-commerce will perform relative to the significant increases in e-commerce net sales the Company experienced during the varying periods of store closures during fiscal 2020; whether or not there will be a more typical back-to-school season this year which usually begins in late July; whether, or for how long, the recent shift away from online shopping towards stores will continue; whether any of the first quarter business the Company did in traditional back-to-school product categories will represent a pull-forward of typical back-to-school spending or if this first quarter business will be incremental to what the Company hopes will be a more normal back-to-school season this year. In light of these and other uncertainties, the Company is not providing any specific earnings guidance at this time.

Conference Call Information

A conference call to discuss these financial results is scheduled for today, June 3, 2021, 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 (domestic) or (201) 689-8471 (international) 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 June 17, 2021, by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) and entering the conference identification number: 13719420. 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 casual apparel, footwear and accessories 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 244 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 the overall effect of the novel coronavirus (COVID-19) pandemic, including its impacts on the Company, its operations, or its future financial condition or operating results, the actions taken or to be taken in response to the COVID-19 pandemic, and the impacts thereof on the Company, its operations, or its future financial condition or operating results, expectations regarding future customer traffic and sales activities, the effects of guidance from local, state and federal governments and health organizations on its future business operations, the possibility of repaying withheld store rents, its ability to properly manage inventory levels, and any other statements about its 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 effects of the COVID-19 pandemic (or other weather, epidemics, pandemics, or other public health issues) on the Company's business and operations, and its ability to respond thereto (including any future surges in the number of cases related thereto and the effects of the emergence from the COVID-19 pandemic on its business), its ability to respond to changing customer preferences and trends, attract customer traffic at its stores and online, execute its growth and long-term strategies, expand into new markets, continue to grow its e-commerce business, effectively manage its inventory and costs, effectively compete with other retailers, attract talented employees, enhance awareness of its brand and brand image, general consumer spending patterns and levels, the markets generally, its ability to satisfy its financial obligations, including under its credit facility and its leases, and other factors that are detailed in the Company's 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 its other filings with the SEC, which are available from the SEC’s website at www.sec.gov and from the Company's 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. The Company does 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 the financial statements and notes thereto contained in the Company's Form 10-K.

 

Tilly’s, Inc.

Consolidated Balance Sheets

(In thousands, except par value)

(unaudited)

 

 

May 1,
2021

 

January 30,
2021

 

May 2,
2020

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

81,015

 

 

$

76,184

 

 

$

65,133

 

Marketable securities

76,633

 

 

64,955

 

 

45,981

 

Receivables

9,701

 

 

8,724

 

 

13,421

 

Merchandise inventories

65,341

 

 

55,698

 

 

67,650

 

Prepaid expenses and other current assets

4,956

 

 

6,595

 

 

2,092

 

Total current assets

237,646

 

 

212,156

 

 

194,277

 

Operating lease assets

219,918

 

 

227,881

 

 

252,554

 

Property and equipment, net

54,139

 

 

52,639

 

 

61,941

 

Other assets

12,530

 

 

12,797

 

 

7,422

 

Total assets

$

524,233

 

 

$

505,473

 

 

$

516,194

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

35,860

 

 

$

24,983

 

 

$

24,837

 

Accrued expenses

29,110

 

 

30,682

 

 

13,591

 

Line of credit

 

 

 

 

23,675

 

Deferred revenue

12,913

 

 

13,492

 

 

10,719

 

Accrued compensation and benefits

14,489

 

 

9,899

 

 

5,098

 

Current portion of operating lease liabilities

53,633

 

 

54,503

 

 

65,595

 

Total current liabilities

146,005

 

 

133,559

 

 

143,515

 

Noncurrent operating lease liabilities

203,627

 

 

211,292

 

 

229,127

 

Other

 

 

 

 

558

 

Total liabilities

349,632

 

 

344,851

 

 

373,200

 

Stockholders’ equity:

 

 

 

 

 

Common stock (Class A)

23

 

 

22

 

 

22

 

Common stock (Class B)

7

 

 

8

 

 

8

 

Preferred stock

 

 

 

 

 

Additional paid-in capital

158,454

 

 

155,437

 

 

153,878

 

Retained earnings (Accumulated deficit)

16,094

 

 

5,135

 

 

(11,115

)

Accumulated other comprehensive income

23

 

 

20

 

 

201

 

Total stockholders’ equity

174,601

 

 

160,622

 

 

142,994

 

Total liabilities and stockholders’ equity

$

524,233

 

 

$

505,473

 

 

$

516,194

 

 

Tilly’s, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(unaudited)

 

 

Thirteen Weeks Ended

 

May 1,

2021

 

May 2,

2020

Net sales

$

163,157

 

 

$

77,289

 

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

108,318

 

 

75,695

 

Gross profit

54,839

 

 

1,594

 

Selling, general and administrative expenses

39,965

 

 

29,995

 

Operating income (loss)

14,874

 

 

(28,401

)

Other (expense) income, net

(115

)

 

409

 

Income (loss) before income taxes

14,759

 

 

(27,992

)

Income tax expense (benefit)

3,800

 

 

(10,597

)

Net income (loss)

$

10,959

 

 

$

(17,395

)

Basic earnings (loss) per share of Class A and Class B common stock

$

0.37

 

 

$

(0.59

)

Diluted earnings (loss) per share of Class A and Class B common stock

$

0.36

 

 

$

(0.59

)

Weighted average basic shares outstanding

29,878

 

 

29,677

 

Weighted average diluted shares outstanding

30,529

 

 

29,677

 

 

Tilly’s, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

 

 

Thirteen Weeks Ended

 

May 1,
2021

 

May 2,
2020

Cash flows from operating activities

 

 

 

Net income (loss)

$

10,959

 

 

$

(17,395

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

Depreciation and amortization

4,324

 

 

5,024

 

Insurance proceeds from casualty loss

117

 

 

 

Stock-based compensation expense

366

 

 

501

 

Impairment of long-lived assets

 

 

333

 

Loss on disposal of assets

62

 

 

 

Gain on sales and maturities of marketable securities

(29

)

 

(330

)

Deferred income taxes

285

 

 

591

 

Changes in operating assets and liabilities:

 

 

 

Receivables

250

 

 

(5,936

)

Merchandise inventories

(9,760

)

 

(10,749

)

Prepaid expenses and other current assets

1,615

 

 

2,411

 

Accounts payable

10,617

 

 

4,661

 

Accrued expenses

(1,745

)

 

(5,284

)

Accrued compensation and benefits

4,590

 

 

(2,092

)

Operating lease liabilities

(1,795

)

 

9,741

 

Deferred revenue

(579

)

 

(1,042

)

Net cash provided by (used in) operating activities

19,277

 

 

(19,566

)

Cash flows from investing activities

 

 

 

Purchases of property and equipment

(5,492

)

 

(3,548

)

Proceeds from sale of property and equipment

10

 

 

 

Insurance proceeds from casualty loss

29

 

 

 

Purchases of marketable securities

(36,644

)

 

(5,996

)

Proceeds from marketable securities

25,000

 

 

30,108

 

Net cash (used in) provided by investing activities

(17,097

)

 

20,564

 

Cash flows from financing activities

 

 

 

Proceeds from line of credit

 

 

23,675

 

Dividends paid

 

 

(29,677

)

Proceeds from exercise of stock options

2,651

 

 

 

Net cash provided by (used in) financing activities

2,651

 

 

(6,002

)

Change in cash and cash equivalents

4,831

 

 

(5,004

)

Cash and cash equivalents, beginning of period

76,184

 

 

70,137

 

Cash and cash equivalents, end of period

$

81,015

 

 

$

65,133

 

 

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)

2020 Q1

240

 

 

1

 

239

 

1,768

2020 Q2

239

 

 

1

 

238

 

1,760

2020 Q3

238

 

1

 

1

 

238

 

1,753

2020 Q4

238

 

1

 

1

 

238

 

1,751

2021 Q1

238

 

2

 

2

 

238

 

1,753

Note: The store counts noted above do not reflect the impact of stores temporarily closed as a result of the COVID-19 pandemic.

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

Source: Tilly’s, Inc.