Delaware | 1-35535 | 45-2164791 | ||
(State of Incorporation) | (Commission File Number) | (IRS Employer Identification Number) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
Item 9.01 | Financial Statements and Exhibits |
TILLY’S, INC. | ||
Date: August 24, 2016 | By: | /s/ Michael L. Henry |
Name: | Michael L. Henry | |
Title: | Chief Financial Officer |
• | Total net sales were $136.4 million, an increase of 5% over last year. |
• | Comparable store sales, which include e-commerce sales, increased 0.9%. |
• | Gross profit was $38.8 million, a 6.1% increase from $36.6 million last year. Gross margin, or gross profit as a percentage of net sales, improved 40 basis points to 28.5% compared to 28.1% last year. This 40 basis point increase in gross margin was attributable to a 70 basis point improvement in buying, distribution and occupancy costs, partially offset by a 30 basis point decline in product margins from increased markdowns. Occupancy costs were lower than expected due to a lease assignment and certain other lease negotiations. |
• | Selling, general and administrative expenses ("SG&A") were $36.6 million, up $1.1 million from $35.5 million last year. This increase was primarily due to increased store payroll dollars associated with 9 net new stores and minimum wage increases, which offset expense reductions in other areas. As a percentage of net sales, total SG&A improved 50 basis points to 26.8% from 27.3% last year. This rate improvement was primarily driven by the combination of more efficient marketing spend and reductions in corporate office payroll, stock compensation, and various other smaller expenses as a percentage of sales. |
• | Operating income was $2.2 million, or 1.6% of net sales, compared to $1.1 million, or 0.8% of net sales, last year. The 80 basis point increase in our operating results was primarily attributable to higher gross profit and reduced SG&A as a percentage of net sales, as noted above. |
• | Net income was $1.4 million, or $0.05 per diluted share, compared to $0.6 million, or $0.02 per diluted share, last year. Our effective tax rate was 38.3% compared to 49.7% last year, primarily due to the tax impact of discrete items related to restricted stock and stock option expirations. |
• | Total net sales were $256.6 million, an increase of 2.6% over last year. |
• | Comparable store sales, which include e-commerce sales, decreased 1.4%. |
• | Gross profit was $71.4 million, a 1.7% decrease from $72.6 million last year. Gross margin, or gross profit as a percentage of net sales, was 27.8% compared to 29.0% last year. This 120 basis point decrease in gross margin was attributable to two factors: 1) a 60 basis point decline in product margins as a result of increased markdowns: and 2) a 60 basis point increase in occupancy costs due to the negative sales comp and adding 9 net new stores year over year. |
• | Selling, general and administrative expenses ("SG&A") were $73.2 million, up $3.7 million from $69.4 million last year. Of this increase, $2.4 million was attributable to the combination of a legal provision and non-cash store asset impairment charges. Excluding these items, SG&A increased $1.4 million, primarily due to increased store payroll dollars associated with 9 net new stores and minimum wage increases, which offset expense reductions in other areas. |
• | Operating loss was $1.7 million, or 0.7% of net sales, compared to operating income of $3.2 million, or 1.3% of net sales, last year. The 200 basis point decrease in our operating results was primarily attributable to lower gross profit and increased SG&A, as noted above. |
• | Income tax benefit was $0.3 million, or 16.3% of pre-tax loss, compared to income tax expense of $1.4 million, or 43.3% of pre-tax income, last year. This tax benefit was attributable to a $0.4 million discrete income tax impact related to restricted stock and stock option expirations during fiscal 2016. |
• | Net loss was $1.3 million, or $0.05 per share, compared to net income of $1.8 million, or $0.06 per diluted share, last year. |
July 30, 2016 | January 30, 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 56,466 | $ | 51,020 | |||
Marketable securities | 39,926 | 49,932 | |||||
Receivables | 8,940 | 5,397 | |||||
Merchandise inventories | 76,820 | 51,357 | |||||
Prepaid expenses and other current assets | 15,022 | 12,968 | |||||
Total current assets | 197,174 | 170,674 | |||||
Property and equipment, net | 97,424 | 99,026 | |||||
Other assets | 1,367 | 1,051 | |||||
Total assets | $ | 295,965 | $ | 270,751 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 41,408 | $ | 16,022 | |||
Accrued expenses | 22,319 | 18,901 | |||||
Deferred revenue | 6,340 | 8,174 | |||||
Accrued compensation and benefits | 6,755 | 5,751 | |||||
Current portion of deferred rent | 6,237 | 6,106 | |||||
Current portion of capital lease obligation | 885 | 858 | |||||
Total current liabilities | 83,944 | 55,812 | |||||
Long-term portion of deferred rent | 38,365 | 40,891 | |||||
Long-term portion of capital lease obligation | 386 | 835 | |||||
Total long-term liabilities | 38,751 | 41,726 | |||||
Total liabilities | 122,695 | 97,538 | |||||
Stockholders’ equity: | |||||||
Common stock (Class A), $0.001 par value; July 30, 2016 - 100,000 shares authorized, 12,479 shares issued and outstanding; January 30, 2016 - 100,000 shares authorized, 12,305 shares issued and outstanding | 12 | 12 | |||||
Common stock (Class B), $0.001 par value; July 30, 2016 - 35,000 shares authorized, 16,069 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; July 30, 2016 and January 30, 2016 - 10,000 shares authorized, no shares issued or outstanding | — | — | |||||
Additional paid-in capital | 134,910 | 133,550 | |||||
Retained earnings | 38,301 | 39,613 | |||||
Accumulated other comprehensive income | 31 | 22 | |||||
Total stockholders’ equity | 173,270 | 173,213 | |||||
Total liabilities and stockholders’ equity | $ | 295,965 | $ | 270,751 |
Three Months Ended | Six Months Ended | ||||||||||||||
July 30, 2016 | August 1, 2015 | July 30, 2016 | August 1, 2015 | ||||||||||||
Net sales | $ | 136,412 | $ | 130,023 | $ | 256,630 | $ | 250,213 | |||||||
Cost of goods sold (includes buying, distribution, and occupancy costs) | 97,575 | 93,427 | 185,206 | 177,565 | |||||||||||
Gross profit | 38,837 | 36,596 | 71,424 | 72,648 | |||||||||||
Selling, general and administrative expenses | 36,605 | 35,492 | 73,159 | 69,415 | |||||||||||
Operating income (loss) | 2,232 | 1,104 | (1,735 | ) | 3,233 | ||||||||||
Other income, net | 91 | 10 | 167 | 18 | |||||||||||
Income (Loss) before income taxes | 2,323 | 1,114 | (1,568 | ) | 3,251 | ||||||||||
Income tax expense (benefit) | 890 | 554 | (256 | ) | 1,409 | ||||||||||
Net income (loss) | $ | 1,433 | $ | 560 | $ | (1,312 | ) | $ | 1,842 | ||||||
Basic earnings (loss) per share of Class A and Class B common stock | $ | 0.05 | $ | 0.02 | $ | (0.05 | ) | $ | 0.07 | ||||||
Diluted earnings (loss) per share of Class A and Class B common stock | $ | 0.05 | $ | 0.02 | $ | (0.05 | ) | $ | 0.06 | ||||||
Weighted average basic shares outstanding | 28,462 | 28,333 | 28,443 | 28,253 | |||||||||||
Weighted average diluted shares outstanding | 28,466 | 28,426 | 28,443 | 28,403 |
Six Months Ended | |||||||
July 30, 2016 | August 1, 2015 | ||||||
Cash flows from operating activities | |||||||
Net (loss) income | $ | (1,312 | ) | $ | 1,842 | ||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 11,650 | 11,260 | |||||
Stock-based compensation expense | 1,459 | 2,301 | |||||
Impairment of assets | 1,523 | 367 | |||||
(Gain) Loss on disposal of assets | (16 | ) | 67 | ||||
Gain on sales and maturities of marketable securities | (106 | ) | (65 | ) | |||
Deferred income taxes | (226 | ) | (147 | ) | |||
Excess tax benefit from stock-based compensation | — | (95 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Receivables | (3,543 | ) | (6,702 | ) | |||
Merchandise inventories | (25,463 | ) | (28,416 | ) | |||
Prepaid expenses and other assets | (2,150 | ) | (877 | ) | |||
Accounts payable | 25,100 | 15,928 | |||||
Accrued expenses | 2,521 | 6,149 | |||||
Accrued compensation and benefits | 1,004 | 411 | |||||
Deferred rent | (2,395 | ) | 353 | ||||
Deferred revenue | (1,834 | ) | (1,769 | ) | |||
Net cash provided by operating activities | 6,212 | 607 | |||||
Cash flows from investing activities | |||||||
Purchase of property and equipment | (10,415 | ) | (11,481 | ) | |||
Proceeds from sale of property and equipment | 43 | — | |||||
Purchases of marketable securities | (39,873 | ) | (19,982 | ) | |||
Maturities of marketable securities | 50,000 | 30,000 | |||||
Net cash used in investing activities | (245 | ) | (1,463 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from exercise of stock options | — | 3,094 | |||||
Payment of capital lease obligation | (422 | ) | (397 | ) | |||
Taxes paid in lieu of shares issued for stock-based compensation | (99 | ) | — | ||||
Excess tax benefit from stock-based compensation | — | 95 | |||||
Net cash (used in) provided by financing activities | (521 | ) | 2,792 | ||||
Change in cash and cash equivalents | 5,446 | 1,936 | |||||
Cash and cash equivalents, beginning of period | 51,020 | 49,789 | |||||
Cash and cash equivalents, end of period | $ | 56,466 | $ | 51,725 |
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 Q2 | 213 | 3 | — | 216 | 1,655 | ||||
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 |