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Tilly's, Inc. Announces First Quarter Operating Results

Introduces Fiscal 2022 Second Quarter Outlook

Tilly’s, Inc. (NYSE: TLYS, the "Company") today announced financial results for the first quarter of fiscal 2022 ended April 30, 2022.

"Our first quarter operating results were in line with our outlook and were an improvement compared to our pre-pandemic performance in the first quarter of fiscal 2019," commented Ed Thomas, President and Chief Executive Officer. "We continue to focus on growing and improving our business over time, despite the near term challenges of the highly inflationary environment and lapping last year’s record-breaking results, which were fueled by unprecedented pandemic-related factors."

Fiscal 2022 First Quarter Operating Results Overview

The following comparisons refer to the Company's operating results for the first quarter of fiscal 2022 ended April 30, 2022 versus the first quarter of fiscal 2021 ended May 1, 2021. For additional context, the Company is also reporting select operating results for the first quarter of fiscal 2022 relative to the same period of fiscal 2019 due to the unique operating environment resulting from the COVID-19 pandemic and the impact of government stimulus payments during fiscal 2021.

  • Total net sales were $145.8 million, a decrease of $(17.4) million or (10.7)%, compared to a Company first quarter record of $163.2 million last year. Total comparable net sales, including both physical stores and e-commerce, decreased by (13.0)%. Last year's results benefited from the impacts of pent-up customer demand following the winding down of 2020 pandemic restrictions and the pandemic-related federal stimulus payments.
    • Net sales from physical stores were $117.5 million, a decrease of $(10.2) million or (8.0)%, compared to $127.7 million last year with a comparable store net sales decrease of (10.8)%. Net sales from stores represented 80.6% of total net sales compared to 78.3% of total net sales last year. The Company ended the first quarter with 241 total stores compared to 238 total stores at the end of the first quarter last year.
    • Net sales from e-commerce were $28.3 million, a decrease of $(7.2) million or (20.3)%, compared to $35.5 million last year. E-commerce net sales represented 19.4% of total net sales compared to 21.7% of total net sales last year.
    • Relative to the pre-pandemic first quarter of fiscal 2019, total net sales increased by $15.5 million, or 11.9%, from $130.3 million during that period. Total comparable net sales increased by 5.8% with a slight decline from physical stores of (0.7)% and an increase from e-commerce of 42.3%, reflecting the general shift in consumer behavior towards online shopping over the past three years.
  • Gross profit was $43.8 million, or 30.1% of net sales, compared to $54.8 million, or 33.6% of net sales, last year. Buying, distribution and occupancy costs deleveraged by 190 basis points collectively, despite decreasing by $(1.0) million in total due to carrying these costs against a lower level of net sales this year compared to last year. Product margins declined by 160 basis points versus last year primarily due to a more normalized markdown rate compared to last year's elevated level of full-price selling. Relative to the pre-pandemic first quarter of fiscal 2019, gross margin was 270 basis points better than in 2019 with lower occupancy costs and 10 basis points of improvement in product margins.
  • Selling, general and administrative ("SG&A") expenses were $42.7 million, or 29.3% of net sales, compared to $40.0 million, or 24.5% of net sales, last year. Of the $2.7 million increase in SG&A expenses, $2.0 million was due to higher store payroll and related benefit costs, primarily from wage inflation. The Company's average rate per store payroll hour increased by 6.5% over last year's first quarter. Additionally, $1.6 million was attributable to a credit from the reversal of a disputed California sales tax assessment in last year's first quarter. Partially offsetting these increases was a reduction in corporate bonus expense of $1.6 million due to the lack of a bonus accrual in fiscal 2022. Relative to the pre-pandemic first quarter of fiscal 2019, SG&A was $7.2 million higher, primarily due to wage inflation, e-commerce marketing and fulfillment costs associated with online net sales growth, and increased insurance premiums.
  • Operating income was $1.1 million, or 0.8% of net sales, compared to $14.9 million, or 9.1% of net sales, last year. Operating income was $146,000, or 0.1% of net sales, in the pre-pandemic first quarter of fiscal 2019.
  • Income tax expense was $0.3 million, or 26.9% of pre-tax income, compared to $3.8 million, or 25.7% of pre-tax income, last year.
  • Net income was $0.8 million, or $0.03 per diluted share, compared to a Company first quarter record of $11.0 million, or $0.36 per diluted share, last year. Weighted average diluted shares were 31.0 million this year compared to 30.5 million last year. Net income was $0.7 million, or $0.02 per diluted share, in the pre-pandemic first quarter of fiscal 2019.

Balance Sheet and Liquidity

As of April 30, 2022, the Company had $111.0 million of cash and marketable securities and no debt outstanding. This compares to $157.6 million at the end of the first quarter last year, and no debt outstanding. Since the end of last year's first quarter, the Company has paid aggregate special cash dividends to stockholders of $61.6 million. During the first quarter of fiscal 2022, the Company repurchased 892,033 shares of its common stock for a total of $8.2 million pursuant to its previously announced stock repurchase program.

The Company ended the first quarter with inventories per square foot up 12.7% relative to the end of the first quarter of fiscal 2021, due in part to continuing supply chain challenges and ending last year's first quarter with inventories below the prior year due to the unanticipated net sales growth last year. The Company expects its inventory levels to be more consistent with its sales performance by the end of the third quarter.

Total capital expenditures for the first quarter were $2.6 million compared to $5.5 million last year, the decrease being primarily due to earlier store openings last year. For fiscal 2022 as a whole, the Company expects its total capital expenditures to be in the range of $23 million to $25 million.

Fiscal 2022 Second Quarter Outlook

As customers continue to suffer from high inflation and energy costs, the Company's fiscal 2022 second quarter total comparable net sales through May 30, 2022, including both physical stores and e-commerce, decreased by 17.0% relative to the comparable period of 2021. Based on current and historical trends, the Company currently estimates that its fiscal 2022 second quarter net sales will be in the range of $170 million to $175 million with product margins approximately 200-250 basis points below last year due to the historically high level of full-price selling during fiscal 2021. The Company expects the combination of buying, distribution and occupancy costs to deleverage by approximately 270-320 basis points relative to last year primarily due to carrying these costs against a lower level of total net sales. The Company expects its SG&A to be approximately $47 million to $48 million, its operating income to be in the range of approximately $6.0 million to $8.5 million, and earnings per diluted share to be in the range of $0.14 to $0.20 with weighted average diluted shares of approximately 30.2 million for the second quarter of fiscal 2022. This compares to a Company second quarter record for net sales of $202 million and earnings per diluted share of $0.66 for the second quarter of fiscal 2021, which doubled the previous Company record for second quarter earnings per share. The Company expects to have 242 total stores open at the end of the second quarter, a net decrease of two stores from 244 total stores at the end of fiscal 2021's second quarter.

The current business environment remains subject to many unpredictable risks and uncertainties including with respect to, among others, the COVID-19 pandemic, the current inflationary environment, continuing supply chain difficulties, labor challenges, geopolitical concerns, and how consumer behavior may change relative to any of these factors as well as last year's historic anomalies of pent-up demand coming out of pandemic-related restrictions and federal stimulus payments. As a result, the Company's estimates concerning its projected business performance may change at any time and there can be no guarantee that the Company's current estimates will be accurate.

Conference Call Information

A conference call to discuss these financial results is scheduled for today, June 2, 2022, 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). 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 9, 2022, by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) and entering the conference identification number: 13729765.

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 240 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 us, our operations, or our future financial condition or operating results, our current operating expectations in light of historical results, expectations regarding customer traffic, our supply chain, and inflation, 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 effects of the COVID-19 pandemic (including any surges in the number of cases related thereto, or other weather, epidemics, pandemics, or other public health issues), supply chain difficulties, and inflation on our business and operations, 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, realize anticipated, enhance awareness of our brand and brand image, general consumer spending patterns and levels, 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 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)

 

April 30,

2022

 

January 29,

2022

 

May 1,

2021

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

59,954

 

$

42,201

 

 

$

81,015

Marketable securities

 

50,997

 

 

97,027

 

 

 

76,633

Receivables

 

8,209

 

 

6,705

 

 

 

9,701

Merchandise inventories

 

74,112

 

 

65,645

 

 

 

65,341

Prepaid expenses and other current assets

 

14,769

 

 

16,400

 

 

 

4,591

Total current assets

 

208,041

 

 

227,978

 

 

 

237,281

Operating lease assets

 

218,163

 

 

216,508

 

 

 

222,209

Property and equipment, net

 

46,606

 

 

47,530

 

 

 

54,139

Deferred tax assets

 

11,594

 

 

11,446

 

 

 

11,664

Other assets

 

1,253

 

 

1,361

 

 

 

1,231

TOTAL ASSETS

$

485,657

 

$

504,823

 

 

$

526,524

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

27,193

 

$

28,144

 

 

$

35,860

Accrued expenses

 

16,741

 

 

19,073

 

 

 

29,110

Deferred revenue

 

15,150

 

 

17,096

 

 

 

12,913

Accrued compensation and benefits

 

8,707

 

 

17,056

 

 

 

14,489

Current portion of operating lease liabilities

 

51,237

 

 

51,504

 

 

 

51,231

Current portion of operating lease liabilities, related party

 

2,483

 

 

2,533

 

 

 

2,402

Other liabilities

 

674

 

 

761

 

 

 

763

Total current liabilities

 

122,185

 

 

136,167

 

 

 

146,768

Long-term liabilities:

 

 

 

 

 

Noncurrent portion of operating lease liabilities

 

174,301

 

 

171,965

 

 

 

192,345

Noncurrent portion of operating lease liabilities, related party

 

20,364

 

 

21,000

 

 

 

11,282

Other liabilities

 

872

 

 

978

 

 

 

1,528

Total long-term liabilities

 

195,537

 

 

193,943

 

 

 

205,155

Total liabilities

 

317,722

 

 

330,110

 

 

 

351,923

Stockholders’ equity:

 

 

 

 

 

Common stock (Class A)

 

23

 

 

24

 

 

 

23

Common stock (Class B)

 

7

 

 

7

 

 

 

7

Preferred stock

 

 

 

 

 

 

Additional paid-in capital

 

167,512

 

 

166,929

 

 

 

158,454

Retained earnings

 

391

 

 

7,754

 

 

 

16,094

Accumulated other comprehensive income/(loss)

 

2

 

 

(1

)

 

 

23

Total stockholders’ equity

 

167,935

 

 

174,713

 

 

 

174,601

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

485,657

 

$

504,823

 

 

$

526,524

Tilly’s, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(unaudited)

 

Thirteen Weeks Ended

 

April 30,

2022

May 1,

2021

Net sales

$

145,775

$

163,157

 

 

 

 

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

 

101,100

 

107,617

 

Rent expense, related party

 

860

 

701

 

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

 

101,960

 

108,318

 

Gross profit

 

43,815

 

54,839

 

 

 

 

Selling, general and administrative expenses

 

42,574

 

39,837

 

Rent expense, related party

 

133

 

128

 

Total selling, general and administrative expenses

 

42,707

 

39,965

 

 

 

 

Operating income

 

1,108

 

14,874

 

Other income (expense), net

 

4

 

(115

)

Income before income taxes

 

1,112

 

14,759

 

Income tax expense

 

299

 

3,800

 

Net income

$

813

$

10,959

 

Basic earnings per share of Class A and Class B common stock

$

0.03

$

0.37

 

Diluted earnings per share of Class A and Class B common stock

$

0.03

$

0.36

 

Weighted average basic shares outstanding

 

30,762

 

29,878

 

Weighted average diluted shares outstanding

 

31,046

 

30,529

 

Tilly’s, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

 

 

Thirteen Weeks Ended

 

April 30,

2021

 

May 1,

2021

Cash flows from operating activities

 

 

 

Net income

$

813

 

 

$

10,959

 

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

 

 

 

Depreciation and amortization

 

3,508

 

 

 

4,324

 

Insurance proceeds from casualty loss

 

 

 

 

117

 

Stock-based compensation expense

 

563

 

 

 

366

 

Impairment of assets

 

13

 

 

 

 

Loss on disposal of assets

 

43

 

 

 

62

 

Gain on sales and maturities of marketable securities

 

(26

)

 

 

(29

)

Deferred income taxes

 

(150

)

 

 

285

 

Changes in operating assets and liabilities:

 

 

 

Receivables

 

(356

)

 

 

250

 

Merchandise inventories

 

(8,467

)

 

 

(9,760

)

Prepaid expenses and other assets

 

1,667

 

 

 

1,615

 

Accounts payable

 

(955

)

 

 

10,617

 

Accrued expenses

 

(2,357

)

 

 

(1,745

)

Accrued compensation and benefits

 

(8,349

)

 

 

4,590

 

Operating lease liabilities

 

(1,361

)

 

 

(2,103

)

Deferred revenue

 

(1,946

)

 

 

(579

)

Other liabilities

 

(193

)

 

 

308

 

Net cash (used in) provided by operating activities

 

(17,553

)

 

 

19,277

 

 

 

 

 

Cash flows from investing activities

 

 

 

Purchases of property and equipment

 

(2,598

)

 

 

(5,492

)

Proceeds from sale of property and equipment

 

 

 

 

10

 

Insurance proceeds from casualty loss

 

 

 

 

29

 

Purchases of marketable securities

 

(4,967

)

 

 

(36,644

)

Proceeds from maturities of marketable securities

 

51,028

 

 

 

25,000

 

Net cash provided by (used in) investing activities

 

43,463

 

 

 

(17,097

)

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from exercise of stock options

 

20

 

 

 

2,651

 

Share repurchases related to share repurchase program

 

(8,177

)

 

 

 

Net cash (used in) provided by financing activities

 

(8,157

)

 

 

2,651

 

 

 

 

 

Increase in cash and cash equivalents

 

17,753

 

 

 

4,831

 

Cash and cash equivalents, beginning of period

 

42,201

 

 

 

76,184

 

Cash and cash equivalents, end of period

$

59,954

 

 

$

81,015

 

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)

2021 Q1

238

 

2

 

2

 

238

 

1,753

2021 Q2

238

 

6

 

 

244

 

1,788

2021 Q3

244

 

 

1

 

243

 

1,781

2021 Q4

243

 

1

 

3

 

241

 

1,764

2022 Q1

241

 

 

 

241

 

1,764

 

Contacts

Investor Relations Contact:

Michael Henry, Executive Vice President, Chief Financial Officer

(949) 609-5599, ext. 17000

irelations@tillys.com

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