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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Tillys Inc | NYSE:TLYS | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.01 | -0.17% | 5.97 | 6.09 | 5.90 | 6.09 | 26,559 | 22:14:01 |
Comp Store Net Sales Increase 4.3%: EPS of $0.21
Non-GAAP EPS of $0.24 Excluding Secondary Offering Costs
Introduces Fourth Quarter Outlook
Tilly’s, Inc. (NYSE: TLYS) today announced financial results for the third quarter and first three quarters of fiscal 2018 ended November 3, 2018.
“Tillys continued its positive momentum with its tenth consecutive quarter of flat to positive comparable store net sales and its strongest back-to-back quarterly comparable store net sales performance since the first half of fiscal 2012," commented Ed Thomas, President and Chief Executive Officer. "We believe we are well positioned to continue our momentum during the holiday season."
Third Quarter Results Overview
The following comparisons refer to operating results for the third quarter of fiscal 2018 versus the third quarter of fiscal 2017 ended October 28, 2017:
Year-to-Date Results Overview
The following comparisons refer to operating results for the first three quarters of fiscal 2018 versus the first three quarters of fiscal 2017 ended October 28, 2017:
Balance Sheet and Liquidity
As of November 3, 2018, the Company had $120.5 million of cash and marketable securities and no debt outstanding. This compares to $121.9 million of cash and marketable securities and no debt outstanding as of October 28, 2017. The Company paid special cash dividends to its stockholders of approximately $29.1 million and $20.1 million in the aggregate during February of 2018 and 2017, respectively.
Fiscal 2018 Fourth Quarter Outlook
The Company expects its fourth quarter total net sales to range from approximately $163 million to $168 million based on an assumed 2% to 5% increase in comparable store net sales. Last year's fourth quarter included an extra week as a result of the 53rd week in last year's retail calendar, which accounted for approximately $7.1 million in added sales for such quarter versus the comparable 13-week period this year. The Company expects fourth quarter operating income to range from approximately $8.5 million to $10.0 million, and earnings per diluted share to range from $0.22 to $0.26. This outlook assumes an anticipated effective tax rate of approximately 26% and weighted average shares of approximately 30.1 million.
Pursuant to the settlement terms of the previously noted legal matter, the Company issued non-transferable discount coupons to approximately 612,000 existing Tillys customers in early September 2018 which allows for a one-time 50% discount on a single, future purchase transaction of up to $1,000. Any unused coupons will expire on September 4, 2019. To date, less than 1% of these coupons have been redeemed, resulting in no material impact to the Company's comparable store net sales or operating results as a whole. Although redemptions have been very low in number thus far, there can be no assurance that the impact of any future coupon redemptions during the 2018 holiday season, or during fiscal 2019, will remain immaterial. Our fourth quarter outlook does not contemplate any specific impacts from future usage of these coupons.
Preliminary Fiscal 2019 New Store, Capital Expenditure and Expense Expectations
The Company expects to open up to 15 to 20 new, full-size stores and an as-yet undetermined number of RSQ-branded pop-up shops during fiscal 2019, in each case assuming appropriate lease economics are obtained. The specific timing of any new store openings is not yet known. The Company expects total capital expenditures for fiscal 2019 not to exceed $25 million, comprised primarily of new store costs supplemented by continuing technology investments. Finally, the Company expects the impact of legislated minimum wage increases, merit increases, new systems costs, and the new lease accounting standard to result in an aggregate increase of approximately $6 million in its annualized operating costs before consideration of any comparable store net sales assumption. The Company estimates that its fiscal 2019 comparable store net sales would need to increase by approximately 3% in order to absorb these anticipated cost increases without creating any deleverage of expenses as a percentage of net sales.
Non-GAAP Financial Measures
In addition to reporting financial measures in accordance with GAAP, the Company is providing certain non-GAAP financial measures including "non-GAAP SG&A," "non-GAAP operating income," "non-GAAP income tax expense," "non-GAAP net income," and "non-GAAP income per diluted share." These amounts are not in accordance with, or an alternative to, GAAP. The Company’s management believes that these measures help provide investors with insight into the underlying comparable financial results, excluding items that may not be indicative of, or are unrelated to, the Company’s core day-to-day operating results.
For a description of these non-GAAP financial measures and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP, please see the accompanying table titled “Supplemental Financial Information; Reconciliation of Select GAAP Financial Measures to Non-GAAP Financial Measures” contained in this press release.
Conference Call Information
A conference call to discuss these financial results is scheduled for today, November 28, 2018, 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 12, 2018, by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) and entering the conference identification number: 13684938. 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 229 total stores, including four RSQ pop-up stores, across 33 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 net sales, future operating income, future net income, future earnings per share, future gross, operating or product margins, anticipated tax rate, future impacts of legal settlements, future inventory levels, future capital expenditures, 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)
November 3,2018 February 3,2018October 28,2017
ASSETS Current assets: Cash and cash equivalents $ 24,751 $ 53,202 $ 38,912 Marketable securities 95,766 82,750 82,961 Receivables 7,608 4,352 3,647 Merchandise inventories 73,772 53,216 62,242 Prepaid expenses and other current assets 10,707 9,534 9,759 Total current assets 212,604 203,054 197,521 Property and equipment, net 78,679 83,321 87,576 Other assets 3,667 3,736 7,805 Total assets $ 294,950 $ 290,111 $ 292,902 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 34,352 $ 21,615 $ 27,329 Accrued expenses 20,292 22,731 31,854 Deferred revenue 7,144 10,879 8,335 Accrued compensation and benefits 9,487 6,119 6,005 Dividends payable — 29,067 — Current portion of deferred rent 5,466 5,220 5,762 Current portion of capital lease obligation — — 155 Total current liabilities 76,741 95,631 79,440 Long-term portion of deferred rent 31,624 31,340 31,377 Other 1,997 2,715 2,955 Total liabilities 110,362 129,686 113,772 Stockholders’ equity: Common stock (Class A), $0.001 par value; 100,000 shares authorized; 21,536, 14,927 and 14,357 shares issued and outstanding, respectively 21 15 14 Common stock (Class B), $0.001 par value; 35,000 shares authorized; 7,944, 14,188 and 14,488 shares issued and outstanding, respectively 8 14 15 Preferred stock, $0.001 par value; 10,000 shares authorized; no shares issued or outstanding — — — Additional paid-in capital 149,141 143,984 140,240 Retained earnings 35,204 16,398 38,765 Accumulated other comprehensive income 214 14 96 Total stockholders’ equity 184,588 160,425 179,130 Total liabilities and stockholders’ equity $ 294,950 $ 290,111 $ 292,902 Tilly’s, Inc. Consolidated Statements of Operations(In thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended November 3,2018 October 28,2017 November 3,2018 October 28,2017 Net sales $ 146,826 $ 152,824 $ 427,866 $ 412,581 Cost of goods sold (includes buying, distribution, and occupancy costs) 101,041 102,730 296,999 288,653 Gross profit 45,785 50,094 130,867 123,928 Selling, general and administrative expenses 37,558 35,982 108,831 111,384 Operating income 8,227 14,112 22,036 12,544 Other income, net 585 375 1,457 810 Income before income taxes 8,812 14,487 23,493 13,354 Income tax expense 2,364 5,730 6,134 5,354 Net income $ 6,448 $ 8,757 $ 17,359 $ 8,000 Basic income per share of Class A and Class B common stock $ 0.22 $ 0.30 $ 0.59 $ 0.28 Diluted income per share of Class A and Class B common stock $ 0.21 $ 0.30 $ 0.58 $ 0.28 Weighted average basic shares outstanding 29,373 28,782 29,221 28,746 Weighted average diluted shares outstanding 30,075 29,031 29,746 28,954 Tilly’s, Inc. Supplemental Financial Information Reconciliation of Select GAAP Financial Measures to Non-GAAP Financial Measures(In thousands, except per share data)
(unaudited)
Third Quarter Ended Nine Months Ended November 3,2018 October 28,2017 November 3,2018 October 28,2017 Selling, general and administrative, as reported $ 37,558 $ 35,982 $ 108,831 $ 111,384 Legal settlement — (650 ) 1,458 (6,816 ) Secondary offering costs (714 ) — (714 ) — Non-GAAP selling, general and administrative $ 36,844 $ 35,332 $ 109,575 $ 104,568 Operating income, as reported $ 8,227 $ 14,112 $ 22,036 $ 12,544 Legal settlement — 650 (1,458 ) 6,816 Secondary offering costs 714 — 714 — Non-GAAP operating income $ 8,941 $ 14,762 $ 21,292 $ 19,360 Income tax expense, as reported $ 2,364 $ 5,730 $ 6,134 $ 5,354 Income tax effect of legal settlement (1) — 255 (386 ) 2,679 Income tax effect of secondary offering costs (1) 189 — 189 — Income tax effect of non-deductibility of a portion of secondary offering costs (1) (165 ) — (165 ) — Non-GAAP income tax expense $ 2,388 $ 5,985 $ 5,772 $ 8,033 Net income, as reported $ 6,448 $ 8,757 $ 17,359 $ 8,000 Legal settlement — 650 (1,458 ) 6,816 Secondary offering costs 714 — 714 — Less: Income tax effects (1) (24 ) (255 ) 362 (2,679 ) Non-GAAP net income $ 7,138 $ 9,152 $ 16,977 $ 12,137 Diluted income per share, as reported $ 0.214 $ 0.30 $ 0.584 $ 0.28 Legal settlement, net of taxes (1) — 0.01 (0.036 ) 0.14 Secondary offering costs, net of taxes (1) 0.023 — 0.023 — Non-GAAP diluted income per share $ 0.237 $ 0.31 $ 0.571 $ 0.42 Weighted average basic shares outstanding 29,373 28,782 29,221 28,746 Weighted average diluted shares outstanding 30,075 29,031 29,746 28,954 (1) The effective tax rate applied to the $0.7 million of secondary offering costs for the third quarter and nine months ended November 3, 2018 was 26.5%. Additionally, this year's income tax expense includes approximately $0.2 million due to the non-deductibility of a portion of the secondary offering costs. The effective tax rate applied for the third quarter and nine months ended October 28, 2017 was 39.3%. Tilly’s, Inc. Consolidated Statements of Cash Flows(In thousands)
(unaudited)
Nine Months Ended November 3,2018 October 28,2017 Cash flows from operating activities Net income $ 17,359 $ 8,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 16,966 17,644 Stock-based compensation expense 1,662 1,773 Impairment of assets 786 848 Loss on disposal of assets 11 170 Gain on marketable securities (983 ) (510 ) Deferred income taxes (419 ) (1,194 ) Changes in operating assets and liabilities: Receivables (3,256 ) 342 Merchandise inventories (20,746 ) (14,474 ) Prepaid expenses and other assets (1,290 ) (777 ) Accounts payable 12,859 9,177 Accrued expenses (6,006 ) 4,202 Accrued compensation and benefits 3,368 (1,254 ) Deferred rent 530 (4,394 ) Deferred revenue (1,562 ) (1,868 ) Net cash provided by operating activities 19,279 17,685 Cash flows from investing activities Purchase of property and equipment (10,394 ) (9,716 ) Purchases of marketable securities (116,442 ) (112,612 ) Proceeds from marketable securities 104,678 85,134 Net cash used in investing activities (22,158 ) (37,194 ) Cash flows from financing activities Dividends paid (29,067 ) (20,080 ) Proceeds from exercise of stock options 3,606 288 Taxes paid in lieu of shares issued for stock-based compensation (111 ) (101 ) Payment of capital lease obligation — (680 ) Net cash used in financing activities (25,572 ) (20,573 ) Change in cash and cash equivalents (28,451 ) (40,082 ) Cash and cash equivalents, beginning of period 53,202 78,994 Cash and cash equivalents, end of period $ 24,751 $ 38,912 Tilly's, Inc. Store Count and Square FootageStoresOpen atBeginning ofQuarter
StoresOpenedDuring Quarter
StoresClosedDuringQuarter
StoresOpen atEnd of Quarter
Total GrossSquare FootageEnd of Quarter(in thousands)
2017 Q3 221 — 1 220 1,681 2017 Q4 220 2 3 219 1,668 2018 Q1 219 4 1 222 1,675 2018 Q2 222 4 — 226 1,698 2018 Q3 226 5 4 227 1,693Note: Total stores opened during fiscal 2018 includes four RSQ-branded, pop-up stores.
View source version on businesswire.com: https://www.businesswire.com/news/home/20181128005695/en/
Investor Relations Contact:Michael Henry, Chief Financial Officer(949) 609-5599, ext. 17000irelations@tillys.com
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