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

GAAP Net Loss Per Share of $(0.65); Non-GAAP Net Loss Per Share of $(0.48)

Non-GAAP Net Loss Per Share in Middle of Outlook Range

Tilly’s, Inc. (NYSE: TLYS, the "Company") today announced financial results for the first quarter of fiscal 2024 ended May 4, 2024.

"Our business continues to face many headwinds from the macro environment, but we believe we are making progress on improving our product margins and driving greater customer engagement through our marketing efforts," commented Hezy Shaked, Co-Founder and Interim President and Chief Executive Officer. "While we expect it to remain difficult to improve our sales results in the near term, we believe the efforts we are making now will produce benefits in the future when the current environment improves."

Operating Results Overview

Fiscal 2024 First Quarter Operating Results Overview

The following comparisons refer to the Company's operating results for the first quarter of fiscal 2024 ended May 4, 2024 versus the first quarter of fiscal 2023 ended April 29, 2023.

  • Total net sales were $115.9 million, a decrease of $7.8 million or 6.3%, compared to $123.6 million last year. Total comparable net sales, including both physical stores and e-commerce ("e-com"), decreased by 9.4% relative to the 13-week period ended May 6, 2023.
    • Net sales from physical stores were $92.8 million, a decrease of $5.0 million or 5.1%, compared to $97.8 million last year, with a comparable store net sales decrease of 8.6%. Net sales from physical stores represented 80.1% of total net sales this year compared to 79.1% of total net sales last year. The Company ended the first quarter with 246 total stores compared to 248 total stores at the end of the first quarter last year.
    • Net sales from e-com were $23.0 million, a decrease of $2.8 million or 10.8%, compared to $25.8 million last year. E-com net sales represented 19.9% of total net sales this year compared to 20.9% of total net sales last year.
  • Gross profit, including buying, distribution, and occupancy costs, was $24.3 million, or 21.0% of net sales, compared to $25.9 million, or 21.0% of net sales, last year. Product margins improved by 130 basis points primarily due to the combination of a lower markdown rate and improved initial markups. Buying, distribution, and occupancy costs deleveraged by 130 basis points collectively, despite being $0.8 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 $45.1 million, or 38.9% of net sales, compared to $43.2 million, or 34.9% of net sales, last year. The $1.9 million increase in SG&A was primarily attributable to an increase in non-cash store asset impairment charges of $1.5 million and an increase in store payroll and related benefits of $1.0 million due primarily to average wage rate increases. These increases were partially offset by a variety of smaller expense decreases.
  • Operating loss was $20.8 million, or 17.9% of net sales, compared to $17.3 million, or 14.0% of net sales, last year, due to the combined impact of the factors noted above.
  • Income tax benefit was $13,000 or 0.1% of pre-tax loss, compared to $4.2 million, or 26.1% of pre-tax loss, last year. The decrease in this quarter's effective income tax rate was primarily attributable to the continuing impact of a full, non-cash deferred tax asset valuation allowance (the "valuation allowance"). On a non-GAAP basis, excluding the valuation allowance, income tax benefit was $5.2 million, or 26.4% of pre-tax loss.
  • Net loss was $19.6 million, or $0.65 net loss per share, compared to $12.0 million, or $0.40 net loss per share, last year. On a non-GAAP basis, excluding the valuation allowance, this year's net loss was $14.5 million, or $0.48 net loss per share. Weighted average shares were 30.0 million this year compared to 29.8 million shares last year.

Non-GAAP Financial Measures

In addition to reporting financial measures in accordance with generally accepted accounting principles ("GAAP"), the Company is providing certain non-GAAP financial measures including "non-GAAP income tax benefit," "non-GAAP net loss," and "non-GAAP net loss per share." These amounts are not in accordance with, and should not be construed as an alternative to, the most directly comparable corresponding GAAP measure. 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 corresponding 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.

Balance Sheet and Liquidity

As of May 4, 2024, the Company had $68.0 million of cash, cash equivalents and marketable securities and no debt outstanding compared to $93.4 million and no debt outstanding as of April 29, 2023. Total inventories increased 1.8% as of May 4, 2024 compared to April 29, 2023. Total year-to-date capital expenditures at the end of the first quarter were $2.1 million this year compared to $4.3 million last year.

Fiscal 2024 Second Quarter Outlook

Total comparable net sales for fiscal May ended June 1, 2024, decreased by (8.4)% relative to the comparable four-week period last year. Based on current quarter-to-date comparable net sales results and current and historical trends, the Company currently estimates the following for the second quarter of fiscal 2024:

  • Net sales to be in the range of approximately $160 million to $165 million, translating to an estimated comparable net sales decrease in the range of approximately (10)% to (7)%, respectively, relative to the comparable 13-week period last year;
  • SG&A expenses to be in the range of $48 million to $49 million in the absence of any non-cash store asset impairment charges;
  • Effective income tax rate of near-zero due to the continuing impact of the valuation allowance;
  • After-tax results to be in the range of a net loss of approximately $(3.9) million to $(0.9) million, respectively; and
  • Per share results to be in the range of a net loss of $(0.13) to $(0.03), respectively, with estimated weighted average shares of approximately 29.9 million.

The Company currently expects to have 247 total stores open at the end of the second quarter of fiscal 2024 compared to 246 at the end of last year's second quarter.

Conference Call Information

A conference call to discuss these financial results is scheduled for today, June 6, 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 June 13, 2024, by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) and entering the conference identification number: 10188068.

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 246 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)

 

 

May 4,

2024

 

February 3,

2024

 

April 29,

2023

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

19,880

 

 

$

47,027

 

 

$

43,686

 

Marketable securities

 

48,142

 

 

 

48,021

 

 

 

49,695

 

Receivables

 

7,135

 

 

 

5,947

 

 

 

12,973

 

Merchandise inventories

 

78,535

 

 

 

63,159

 

 

 

77,182

 

Prepaid expenses and other current assets

 

9,742

 

 

 

11,905

 

 

 

9,332

 

Total current assets

 

163,434

 

 

 

176,059

 

 

 

192,868

 

Operating lease assets

 

199,613

 

 

 

203,825

 

 

 

216,385

 

Property and equipment, net

 

45,442

 

 

 

48,063

 

 

 

49,438

 

Deferred tax assets, net

 

 

 

 

 

 

 

12,728

 

Other assets

 

1,522

 

 

 

1,598

 

 

 

1,765

 

TOTAL ASSETS

$

410,011

 

 

$

429,545

 

 

$

473,184

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

22,013

 

 

$

14,506

 

 

$

24,730

 

Accrued expenses

 

12,712

 

 

 

13,063

 

 

 

14,253

 

Deferred revenue

 

14,127

 

 

 

14,957

 

 

 

14,792

 

Accrued compensation and benefits

 

8,457

 

 

 

9,902

 

 

 

9,056

 

Current portion of operating lease liabilities

 

52,662

 

 

 

48,672

 

 

 

49,567

 

Current portion of operating lease liabilities, related party

 

3,194

 

 

 

3,121

 

 

 

2,908

 

Other liabilities

 

253

 

 

 

336

 

 

 

446

 

Total current liabilities

 

113,418

 

 

 

104,557

 

 

 

115,752

 

Long-term liabilities:

 

 

 

 

 

Noncurrent portion of operating lease liabilities

 

151,875

 

 

 

160,531

 

 

 

169,791

 

Noncurrent portion of operating lease liabilities, related party

 

18,438

 

 

 

19,267

 

 

 

21,633

 

Other liabilities

 

278

 

 

 

321

 

 

 

487

 

Total long-term liabilities

 

170,591

 

 

 

180,119

 

 

 

191,911

 

Total liabilities

 

284,009

 

 

 

284,676

 

 

 

307,663

 

Stockholders’ equity:

 

 

 

 

 

Common stock (Class A)

 

23

 

 

 

23

 

 

 

23

 

Common stock (Class B)

 

7

 

 

 

7

 

 

 

7

 

Preferred stock

 

 

 

 

 

 

 

 

Additional paid-in capital

 

173,197

 

 

 

172,478

 

 

 

170,608

 

Accumulated deficit

 

(47,583

)

 

 

(27,962

)

 

 

(5,438

)

Accumulated other comprehensive income

 

358

 

 

 

323

 

 

 

321

 

Total stockholders’ equity

 

126,002

 

 

 

144,869

 

 

 

165,521

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

410,011

 

 

$

429,545

 

 

$

473,184

 

 

Tilly’s, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(unaudited)

 

 

Thirteen Weeks Ended

 

May 4,

2024

 

April 29,

2023

Net sales

$

115,856

 

 

$

123,637

 

 

 

 

 

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

 

90,612

 

 

 

96,768

 

Rent expense, related party

 

931

 

 

 

931

 

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

 

91,543

 

 

 

97,699

 

Gross profit

 

24,313

 

 

 

25,938

 

 

 

 

 

Selling, general and administrative expenses

 

44,968

 

 

 

43,066

 

Rent expense, related party

 

133

 

 

 

133

 

Total selling, general and administrative expenses

 

45,101

 

 

 

43,199

 

 

 

 

 

Operating loss

 

(20,788

)

 

 

(17,261

)

Other income, net

 

1,154

 

 

 

1,064

 

Loss before income taxes

 

(19,634

)

 

 

(16,197

)

Income tax benefit

 

(13

)

 

 

(4,229

)

Net loss

$

(19,621

)

 

$

(11,968

)

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

$

(0.65

)

 

$

(0.40

)

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

$

(0.65

)

 

$

(0.40

)

Weighted average basic shares outstanding

 

29,962

 

 

 

29,798

 

Weighted average diluted shares outstanding

 

29,962

 

 

 

29,798

 

 

Tilly’s, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

 

 

Thirteen Weeks Ended

 

May 4,

2024

 

April 29,

2023

Cash flows from operating activities

 

 

 

Net loss

$

(19,621

)

 

$

(11,968

)

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

 

 

 

Depreciation and amortization

 

3,095

 

 

 

3,214

 

Stock-based compensation expense

 

566

 

 

 

522

 

Impairment of assets

 

1,663

 

 

 

154

 

(Gain) loss on disposal of assets

 

(16

)

 

 

16

 

Gain on maturities of marketable securities

 

(708

)

 

 

(295

)

Deferred income taxes

 

 

 

 

(4,231

)

Changes in operating assets and liabilities:

 

 

 

Receivables

 

(822

)

 

 

(3,683

)

Merchandise inventories

 

(15,376

)

 

 

(15,065

)

Prepaid expenses and other assets

 

2,690

 

 

 

8,162

 

Accounts payable

 

7,480

 

 

 

8,765

 

Accrued expenses

 

14

 

 

 

441

 

Accrued compensation and benefits

 

(1,445

)

 

 

873

 

Operating lease liabilities

 

(2,254

)

 

 

(1,616

)

Deferred revenue

 

(830

)

 

 

(1,311

)

Other liabilities

 

(126

)

 

 

(173

)

Net cash used in operating activities

 

(25,690

)

 

 

(16,195

)

 

 

 

 

Cash flows from investing activities

 

 

 

Purchases of marketable securities

 

(29,496

)

 

 

(24,524

)

Purchases of property and equipment

 

(2,137

)

 

 

(4,255

)

Proceeds from maturities of marketable securities

 

30,000

 

 

 

15,081

 

Proceeds from sale of property and equipment

 

23

 

 

 

 

Net cash used in investing activities

 

(1,610

)

 

 

(13,698

)

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from exercise of stock options

 

153

 

 

 

53

 

Net cash provided by financing activities

 

153

 

 

 

53

 

 

 

 

 

Change in cash and cash equivalents

 

(27,147

)

 

 

(29,840

)

Cash and cash equivalents, beginning of period

 

47,027

 

 

 

73,526

 

Cash and cash equivalents, end of period

$

19,880

 

 

$

43,686

 

Tilly’s, Inc.

Supplemental Financial Information

Reconciliation of Select GAAP Financial Measures to Non-GAAP Financial Measures

(In thousands)

(unaudited)

Definitions of certain non-GAAP financial measures included in the tables below are as follows:

  • We define "non-GAAP income tax benefit" as loss before income tax multiplied by an effective income tax rate of 26.3%.

 

Thirteen Weeks Ended

 

May 4,

2024

 

April 29,

2023

Income tax benefit

$

(13

)

 

$

(4,229

)

Non-cash valuation allowance on deferred tax assets

 

(5,164

)

 

 

 

Non-GAAP income tax benefit

$

(5,177

)

 

$

(4,229

)

  • We define "non-GAAP net loss" as net loss less non-cash valuation allowance on deferred tax assets.
  • We define "non-GAAP basic net loss per share" and "non-GAAP diluted net loss per share" as non-GAAP net loss divided by the weighted average shares outstanding on a basic and diluted basis, respectively.

 

Thirteen Weeks Ended

 

May 4,

2024

 

April 29,

2023

Net loss

$

(19,621

)

 

$

(11,968

)

Non-cash valuation allowance on deferred tax assets

 

(5,164

)

 

 

 

Non-GAAP net loss

$

(14,457

)

 

$

(11,968

)

 

 

 

 

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

$

(0.65

)

 

$

(0.40

)

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

$

(0.65

)

 

$

(0.40

)

Non-GAAP basic net loss per share of Class A and Class B common stock

$

(0.48

)

 

$

(0.40

)

Non-GAAP diluted net loss per share of Class A and Class B common stock

$

(0.48

)

 

$

(0.40

)

Weighted average basic shares outstanding used to compute GAAP and non-GAAP basic net loss per share

 

29,962

 

 

29,798

 

Weighted average diluted shares outstanding used to compute GAAP and non-GAAP diluted net loss per share

 

29,962

 

 

29,798

 

 

 

 

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

 

Contacts

Investor Relations:

Michael Henry, Executive Vice President, Chief Financial Officer

(949) 609-5599, ext. 17000

irelations@tillys.com

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