EX-99.1 2 q1fy2019earningsrelease.htm EXHIBIT 99.1 Exhibit

Exhibit 99.1
tillyslogoa26.jpg

Tilly’s, Inc. Announces Fiscal 2019 First Quarter Results
Comp Store Net Sales Increase 2.4%; EPS of $0.02
Introduces Second Quarter Outlook

Irvine, CA – May 29, 2019 – Tilly’s, Inc. (NYSE: TLYS, the "Company") today announced financial results for the first quarter of fiscal 2019 ended May 4, 2019.

“Tillys continued its positive momentum during the first quarter of fiscal 2019 with its twelfth consecutive quarter of flat to positive comp sales," commented Ed Thomas, President and Chief Executive Officer. "Although the second quarter is off to a slow start, our goal is to continue improving our operating results during fiscal 2019."

First Quarter Results Overview
The following comparisons refer to operating results for the first quarter of fiscal 2019 versus the first quarter of fiscal 2018 ended May 5, 2018:
•
Total net sales were $130.3 million, an increase of $6.7 million or 5.4%, compared to $123.6 million last year. The Company ended first quarter of fiscal 2019 with 229 total stores compared to 222 total stores last year, both including three RSQ-branded pop-up stores.
•
Comparable store net sales, which includes e-commerce net sales, increased 2.4% compared to an increase of 0.1% during last year's first quarter. E-commerce net sales increased 29.6% and represented approximately 15.1% of total net sales this year, compared to a decrease of 7.2% and a 12.2% share of total net sales last year. Comparable store net sales in physical stores decreased 1.4% and represented approximately 84.9% of total net sales, compared to an increase of 1.2% and an 87.8% share of total net sales last year.
•
Gross profit was $35.7 million, an increase of $0.7 million or 2.0%, compared to $35.0 million last year. Gross margin, or gross profit as a percentage of net sales, decreased to 27.4% from 28.3% last year. This 90 basis point decrease in gross margin was primarily due to an 80 basis point increase in distribution costs primarily as a result of higher e-commerce shipping costs associated with strong e-commerce net sales growth and a 70 basis point decrease in product margins due to higher total markdowns. These cost increases were partially offset by 60 basis points of improved leverage of occupancy and buying costs as a percentage of net sales.
•
Selling, general and administrative expenses ("SG&A") were $35.5 million, or 27.3% of net sales, compared to $33.6 million, or 27.2% of net sales, last year. The $1.9 million increase in SG&A was primarily attributable to an increase in store payroll of approximately $1.0 million due in part to minimum wage and annual merit increases, and an increase in e-commerce marketing and fulfillment expenses of approximately $0.8 million associated with e-commerce net sales growth.
•
Operating income was $0.1 million, or 0.1% of net sales, compared to $1.3 million, or 1.1% of net sales, last year. The $1.2 million decline in operating results was largely attributable to the increased costs associated with e-commerce net sales growth and the minimum wage impact on store payroll, as explained above, partially offset by the positive impact of improved comp sales results.
•
Other income increased to $0.8 million from $0.4 million last year, primarily due to higher interest rates on our cash and marketable securities investment portfolio compared to last year.
•
Income tax expense was $0.3 million, or 30.6% of pre-tax income, compared to $0.5 million, or 28.6% of pre-tax income, last year. Income tax expense includes certain discrete items associated with employee stock-based award activity in both periods.


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•
Net income was $0.7 million, or $0.02 per diluted share, compared to $1.2 million, or $0.04 per diluted share, last year.

Balance Sheet and Liquidity
As of May 4, 2019, the Company had $109.8 million of cash and marketable securities and no debt outstanding under its revolving credit facility. This compares to $105.0 million of cash and marketable securities and no debt outstanding under its revolving credit facility as of May 5, 2018. For the third consecutive year, the Company paid a special cash dividend to its stockholders in February. This year's special cash dividend was approximately $29.5 million in the aggregate, or $1 per share.

Fiscal 2019 Second Quarter Outlook
The Company's quarter-to-date comparable store net sales have decreased 6.6% through Memorial Day weekend. The Company believes this slow start is largely attributable to unseasonable weather across much of the country, particularly in California where 95 of the Company's 228 total stores reside, resulting in weak sales results across almost all spring/summer product categories. The Company believes these results will improve over the remainder of the second quarter, assuming more normal weather patterns occur. Based on current and historical trends, the Company expects its second quarter total net sales to range from approximately $154 million to approximately $159 million based on a comparable store net sales decrease of 1% to 4% for the quarter as a whole. The Company expects second quarter operating income to range from approximately $6.5 million to approximately $8.5 million, and earnings per diluted share to range from $0.17 to $0.23. This outlook assumes no non-cash store asset impairment charges, an anticipated effective tax rate of approximately 27%, and weighted average shares of approximately 30 million.
Regarding the legal settlement coupons the Company issued last September, less than 2% have been redeemed to date, resulting in no material impact on its business. All such coupons will expire on September 4, 2019. While there can be no guarantee that redemptions will remain immaterial during the upcoming back-to-school season, the Company is not expecting any meaningful impacts on its business during the final three months of the redemption period based on the redemption results thus far.

Conference Call Information
A conference call to discuss these financial results is scheduled for today, May 29, 2019, 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 June 12, 2019, by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) and entering the conference identification number: 13690445. 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 228 total stores, including two 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 sales, future operating income, future net income, future earnings per share, future gross, operating or product margins, anticipated tax rate, future inventory levels, and market

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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.



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Tilly’s, Inc.
Consolidated Balance Sheets
(In thousands, except par value)
(unaudited)

 
May 4,
2019
 
February 2,
2019
 
May 5,
 2018
ASSETS
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
33,864

 
$
68,160

 
$
41,190

Marketable securities
75,953

 
75,919

 
63,799

Receivables
6,288

 
6,082

 
4,955

Merchandise inventories
58,963

 
55,809

 
56,837

Prepaid expenses and other current assets
5,294

 
11,171

 
9,266

Total current assets
180,362

 
217,141

 
176,047

Operating lease assets
244,139

 
—

 
—

Property and equipment, net
70,608

 
73,842

 
80,542

Other assets
2,176

 
2,185

 
3,277

Total assets
$
497,285

 
$
293,168

 
$
259,866

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accounts payable
$
23,479

 
$
24,207

 
$
19,504

Accrued expenses
17,044

 
18,756

 
23,713

Deferred revenue
9,105

 
10,373

 
7,622

Accrued compensation and benefits
7,019

 
8,930

 
6,614

Dividends payable
—

 
29,453

 
—

Current portion of operating lease liabilities
52,600

 
—

 
—

Current portion of deferred rent
—

 
5,540

 
5,322

Total current liabilities
109,247

 
97,259

 
62,775

Noncurrent operating lease liabilities
222,086

 
—

 
—

Noncurrent deferred rent
—

 
30,825

 
30,857

Other
1,422

 
1,757

 
2,476

Total liabilities
332,755

 
129,841

 
96,108

Stockholders’ equity:
 
 
 
 
 
Common stock (Class A), $0.001 par value; 100,000 shares authorized; 21,816, 21,642 and 15,197 shares issued and outstanding, respectively
22

 
21

 
15

Common stock (Class B), $0.001 par value; 35,000 shares authorized; 7,706, 7,844 and 13,948 shares issued and outstanding, respectively
8

 
8

 
14

Preferred stock, $0.001 par value; 10,000 shares authorized; no shares issued or outstanding
—

 
—

 
—

Additional paid-in capital
150,331

 
149,737

 
144,550

Retained earnings
14,012

 
13,335

 
19,068

Accumulated other comprehensive income
157

 
226

 
111

Total stockholders’ equity
164,530

 
163,327

 
163,758

Total liabilities and stockholders’ equity
$
497,285

 
$
293,168

 
$
259,866





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Tilly’s, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
(unaudited)

 
 
Three Months Ended
 
 
May 4,
2019
 
May 5,
2018
Net sales
 
$
130,303

 
$
123,634

Cost of goods sold (includes buying, distribution, and occupancy costs)
 
94,619

 
88,657

Gross profit
 
35,684

 
34,977

Selling, general and administrative expenses
 
35,538

 
33,646

Operating income
 
146

 
1,331

Other income, net
 
829

 
383

Income before income taxes
 
975

 
1,714

Income tax expense
 
298

 
491

Net income
 
$
677

 
$
1,223

Basic income per share of Class A and Class B common stock
 
$
0.02


$
0.04

Diluted income per share of Class A and Class B common stock
 
$
0.02


$
0.04

Weighted average basic shares outstanding
 
29,469

 
29,080

Weighted average diluted shares outstanding
 
29,808

 
29,438

























 

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Tilly’s, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
 
Three Months Ended
 
May 4,
2019
 
May 5,
2018
Cash flows from operating activities
 
 
 
Net income
$
677

 
$
1,223

Adjustments to reconcile net income to net cash (used in) provided by operating activities:
 
 
 
Depreciation and amortization
5,209

 
5,815

Stock-based compensation expense
529

 
580

Impairment of assets
—

 
145

Loss on disposal of assets
10

 
—

Gain on sales and maturities of marketable securities
(549
)
 
(265
)
Deferred income taxes
(130
)
 
(87
)
Changes in operating assets and liabilities:
 
 
 
Receivables
246

 
(603
)
Merchandise inventories
(3,154
)
 
(3,811
)
Prepaid expenses and other assets
479

 
246

Accounts payable
(895
)
 
(1,710
)
Accrued expenses
(806
)
 
107

Accrued compensation and benefits
(1,911
)
 
495

Operating lease liabilities and deferred rent
(715
)
 
(381
)
Deferred revenue
(1,268
)
 
(1,084
)
Net cash (used in) provided by operating activities
(2,278
)
 
670

Cash flows from investing activities
 
 
 
Purchase of property and equipment
(3,059
)
 
(2,946
)
Purchases of marketable securities
(34,572
)
 
(21,052
)
Proceeds from marketable securities
35,000

 
40,397

Net cash (used in) provided by investing activities
(2,631
)
 
16,399

Cash flows from financing activities
 
 
 
Dividends paid
(29,453
)
 
(29,067
)
Proceeds from exercise of stock options
151

 
85

Taxes paid in lieu of shares issued for stock-based compensation
(85
)
 
(99
)
Net cash used in financing activities
(29,387
)
 
(29,081
)
Change in cash and cash equivalents
(34,296
)
 
(12,012
)
Cash and cash equivalents, beginning of period
68,160

 
53,202

Cash and cash equivalents, end of period
$
33,864

 
$
41,190






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Tilly's, Inc.
Store Count and Square Footage

 
Stores
 Open at
 Beginning 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)
2018 Q1
219
 
4
 
1
 
222
 
1,675
2018 Q2
222
 
4
 
—
 
226
 
1,698
2018 Q3
226
 
5
 
4
 
227
 
1,693
2018 Q4
227
 
2
 
—
 
229
 
1,703
2019 Q1
229
 
1
 
1
 
229
 
1,708

Note: Total stores opened during fiscal 2018 includes four RSQ-branded, pop-up stores.


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


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