Tilly's, Inc. Announces Fourth Quarter Fiscal 2012 Results; Introduces First Quarter and Full Year 2
Tilly's, Inc. Announces Fourth Quarter Fiscal 2012 Results; Introduces First Quarter and Full Year 2013 Outlook
- Fourth Quarter Net Sales Increased 14.5%; Comp Store Sales Decreased 0.9%
- Fourth Quarter GAAP Net Income of $9.8 million
- Fourth Quarter Adjusted Net Income up 11% to $8.9 million
- Fiscal Year Adjusted Net Income up 19% to $23.3 million
"I am proud of what we accomplished in fiscal 2012. In line with our long-term goals we achieved double-digit growth in net sales and, on an adjusted basis, leveraged our SG&A expenses, increased our operating margin and grew net income by 19% during the year. Despite the variability in sales trends we experienced in the second half of 2012, we maintained our strong pricing discipline and exited the year with inventory that was clean, current and well positioned for the spring season. Our business continued to generate significant cash flow and we capitalized on a strong pipeline of real estate opportunities to open a net 28 new stores during the year, further expanding the Tilly's concept into 20 new markets and augmenting a key driver of future growth," commented Daniel Griesemer, President and Chief Executive Officer. "As we begin fiscal 2013, we are confident in the fundamentals of our business and in our ability to deliver on the opportunities we see to expand the Tilly's brand for sustainable, long-term, quality growth."
For the fourth quarter ended February 2, 2013:
- Total net sales for the fourth quarter were $140.8 million, an increase of 14.5% compared to the fourth quarter of 2011.
- Comparable store sales for the thirteen-week period, which include e-commerce sales, decreased 0.9%. E-commerce sales for the thirteen-week period were $19.3 million, an increase of 20% compared to the fourth quarter of 2011.
- Gross profit increased 13.2% to $46.8 million. Gross margin was 33.3%, compared to 33.6% in the fourth quarter of 2011.
- Operating income on a GAAP basis was $14.8 million compared to $14.1 million in the fourth quarter of 2011. Operating margin was 10.5%, compared to 11.4% in the fourth quarter of 2011.
- On a GAAP basis, net income was $9.8 million, or $0.35 per diluted share, based on a weighted average diluted share count of 28.0 million shares. This compares to net income of $13.9 million, or $0.67 per diluted share, based on 20.5 million weighted average diluted shares in the fourth quarter of 2011.
- Adjusted net income for the quarter increased 10.8% to $8.9 million, or $0.32 per diluted share, compared to adjusted net income of $8.0 million, or $0.39 per diluted share in the fourth quarter of 2011. These results adjust GAAP net income to assume an expected long-term effective tax rate of 40% for both this year and last year periods, and add back a charge for on-going non-cash compensation expense for stock options of $0.7 million, before tax, to the fourth quarter of 2011, which equals the charge for on-going non-cash compensation expense in the fourth quarter of 2012.
- At the conclusion of this press release is a reconciliation of non-GAAP results to GAAP results.
For the fiscal year ended February 2, 2013:
- Total net sales for the fiscal year were $467.3 million, an increase of 16.6% compared to the prior year.
- Comparable store sales for the fifty-two week period, which include e-commerce sales, increased 2.2%. E-commerce sales for the fifty-two week period were $53.0 million, an increase of 21% compared to the prior year.
- Gross profit increased 16.3% to $150.2 million. Gross margin was 32.1%, compared to 32.2% in the prior year.
- Operating income on a GAAP basis was $31.4 million including a one-time, non-cash charge to SG&A expense of $7.6 million, before tax, to recognize life to date compensation expense for stock options, which was triggered by the completion of the Company's initial public offering in the second quarter of 2012.
- On a GAAP basis, net income was $23.9 million, or $0.92 per diluted share, based on a weighted average diluted share count of 26.1 million shares. GAAP net income includes the one-time non-cash compensation charge for stock options of $7.6 million to SG&A as well as a one-time net tax provision benefit of $3.0 million, both triggered at the initial public offering effective date in the second quarter of 2012. This compares to prior year net income of $34.3 million, or $1.68 per diluted share, based on 20.5 million weighted average diluted shares in the prior year.
- Adjusted net income increased 18.7% to $23.3 million, or $0.90 per diluted share, compared to adjusted net income of $19.7 million, or $0.96 per diluted share, in the prior year period. These results adjust GAAP net income for the one-time, non-cash compensation charge to SG&A incurred in the second quarter of 2012, assume an expected long-term effective tax rate of 40% for both this year and last year periods, and add back a charge for on-going non-cash compensation expense for stock options of $2.0 million, before tax, for the second, third and fourth quarters of 2011, which equals the charge for on-going non-cash compensation expense in the second, third and fourth quarters of 2012.
- At the conclusion of this press release is a reconciliation of non-GAAP results to GAAP results.
Tilly's follows the retail 4-5-4 reporting calendar, which included an extra week in the fourth quarter of fiscal 2012 (the 53rd week). In the 53rd week, the Company had pre-tax income of approximately $0.6 million. The 53rd week is not included in the comparable store sales percentage.
Balance Sheet and Liquidity
As of February 2, 2013, the Company had $57.2 million of cash and marketable securities compared to $25.1 million as of January 28, 2012. The Company ended the quarter with no borrowings and no debt outstanding on its revolving credit facility.
First Quarter 2013 Outlook
Although traffic and sales were soft in the first few weeks of the quarter, trends have shown solid improvement in March. Given this variability we believe it prudent to remain cautious and therefore expect comparable store sales to decline in the low- to mid-single digit range compared to a 4.3% comparable store sales increase in the first quarter of 2012. Using the anticipated effective tax rate of 40%, net income for the first quarter is expected to be in the range of $1.1 million to $2.0 million, or $0.04 to $0.07 per diluted share, and assumes a weighted average diluted share count of 28.2 million shares, compared to 20.5 million weighted average diluted shares in the first quarter of last year.
First quarter 2012 adjusted net income was $3.2 million, which includes ongoing stock-based compensation expense and a 40% effective tax rate to make that quarter, operating as an S-corporation, comparable to operating in 2013 as a C-corporation. (See reconciliation of non-GAAP results to GAAP results at the end of this release.)
Fiscal Year 2013 Outlook
Given continued economic uncertainty, the Company is projecting comparable store sales growth in the low-single digit range for fiscal 2013, on a 52-week vs. 52-week basis. Using an anticipated full year effective tax rate of 40%, net income for fiscal year 2013 is expected to be in the range of $21.5 million to $23.0 million, or $0.75 to $0.81 per diluted share, and assumes a weighted average diluted share count of 28.4 million shares, compared to 26.1 million weighted average diluted shares for the full year 2012.
Full year 2012 adjusted net income was $22.9 million, which includes four quarters of ongoing stock -based compensation expense totaling $2.7 million and a 40% effective tax rate for the entire year, and excludes a one-time charge to recognize life-to-date stock-based compensation that was recorded in the second quarter of 2012 and a one-time tax benefit resulting from the conversion of deferred tax assets to the higher C-corporation value of those assets. (See reconciliation of non-GAAP results to GAAP results at the end of this release.)
Conference Call Information
A conference call to discuss the financial results is scheduled for today, March 20, 2013, at 5:30 p.m. ET (2:30 p.m. PT). Investors and analysts interested in participating in the call are invited to dial (888) 395-3227 at 5:25 p.m. ET (2:25 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 April 3, 2013, by dialing (877) 870-5176 (domestic) or (858) 384-5517 (international) and entering the conference identification number: 1954786. Please note participants must enter the conference identification number in order to access the replay.
Tilly's is a fast-growing destination specialty retailer of West Coast inspired apparel, footwear and accessories with an extensive assortment of the most relevant and sought-after brands rooted in action sports, music, art and fashion. Tilly's is headquartered in Southern California and, as of February 2, 2013, operated 168 stores and through its website, www.tillys.com.
Non-GAAP Financial Measures
In addition to reporting financial measures in accordance with generally accepted accounting principles in the United States ("GAAP"), the Company provides non-GAAP "adjusted selling, general and administrative expenses", "adjusted operating income", "adjusted income before income taxes", "adjusted income tax provision", "adjusted net income", "adjusted basic earnings per share" and "adjusted diluted earnings per share". These amounts are not in accordance with, or an alternative to, GAAP. The Company's management believes that these measures provide investors with transparency by helping illustrate the financial results: (i) as if the Company had been a publicly traded "C" Corporation during the relevant time periods, in order to provide a better comparison of past periods to current periods as a "C" Corporation; and (ii) to exclude items that may not be indicative of, or are unrelated to, the Company's core operating results, providing a better baseline for analyzing trends in the underlying business.
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 Information - Consolidated Statements of Income; Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures" contained in this press release.
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 guidance, future financial and operating results 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, execute our growth strategy, expand into new markets, effectively compete with other retailers, enhance our brand image and other factors that are detailed in our Registration Statement on Form S-1 (File No. 333-175299), including those detailed in the section titled "Risk Factors" contained that registration statement, which is 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 registration statement and our Forms 10-Q.
Consolidated Balance Sheets
(In thousands, except per share data)
|Cash and cash equivalents||$||17,314||$||25,091|
|Prepaid expenses and other current assets||11,387||5,616|
|Total current assets||121,098||73,843|
|Property and equipment, net||80,926||64,077|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Accrued compensation and benefits||6,094||7,536|
|Current portion of deferred rent||4,555||3,335|
|Current portion of capital lease obligation/Related party||712||669|
|Total current liabilities||47,207||46,170|
|Long-term portion of deferred rent||37,620||30,256|
|Long-term portion of capital lease obligation/Related party||3,258||3,969|
|Total long-term liabilities||40,878||34,225|
|Commitments and contingencies|
|Common stock, $0.001 par value; February 2, 2013 - no shares authorized, issued or outstanding;|
|January 28, 2012 - 21,600 shares authorized, 20,000 shares issued and outstanding||-||20|
|Common stock (Class A), $0.001 par value; February 2, 2013 - 100,000 shares authorized, 10,772|
shares issued and outstanding; January 28, 2012 - 100,000 shares authorized, 1 shares issued and outstanding
|Common stock (Class B), $0.001 par value; February 2, 2013 - 35,000 shares authorized, 16,920 shares|
|issued and outstanding; January 28, 2012 - 35,000 shares authorized, no shares issued or outstanding||17||-|
|Preferred stock, $0.001 par value; February 2, 2013 and January 28, 2012 - 10,000 shares authorized,|
|no shares issued or outstanding||-||-|
|Additional paid-in capital||117,391||150|
|Retained earnings (deficit)||(140||)||60,254|
|Accumulated other comprehensive income||17||-|
|Total stockholders' equity||117,296||60,424|
|Total liabilities and stockholders' equity||$||205,381||$||140,819|
Consolidated Statements of Income
(In thousands, except per share data)
|Cost of goods sold (includes buying, distribution, and occupancy costs)||93,946||81,572||317,096||271,482|
|Selling, general and administrative expenses||32,011||27,302||118,805||94,217|
|Interest expense, net||46||46||91||196|
|Income before income taxes||14,768||14,009||31,299||34,729|
|Income tax expense||4,927||153||7,406||389|
|Basic earnings per share||$||0.36||$||0.69||$||0.93||$||1.72|
|Diluted earnings per share||$||0.35||$||0.67||$||0.92||$||1.68|
|Weighted average basic shares outstanding||27,686||20,000||25,656||20,000|
|Weighted average diluted shares outstanding||28,033||20,532||26,076||20,500|
Consolidated Statements of Cash Flows
|Fiscal Year Ended|
|Cash flows from operating activities|
|Adjustments to reconcile net income to net cash provided by operating activities:|
|Depreciation and amortization||16,679||15,129||14,292|
|Loss on disposal of assets||111||232||224|
|Impairment of assets||-||554||1,985|
|Loss on sales of marketable securities||28||-||-|
|Deferred income taxes||6,689||-||-|
|Stock-based compensation expense||9,570||-||-|
|Excess tax benefit from stock-based compensation||(95||)||-||-|
|Changes in operating assets and liabilities:|
|Prepaid expenses and other assets||(12,930||)||(2,868||)||(1,356||)|
|Accrued compensation and benefits||(1,442||)||3,362||958|
|Net cash provided by operating activities||41,730||52,584||41,702|
|Cash flows from investing activities|
|Purchase of property and equipment||(33,298||)||
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