Tilly's, Inc. Announces First Quarter Fiscal 2013 Results
Tilly's, Inc. Announces First Quarter Fiscal 2013 Results
- First Quarter Net Sales Increased 13%; Comp Store Sales Increased 1.1%
- First Quarter Net Income of $2.3 million
- Increases Full Year 2013 Outlook
"Our first quarter results were better than expected as comparable store sales in March and April improved from February, driven by the depth and relevance of our merchandise offering particularly during the critical spring break and pre-Easter periods. We maintained our pricing integrity during a highly promotional environment and ended the quarter with inventory that was clean, current and well positioned for summer," commented Daniel Griesemer, President and Chief Executive Officer. "These results reflect the strength of our business model and the diligent execution of our team that remains focused on making strategic decisions for the long-term health of our brand."
For the first quarter ended May 4, 2013:
- Total net sales were $109.1 million, an increase of 13.0% compared to the first quarter of 2012.
- Comparable store sales, which include e-commerce sales, increased 1.1% compared to the first quarter of 2012. E-commerce sales were $12.6 million, an increase of 16% compared to the first quarter of 2012.
- Gross profit increased 5.9% to $32.2 million compared to the first quarter of 2012. Gross margin was 29.5%, compared to 31.5% in the first quarter of 2012.
- Operating income was $3.9 million compared to $6.0 million in the first quarter of 2012. Operating margin was 3.6%, compared to 6.2% in the first quarter of 2012.
- Net income was $2.3 million, or $0.08 per diluted share, based on a weighted average diluted share count of 28.0 million shares. This compares to first quarter 2012 net income of $5.9 million, or $0.29 per diluted share, and first quarter 2012 adjusted net income of $3.2 million, or $0.15 per diluted share, based on 20.5 million weighted average diluted shares. Adjusted net income assumes an expected annual effective tax rate of 40%, and adds back a charge for on-going non-cash compensation expense for stock options similar to the charge in the other three quarters of fiscal year 2012.
- At the conclusion of this press release is a reconciliation of non-GAAP results to GAAP results.
Balance Sheet and Liquidity
As of May 4, 2013, the Company had $48.6 million of cash and marketable securities and no borrowings or debt outstanding on its revolving credit facility.
Second Quarter 2013 Outlook
We expect comparable store sales to be flat to a low-single digit increase compared to a 5.1% comparable store sales increase in the second quarter of 2012. Additionally, the 2013 fiscal calendar shift will cause the first peak week of the Company's Back-to-School season to fall in the end of the second quarter this year compared to being the first week of the third quarter last year. As a result, we expect an estimated $8.0 million to $9.0 million in sales will shift into the Company's second quarter from the third quarter, when compared to the 2012 fiscal calendar. Using the anticipated effective tax rate of 40%, net income for the second quarter is expected to be in the range of $3.2 million to $3.8 million, or $0.11 to $0.14 per diluted share, and assumes a weighted average diluted share count of 28.2 million shares, compared to 27.3 million weighted average diluted shares in the second quarter of last year.
Second quarter 2012 adjusted net income was $2.6 million, which excludes a one-time, non-cash compensation charge to SG&A and a one-time net tax provision benefit, and includes a 40% effective tax rate to make that quarter comparable. (See reconciliation of non-GAAP results to GAAP results at the end of this release.)
Fiscal Year 2013 Outlook
The Company continues to expect 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 $23.3 million, or $0.76 to $0.82 per diluted share, and assumes a weighted average diluted share count of 28.3 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.)
Chief Financial Officer Retirement
Tilly's today announced that Bill Langsdorf, the Company's Senior Vice President and Chief Financial Officer, plans to retire later this year. Mr. Langsdorf plans to remain CFO until his successor is in place, and intends to work closely with Tilly's management to ensure a smooth and successful transition of his responsibilities.
"I want to thank Bill for his many important contributions to Tilly's success," said Daniel Griesemer, Tilly's President and Chief Executive Officer. "For more than six years, Bill has been a valuable and dedicated business partner to Tilly's, and was instrumental in preparing Tilly's for its successful initial public offering in 2012. He displays a unique blend of thoughtfulness, strategic thinking and hard work that earns him the respect, admiration and confidence of everyone who has the pleasure of working with him, both inside and outside of the Company. We wish him all the best in his future endeavors."
"I am proud of the Tilly's team and what we have accomplished over the last several years," said Mr. Langsdorf. "The company is well prepared for the future. After having completed our initial public offering last year, this is an opportune time for me to move to the next chapter. I look forward to assisting management as needed during this transition period."
Conference Call Information
A conference call to discuss the financial results is scheduled for today, May 29, 2013, at 4:30 p.m. ET (1:30 p.m. PT). Investors and analysts interested in participating in the call are invited to dial (888) 438-5524 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, 2013, by dialing (877) 870-5176 (domestic) or (858) 384-5517 (international) and entering the conference identification number: 3921385. 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 May 4, 2013, operated 175 stores and through its website, www.tillys.com.
Non-GAAP Financial Measures
In addition to reporting financial measures in accordance with accounting principles generally accepted in the United States ("GAAP"), the Company provides certain non-GAAP financial measures including "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 Annual Report on Form 10-K, filed with the Securities and Exchange Commission ("SEC") on April 3, 2013, 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.
|Consolidated Balance Sheets|
(In thousands, except per share data)
|Cash and cash equivalents||$||18,624||$||17,314|
|Prepaid expenses and other current assets||12,376||11,387|
|Total current assets||118,689||121,098|
|Property and equipment, net||87,322||80,926|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Accrued compensation and benefits||3,366||6,094|
|Current portion of deferred rent||4,830||4,555|
|Current portion of capital lease obligation/Related party||723||712|
|Total current liabilities||46,861||47,207|
|Long-term portion of deferred rent||39,227||37,620|
|Long-term portion of capital lease obligation/Related party||3,073||3,258|
|Total long-term liabilities||42,300||40,878|
|Commitments and contingencies|
|Common stock (Class A), $0.001 par value; May 4, 2013 - 100,000 shares authorized,|
|10,783 shares issued and outstanding; February 2, 2013 - 100,000 shares authorized,|
|10,772 shares issued and outstanding||11||11|
|Common stock (Class B), $0.001 par value; May 4, 2013 and February 2, 2013 - 35,000|
|shares authorized, 16,920 shares issued and outstanding||17||17|
|Preferred stock, $0.001 par value; May 4, 2013 and February 2, 2013 - 10,000 shares|
|authorized, no shares issued or outstanding||-||-|
|Additional paid-in capital||118,283||117,391|
|Retained earnings (deficit)||2,168||(140||)|
|Accumulated other comprehensive income||31||17|
|Total stockholders' equity||120,510||117,296|
|Total liabilities and stockholders' equity||$||209,671||$||205,381|
|Consolidated Statements of Income|
(In thousands, except per share data)
|Thirteen Weeks Ended|
|Cost of goods sold (includes buying, distribution, and occupancy costs)||76,921||66,106|
|Selling, general and administrative expenses||28,281||24,392|
|Interest expense, net||49||44|
|Income before income taxes||3,868||5,982|
|Income tax expense||1,560||68|
|Basic earnings per share||$||0.08||$||0.30|
|Diluted earnings per share||$||0.08||$||0.29|
|Weighted average basic shares outstanding||27,692||20,000|
|Weighted average diluted shares outstanding||28,027||20,512|
|Consolidated Statements of Cash Flows|
|Thirteen Weeks Ended|
|Cash flows from operating activities|
|Adjustments to reconcile net income to net cash provided by operating activities:|
|Depreciation and amortization||4,650||3,904|
|Gain on disposal of assets||(3||)||(115||)|
|Gain on sales and maturities of marketable securities||(44||)||-|
|Deferred income taxes||347||-|
|Stock-based compensation expense||892||-|
|Changes in operating assets and liabilities:|
|Prepaid expenses and other assets||(1,648||)||(502||)|
|Accrued compensation and benefits||(2,728||)||(2,672||)|
|Net cash provided by operating activities||2,908||3,930|
|Cash flows from investing activities|
|Purchase of property and equipment||(11,435||)||(7,523||)|
|Proceeds from sale of property and equipment||11||-|
|Insurance proceeds from casualty loss||-||641|
|Maturities of marketable securities||10,000||-|
|Net cash used in investing activities||(1,424||)||(6,882||)|
|Cash flows from financing activities|
|Payment of capital lease obligation||(174||)||(163||)|
|Net cash used in financing activities||(174||)||(423||)|
|Change in cash and cash equivalents||1,310||(3,375||)|
|Cash and cash equivalents, beginning of period||17,314||25,091|
|Cash and cash equivalents, end of period||$||18,624||$||21,716|
Supplemental Information - Consolidated Statements of Income
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
|(In thousands, except per share amounts)|
The tables below reconcile the non-GAAP financial measures of adjusted selling, general and administrative expenses ("SG&A"), adjusted operating income, adjusted income before income taxes, adjusted income tax provision, adjusted net income, and adjusted basic and diluted earnings per share, with the most directly comparable GAAP financial measures of actual SG&A, actual operating income, actual income before income taxes, actual income tax provision, actual net income, and actual basic and diluted earnings per share.