Tilly’s, Inc. Announces First Quarter Fiscal 2014 Results and Introduces Second Quarter Fiscal 2014 Outlook

  Tilly’s, Inc. Announces First Quarter Fiscal 2014 Results and Introduces   Second Quarter Fiscal 2014 Outlook    *First Quarter Net Sales of $111.1 million; Comp Store Sales Decreased 6.8%   *First Quarter EPS of $0.02  Business Wire  IRVINE, Calif. -- May 28, 2014  Tilly’s, Inc. (NYSE:TLYS) today announced financial results for the first quarter of fiscal 2014 ended May 3, 2014.  “Earnings results were in line with our expectations and reflect the continuation of a tough retail environment and the planned reduction in our clearance merchandise, which put pressure on our comparable store sales. We delivered strong product margin improvement through careful inventory management and operating discipline, and our inventory is well positioned for the summer selling season. We also advanced our strategic initiatives including the opening of our new dedicated e-commerce fulfillment center,” commented Daniel Griesemer, President and Chief Executive Officer. “We remain focused on maintaining the continued health and relevance of our brand, and are confident in our ability to capitalize on the long-term opportunities to grow our business.”  For the first quarter ended May 3, 2014:    *Total net sales were $111.1 million, an increase of 1.8% compared to     $109.1 million in the first quarter of 2013.   *Comparable store sales, which include e-commerce sales, decreased 6.8%     compared to the same 13-week period in 2013. E-commerce sales were $12.7     million, an increase of approximately 1.2% compared to the same     thirteen-week period in 2013.   *Gross profit was $31.3 million compared to $31.8 million in the first     quarter of 2013. Gross margin was 28.2% compared to 29.1% in the first     quarter of 2013. Product margins increased approximately 60 basis points,     offset primarily by deleverage in occupancy costs as a result of the     negative comparable store sales.   *Operating income was $1.1 million and compares to operating income of $3.9     million in the first quarter of 2013.   *Net income was $0.6 million, or $0.02 per diluted share, based on a     weighted average diluted share count of 28.2 million shares and an     effective tax rate of approximately 45%, reflecting a discrete item     related to stock option forfeitures. This compares to net income in the     first quarter of 2013 of $2.3 million, or $0.08 per diluted share, based     on a weighted average diluted share count of 28.0 million shares and an     effective tax rate of 40%.  Balance Sheet and Liquidity  As of May 3, 2014, the Company had $52.4 million of cash and marketable securities and no borrowings or debt outstanding on its revolving credit facility.  Second Quarter 2014 Outlook  We continue to experience weak traffic trends and a highly promotional environment in teen retail. If these trends continue, we would expect second quarter comparable store sales to decline in the high single digits, and net income per diluted share to be in the range of $0.03 to $0.07. This assumes an anticipated effective tax rate of 40% and a weighted average diluted share count of 28.2 million shares. Second quarter 2013 net income was $4.3 million, or $0.15 per diluted share, based on a weighted average diluted share count of 28.1 million shares.  Conference Call Information  A conference call to discuss the financial results is scheduled for today, May 28, 2014, at 4:30 p.m. ET (1:30 p.m. PT). Investors and analysts interested in participating in the call are invited to dial (800) 239-9838 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 11, 2014, by dialing (877) 870-5176 (domestic) or (858) 384-5517 (international) and entering the conference identification number: 7837315. Please note participants must enter the conference identification number in order to access the replay.  About Tilly’s  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 28, 2014, operated 201 stores and through 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 net income, future gross, operating or product margins, and anticipated tax rate and our business and strategy, including but not limited to store expansion, expansion of brands and exclusive relationships, development and growth of our ecommerce platform and business, 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 ecommerce business, effectively manage our inventory and costs, effectively compete with other retailers, enhance our 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”) on April 1, 2014, 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 per share data)  (Unaudited)                                                                                                                          May 3,        February 1,                                                      2014          2014                                                                     ASSETS Current assets: Cash and cash equivalents                            $ 27,396      $  25,412 Marketable securities                                  24,971         34,943 Receivables                                            9,296          8,545 Merchandise inventories                                52,850         46,266 Prepaid expenses and other current assets             11,948        11,772 Total current assets                                   126,461        126,938 Property and equipment, net                            105,146        100,936 Other assets                                          4,715         4,533 Total assets                                         $ 236,322     $  232,407                                                                     LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable                                     $ 21,766      $  19,645 Deferred revenue                                       5,202          6,214 Accrued compensation and benefits                      3,458          4,975 Accrued expenses                                       11,648         9,241 Current portion of deferred rent                       5,509          5,395 Current portion of capital lease                      770           758 obligation/Related party Total current liabilities                              48,353         46,228 Long-term portion of deferred rent                     43,440         42,756 Long-term portion of capital lease                    2,303         2,500 obligation/Related party Total long-term liabilities                           45,743        45,256 Total liabilities                                      94,096         91,484                                                                     Commitments and contingencies                                                                     Stockholders' equity: Common stock (Class A), $0.001 par value; May 3, 2014 - 100,000 shares authorized, 11,429 shares issued and outstanding; February 1, 2014 - 100,000 shares authorized, 11,361 shares issued and outstanding                                            11             11 Common stock (Class B), $0.001 par value; May 3, 2014 - 35,000 shares authorized, 16,574 shares issued and outstanding; February 1, 2014 - 35,000 shares authorized, 16,642 shares issued and outstanding                                            17             17 Preferred stock, $0.001 par value; May 3, 2014 and February 1, 2014 - 10,000 shares authorized, no shares issued or outstanding                        -              - Additional paid-in capital                             123,598        122,886 Retained earnings                                      18,588         17,997 Accumulated other comprehensive income                12            12 Total stockholders' equity                            142,226       140,923 Total liabilities and stockholders' equity           $ 236,322     $  232,407                                                                                                                          Tilly’s, Inc.  Consolidated Statements of Income  (In thousands, except per share data)  (Unaudited)                                                                                                                Thirteen Weeks Ended                                                        May 3,      May 4,                                                        2014          2013                                                                       Net sales                                              $ 111,134     $ 109,119 Cost of goods sold (includes buying, distribution,      79,807       77,313 and occupancy costs) ^(1) Gross profit ^(1)                                        31,327        31,806 Selling, general and administrative expenses ^(1)       30,250       27,889 Operating income                                         1,077         3,917 Other expense, net                                      -            49 Income before income taxes                               1,077         3,868 Income tax expense                                      486          1,560 Net income                                             $ 591         $ 2,308                                                                       Basic earnings per share of Class A and Class B        $ 0.02        $ 0.08 common stock Diluted earnings per share of Class A and Class B      $ 0.02        $ 0.08 common stock Weighted average basic shares outstanding                27,983        27,692 Weighted average diluted shares outstanding              28,151        28,027                                                                                 Gross profit in the first quarter of fiscal 2013 includes a $0.4 ^(1)  million reclassification of stock-based compensation expense from        selling, general and administrative expenses to cost of goods sold to        correct for an immaterial prior period error.                                                            Tilly’s, Inc.  Consolidated Statements of Cash Flows  (In thousands)  (Unaudited)                                                                                                          Thirteen Weeks Ended                                                     May 3,       May 4,                                                     2014           2013                                                                     Cash flows from operating activities Net income                                          $ 591          $ 2,308 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization                         4,776          4,650 Loss (gain) on disposal of assets                     29             (3      ) Gain on sales and maturities of marketable            (37    )       (44     ) securities Deferred income taxes                                 34             347 Stock-based compensation expense                      838            892 Changes in operating assets and liabilities: Receivables                                           (751   )       (2,155  ) Merchandise inventories                               (6,584 )       (3,070  ) Prepaid expenses and other assets                     (517   )       (1,648  ) Accounts payable                                      2,176          1,912 Accrued expenses                                      1,279          1,493 Accrued compensation and benefits                     (1,517 )       (2,728  ) Deferred rent                                         798            1,882 Deferred revenue                                     (1,012 )      (928    ) Net cash provided by operating activities            103          2,908                                                                        Cash flows from investing activities Purchase of property and equipment                    (7,943 )       (11,435 ) Proceeds from sale of property and equipment          -              11 Purchases of marketable securities                    (4,991 )       - Maturities of marketable securities                  15,000       10,000   Net cash provided by (used in) investing             2,066        (1,424  ) activities                                                                     Cash flows from financing activities Payment of capital lease obligation                  (185   )      (174    ) Net cash used in financing activities                (185   )      (174    )                                                                     Change in cash and cash equivalents                   1,984          1,310 Cash and cash equivalents, beginning of period       25,412       17,314   Cash and cash equivalents, end of period            $ 27,396      $ 18,624                                                                                                                                         Tilly's, Inc.  Store Count and Square Footage                                                                                                                                    Total Gross             Stores        Stores       Stores       Stores       Square                                                                  Footage             Open at       Opened       Closed       Open at      End of Qtr             Beg of        During       During       End of       (in             Qtr           Qtr          Qtr          Qtr          thousands) 2013 Q1     168           7            0            175          1,371 2013 Q2     175           7            0            182          1,423 2013 Q3     182           7            0            189          1,472 2013 Q4     189           7            1            195          1,513                                                                   2014 Q1     195           3            0            198          1,535  Contact:  Investor Relations: ICR, Inc. Anne Rakunas/Joseph Teklits 310-954-1113 anne.rakunas@icrinc.com  
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