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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