Tilly's, Inc. Announces Fiscal 2020 Fourth Quarter and Full Year Results

IRVINE, Calif.--()--Tilly’s, Inc. (NYSE: TLYS, the "Company") today announced financial results for the fourth quarter and full 2020 fiscal year ended January 30, 2021.

"Finishing such a challenging year with a positive fourth quarter comp, a significantly stronger e-com business, and improved earnings per share compared to last year's fourth quarter, along with a strong, debt-free balance sheet was a remarkable accomplishment," commented Ed Thomas, President and Chief Executive Officer.

Fiscal 2020 Fourth Quarter Results Overview

The following comparisons refer to operating results for the fourth quarter of fiscal 2020 versus the fourth quarter of fiscal 2019 ended February 1, 2020:

  • Total net sales were $177.9 million, an increase of $5.4 million or 3.2%, compared to $172.5 million last year. Total comparable net sales, including both physical stores and e-commerce, increased by 2.5% compared to last year.
    • Net sales from physical stores were $122.5 million, a decrease of $16.7 million or 12.0%, compared to $139.2 million last year. Comparable net sales from physical stores decreased by 12.3%. Store traffic decreased by 25% compared to last year's fourth quarter, partially offset by increases in conversion rate and average transaction value. Net sales from stores represented 68.9% of total net sales compared to 80.7% of total net sales last year. The Company ended the fourth quarter of fiscal 2020 with 238 total stores, substantially all of which were open to the public but subject to government restrictions on customer traffic and with reduced operating hours as a result of the COVID-19 pandemic. This compares to 240 total stores, all of which were open to the public without restrictions, last year.
    • Net sales from e-commerce were $55.4 million, an increase of $22.1 million or 66.5% compared to approximately $33.3 million last year. E-commerce net sales represented 31.1% of total net sales compared to 19.3% of total net sales last year.
  • Gross profit was $58.3 million, an increase of $6.1 million compared to $52.1 million last year. Gross margin, or gross profit as a percentage of net sales, was 32.7%, an improvement of 250 basis points compared to 30.2% last year. Product margins improved by 210 basis points as a percentage of net sales primarily due to reduced total markdowns. Total buying, distribution and occupancy costs improved by 40 basis points as a percentage of net sales. Occupancy costs improved by 170 basis points as a percentage of net sales and by $2.3 million in the aggregate, primarily due to favorable lease negotiations and a decrease in depreciation compared to last year. Distribution costs deleveraged by 140 basis points as a percentage of net sales and increased by $2.8 million, primarily due to an increase in e-commerce shipping charges of $3.1 million associated with the significant increase in e-commerce orders. Buying costs improved by 10 basis points.
  • Selling, general and administrative expenses ("SG&A") were $44.1 million, an increase of $0.5 million compared to $43.6 million last year. SG&A as a percentage of net sales was 24.8%, an improvement of 50 basis points compared to 25.3% last year. Total e-commerce marketing and fulfillment expenses increased by $4.0 million associated with significant increase in e-commerce activity compared to last year. This increase was largely offset by reduced store payroll and related benefits expenses of $2.5 million resulting from the reduced operating hours associated with the COVID-19 pandemic and a reduction in print advertising costs of $1.0 million compared to last year.
  • Operating income was $14.1 million, or 7.9% of net sales, compared to $8.5 million, or 4.9% of net sales, last year. The $5.6 million increase in operating income was primarily due to the combined impact of the factors noted above.
  • Other expense was $0.1 million compared to other income of $0.6 million last year, primarily due to earning lower interest rates on our investments this year and approximately $0.2 million in costs associated with our new ABL credit facility.
  • Income tax expense was $5.1 million, or 36.6% of pre-tax income, compared to $2.8 million, or 30.9% of pre-tax income, last year.
  • Net income was $8.9 million, or $0.29 per diluted share, compared to $6.3 million, or $0.21 per diluted share, last year.

Fiscal 2020 Full Year Results Overview

The following comparisons refer to operating results for the fifty-two weeks of fiscal 2020 versus the fifty-two weeks of fiscal 2019:

  • Total net sales were $531.3 million, a decrease of $88.0 million or 14.2%, compared to $619.3 million last year primarily as a result of the various periods of store closures, reduced store operating hours, and restrictions on customer traffic into physical stores resulting from the COVID-19 pandemic.
    • Net sales from physical stores were $357.9 million, a decrease of $162.9 million or 31.3%, compared to $520.8 million last year. In terms of total available store operating days in fiscal 2020, physical stores were open for 50% of the first quarter, 65% of the second quarter, 94% of the third quarter, and substantially all of the fourth quarter. Net sales from stores represented 67.4% of total net sales compared to 84.1% of total net sales last year.
    • Net sales from e-commerce were $173.4 million, an increase of $74.9 million or 76.2%, compared to $98.5 million last year. E-commerce net sales represented 32.6% of total net sales compared to 15.9% last year.
  • Gross profit was $142.2 million, a decrease of $44.5 million or 23.8%, compared to $186.7 million last year. Gross margin was 26.8%, a decrease of 330 basis points as a percentage of net sales, compared to 30.1% last year. Product margins improved 60 basis points as a percentage of net sales primarily due to reduced total markdowns. Total buying, distribution and occupancy costs improved by 400 basis points as a percentage of net sales. Occupancy costs deleveraged 200 basis points as a percentage of net sales, despite being reduced by $4.1 million and having two fewer stores compared to last year, against lower total net sales. Distribution costs deleveraged 190 basis points as a percentage of net sales primarily due to an increase in e-commerce shipping charges of $8.5 million resulting from a greater volume of e-commerce orders. Buying costs deleveraged 10 basis points as a percentage of net sales.
  • SG&A expenses were $145.2 million, or 27.3% of net sales, compared to $158.3 million, or 25.6% of net sales, last year. The $13.0 million decrease in SG&A was primarily due to reduced store payroll and related benefits expenses of $18.9 million resulting from the various periods of pandemic-related store closures this year and reduced staffing levels upon reopening of stores and a $2.3 million decrease in print advertising costs. Several other expenses were also reduced to a much smaller degree. These expense reductions were partially offset by higher aggregate e-commerce marketing and fulfillment expenses of approximately $11.5 million associated with significant increase in e-commerce activity compared to last year.
  • Operating loss was $(3.0) million, or (0.6)% of net sales, compared to operating income of $28.5 million, or 4.6% of net sales, last year. The decrease in operating results was primarily attributable to the impacts of the COVID-19 pandemic on the Company's business as noted above.
  • Other income was $0.6 million, a decrease of $2.3 million compared to $2.9 million last year, primarily due to earning lower interest rates on our investments and incurring approximately $0.2 million of costs in this year's fourth quarter associated with our new ABL credit facility.
  • Income tax benefit was $1.3 million, or 53.5% of pre-tax loss, compared to income tax expense of $8.7 million, or 27.9% of pre-tax income, last year.
  • Net loss was $(1.1) million, or $(0.04) per basic share, compared to net income of $22.6 million, or $0.76 per diluted share, last year.

Balance Sheet and Liquidity

As of January 30, 2021, the Company had $141.1 million of cash and marketable securities, including $2.2 million of withheld store lease payments, and no debt outstanding. This compares to $139.9 million in cash and marketable securities with no withheld store lease payments and no debt outstanding as of February 1, 2020. The Company ended fiscal 2020 with merchandise inventories per square foot down 0.7% compared to last year.

Fiscal 2021 First Quarter Outlook

On March 18, 2020, all of the Company's stores were closed as a result of the COVID-19 pandemic and remained closed for the remainder of the first quarter of fiscal 2020 and beyond. During this store shutdown period, net sales from physical stores ceased while net sales from e-commerce increased significantly, but not enough to overcome the complete loss of sales from physical stores during the latter half of last year's first quarter. The pandemic remains ongoing and continues to impact retail in physical stores in terms of reduced operating hours, restrictions on customer traffic compared to pre-pandemic levels, and other factors. As the Company begins to anniversary last year's store shutdown period, it expects its net sales and earnings per share will be significantly improved compared to its reported net sales of $77.3 million and loss per share of $(0.59) during last year's first quarter. However, specific results are impossible to predict, particularly how close store performance will be relative to fiscal 2019 pre-pandemic levels as well as how e-commerce will perform relative to the significant net sales increases achieved during last year's store shutdown period. Due to the continuing uncertainties surrounding the pandemic, including but not limited to its impacts on consumer behavior, future customer traffic to physical stores, the Company's ability to continue to operate some or all of its stores or e-commerce at any point in time, and ongoing port delivery delays, the Company cannot provide any specific net sales or earnings per share guidance at this time.

The Company is providing the following updates regarding its fiscal 2021 first quarter business through March 8, 2021 compared to the comparable period of last year's first quarter:

  • The Company's total comparable net sales, including both physical stores and e-commerce, were $45.3 million, a decrease of $2.2 million or 4.6%, compared to $47.5 million last year. Total comparable net sales decreased in February 2021, but have been positive thus far in March 2021.
  • Comparable net sales from physical stores were $34.5 million, a decrease of $5.3 million or 13.3% compared to $39.8 million last year. Store traffic has decreased by 28% compared to the corresponding period of last year, partially offset by increases in conversion rate and average transaction value.
  • Net sales from e-commerce were $10.7 million, an increase of $3.1 million or 40.6%, compared to $7.6 million last year.
  • As of March 9, 2021, the Company had $138.7 million of cash and marketable securities, including an aggregate of $2.1 million of withheld store lease payments from last year's store shutdown period, and no debt outstanding. This compares to $115.5 million of cash and marketable securities with no withheld store lease payments and no debt outstanding for the comparable fiscal date last year. In February 2020, the Company paid aggregate cash dividends of $29.7 million, or $1.00 per share, to stockholders, which was not repeated this year due to certain temporary restrictions on such payments within the Company's asset-backed credit facility which expire in November 2021. Based on all currently available information, the Company believes the combination of its cash, marketable securities, cash flows from operations and credit facility availability will be more than sufficient to support its operations for at least the next twelve months.

Conference Call Information

A conference call to discuss these financial results is scheduled for today, March 11, 2021, 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 (domestic) or (201) 689-8471 (international) 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 through March 25, 2021, by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international). Please note participants must enter the conference identification number of 13716530 in order to access the replay.

About Tillys

Tillys is a leading, destination specialty retailer of casual apparel, footwear and accessories for young men, young women, boys and girls with an extensive selection of iconic global, emerging, and proprietary brands rooted in an active, outdoor and social lifestyle. Tillys is headquartered in Irvine, California and currently operates 238 total stores across 33 states, as well as its website, www.tillys.com.

Forward-Looking Statements

Certain statements in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, statements regarding the overall effect of the novel coronavirus (COVID-19) pandemic, including its impacts on us, our operations, or our future financial condition or operating results, the actions taken or to be taken in response to the COVID-19 pandemic, and the impacts thereof on us, our operations, or our future financial condition or operating results, expectations regarding customer traffic and sales activities once stores have reopened, the effects of guidance from local, state and federal governments and health organizations on our future business operations, the possibility of repaying withheld store rents, our ability to properly manage our inventory levels, and any other statements about our future cash position, financial flexibility, 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, the effects of the COVID-19 pandemic (or other weather, epidemics, pandemics, or other public health issues) on our business and operations, and our ability to respond thereto (including any surges in the number of cases related thereto), 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, attract talented employees, realize anticipated, enhance awareness of our brand and brand image, general consumer spending patterns and levels, the markets generally, our ability to satisfy our financial obligations, including under our credit facility and our leases, 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.

 

Tilly’s, Inc.

Consolidated Balance Sheets

(In thousands, except par value)

(unaudited)

 

 

January 30,
2021

 

February 1,
2020

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

76,184

 

 

$

70,137

 

Marketable securities

64,955

 

 

69,780

 

Receivables

8,724

 

 

7,485

 

Merchandise inventories

55,698

 

 

56,901

 

Prepaid expenses and other current assets

6,595

 

 

4,561

 

Total current assets

212,156

 

 

208,864

 

Operating lease assets

227,881

 

 

263,649

 

Property and equipment, net

52,639

 

 

66,176

 

Other assets

12,797

 

 

7,951

 

Total assets

$

505,473

 

 

$

546,640

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

24,983

 

 

$

20,562

 

Accrued expenses

30,682

 

 

20,755

 

Deferred revenue

13,492

 

 

11,761

 

Accrued compensation and benefits

9,899

 

 

7,190

 

Dividends payable

 

 

29,677

 

Current portion of operating lease liabilities

54,503

 

 

55,321

 

Total current liabilities

133,559

 

 

145,266

 

Noncurrent operating lease liabilities

211,292

 

 

240,755

 

Other

 

 

718

 

Total liabilities

344,851

 

 

386,739

 

Stockholders’ equity:

 

 

 

Common stock (Class A)

22

 

 

22

 

Common stock (Class B)

8

 

 

8

 

Preferred stock

 

 

 

Additional paid-in capital

155,437

 

 

153,377

 

Retained earnings

5,135

 

 

6,280

 

Accumulated other comprehensive income

20

 

 

214

 

Total stockholders’ equity

160,622

 

 

159,901

 

Total liabilities and stockholders’ equity

$

505,473

 

 

$

546,640

 

 

Tilly’s, Inc.

Consolidated Statements of Income (Loss)

(In thousands, except per share data)

(unaudited)

 

 

Thirteen Weeks Ended

 

Fifty-Two Weeks Ended

 

January 30,
2021

 

February 1,
2020

 

January 30,
2021

 

February 1,
2020

Net sales

$

177,920

 

 

$

172,479

 

 

$

531,329

 

 

$

619,300

 

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

119,658

 

 

120,345

 

 

389,139

 

 

432,592

 

Gross profit

58,262

 

 

52,134

 

 

142,190

 

 

186,708

 

Selling, general and administrative expenses

44,148

 

 

43,639

 

 

145,230

 

 

158,253

 

Operating income (loss)

14,114

 

 

8,495

 

 

(3,040

)

 

28,455

 

Other (expense) income, net

(111

)

 

589

 

 

581

 

 

2,901

 

Income (loss) before income taxes

14,003

 

 

9,084

 

 

(2,459

)

 

31,356

 

Income tax expense (benefit)

5,132

 

 

2,811

 

 

(1,314

)

 

8,734

 

Net income (loss)

$

8,871

 

 

$

6,273

 

 

$

(1,145

)

 

$

22,622

 

Basic income (loss) per share of Class A and Class B common stock

$

0.30

 

 

$

0.21

 

 

$

(0.04

)

 

$

0.77

 

Diluted income (loss) per share of Class A and Class B common stock

$

0.29

 

 

$

0.21

 

 

$

(0.04

)

 

$

0.76

 

Weighted average basic shares outstanding

29,711

 

 

29,628

 

 

29,697

 

 

29,533

 

Weighted average diluted shares outstanding

30,115

 

 

29,926

 

 

29,697

 

 

29,788

 

 

Tilly’s, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

 

 

Fifty-Two Weeks Ended

 

January 30,
2021

 

February 1,
2020

Cash flows from operating activities

 

 

 

Net (loss) income

$

(1,145

)

 

$

22,622

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

19,055

 

 

20,948

 

Stock-based compensation expense

2,036

 

 

2,136

 

Impairment of long-lived assets

955

 

 

282

 

Loss on disposal of assets

87

 

 

908

 

Gain on sales and maturities of marketable securities

(714

)

 

(1,660

)

Deferred income taxes

(4,949

)

 

(5,720

)

Changes in operating assets and liabilities:

 

 

 

Receivables

96

 

 

3,204

 

Merchandise inventories

1,203

 

 

(1,092

)

Prepaid expenses and other current assets

(1,722

)

 

557

 

Accounts payable

5,020

 

 

(4,227

)

Accrued expenses

10,600

 

 

1,369

 

Accrued compensation and benefits

2,709

 

 

(1,740

)

Operating lease liabilities

3,935

 

 

(2,541

)

Deferred revenue

1,731

 

 

1,388

 

Net cash provided by operating activities

38,897

 

 

36,434

 

Cash flows from investing activities

 

 

 

Purchases of property and equipment

(8,471

)

 

(14,299

)

Purchases of marketable securities

(80,896

)

 

(126,526

)

Proceeds from marketable securities

86,170

 

 

134,316

 

Net cash used in investing activities

(3,197

)

 

(6,509

)

Cash flows from financing activities

 

 

 

Proceeds from line of credit

23,675

 

 

 

Repayment of line of credit

(23,675

)

 

 

Dividends paid

(29,677

)

 

(29,453

)

Proceeds from exercise of stock options

24

 

 

1,590

 

Taxes paid in lieu of shares issued for stock-based compensation

 

 

(85

)

Net cash used in financing activities

(29,653

)

 

(27,948

)

Change in cash and cash equivalents

6,047

 

 

1,977

 

Cash and cash equivalents, beginning of period

70,137

 

 

68,160

 

Cash and cash equivalents, end of period

$

76,184

 

 

$

70,137

 

 

Tilly's, Inc.

Store Count and Square Footage

 

 

Store
Count at
Beginning of
Quarter

 

New Stores
Opened
During Quarter

 

Stores
Permanently
Closed

During Quarter

 

Store Count at
End of Quarter

 

Total Gross
Square Footage
End of Quarter
(in thousands)

2020 Q1

240

 

 

1

 

239

 

1,768

2020 Q2

239

 

 

1

 

238

 

1,760

2020 Q3

238

 

1

 

1

 

238

 

1,753

2020 Q4

238

 

1

 

1

 

238

 

1,751

Note: The store counts noted above do not reflect the impact of stores temporarily closed as a result of the COVID-19 pandemic.

Contacts

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

Contacts

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