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Tilly's (TLYS) Tops Q4 Views on Strong Assortment, Marketing; Stifel Highlights Three Key Initiative for 2015

March 19, 2015 8:59 AM EDT
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Price: $6.80 -1.45%

Rating Summary:
    4 Buy, 9 Hold, 0 Sell

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Stifel affirms Tilly's (NYSE: TLYS) at Hold following Q4 results and outlook reported on Wednesday night.

Analyst Richard Jaffe noted that Q4 EPS of $0.25 compared with the firm's outlook calling for EPS of $0.23. Comps rose 2.9 percent, which the analyst says is due to a compelling and more differentiated product assortment, engaging marketing, effective digital efforts and a better retail environment.

Tilly's is looking for Q1 EPS of $0.03 to $0.05, while Stifel was at $0.02. Comps are expected to grow in the positive low-single-digit range.

Jaffe also noted the following key strategic initiatives for 2015:

1. Increase Product Differentiation and Innovation in the Assortment – The company has increased both the product and the brands that are new, unique or exclusive to Tilly’s. In addition, Tilly’s has added more exclusive collaborations with brands; recent exclusives include styles from Neff and LRG. Management added new product offerings which included: Hall of Fame and Free People. By adding more relevant merchandise, we believe the company can grow comps and gain market share over the long term.

2. Greater Emphasis on Digital Platform – During 3Q:14, Tilly’s completed its fully integrated digital platform. The new website has an improved look/feel, navigation and performance. We believe Tilly’s has a significant opportunity to increase its market share as e-commerce only represents approximately 13% of total sales by our estimation. In efforts to increase brand awareness, the company plans to utilize digital to leverage its new loyalty program “Tilly’s Hook Up” and to increase digital marketing, particularly through mobile devices. Tilly’s Hook Up has grown significantly and surpassed one million members.

The venue provides a seamless shopping experience for its customer. The company also offers internet-exclusive merchandise in addition to product found in stores, providing an even broader and more diverse offering. The website is an effective comp driver as it reaches customers who do not live near a Tilly’s store. The company utilizes the web to market new products, promote and advertise events which likely aids in both store and website traffic. In addition, the company plans to add more personalization and customization in its marketing efforts. We believe that e-commerce will continue to be an important component of the Tilly’s operating model, and has the potential to contribute well above 15% of the company’s total sales in the long term with margins at least similar to, and possibly higher than retail stores.

3. Evolve Real Estate Strategy – Management indicated its plans to slow square footage growth in the near term. In 2015, the company plans to open 15 stores, a 6% increase, versus the historical 15% additional stores per year. In addition, new stores will be ~10% smaller, 6,700-7,200 square feet (old stores were approximately 7,800 square feet), creating what we believe to be a more productive stores. The company also discussed its plans to further develop an outlet strategy which requires less capital and can generate strong returns. Roughly 30% of new Tilly’s stores will be outlets. Both full-line and outlet stores are performing in-line with the new store economic model.

For an analyst ratings summary and ratings history on Tilly's click here. For more ratings news on Tilly's click here.

Tilly's closed at $13.42 yesterday.



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Analyst Comments, Analyst EPS View, Retail Sales