Roth Capital Sees Tilly's (TLYS) Possibly Offering a Special Dividend, Preannounces Positive Results

Roth Capital analyst Matt Koranda reiterated a Buy rating and $13.00 price target on Tilly's (NYSE: TLYS) after the company provided a Holiday 2020 update, citing +2.7% comps in the nine-week holiday period ended 1/2/21. The analyst views this update as positive vs. the consensus sales growth expectation of (5%) for full 4FQ. Additionally, Tilly's cash balance of $169mn implies >$40mn in FCF in the last nine weeks vs >$30mn in December alone.

The analyst believes this healthy cash balance boosts the likelihood of a special dividend after November 2021 as recent credit facility amendments prohibit payouts until after this month. He noted two issues:
1) With under three weeks remaining in the quarter (4FQ ends 1/30), QTD sales are tracking ahead of consensus/ROTHe expectations. Total revenue through 1/2/21 is up +3.3% YoY, ahead of prior consensus/ROTHe of (5%)/(3%) YoY. Comparable store sales are +2.7% YoY. Both stores and e-commerce appear to be driving the better-than-expected performance, with physical store/e-commerce QTD sales (12%)/+65% YoY vs. prior 4FQ ROTHe of (14%)/+43% YoY.

2) Tilly's cash balance of $169mn (as of 1/4/21) appears well ahead of our prior 4FQ ending balance projection of $125mn. This suggests >$40mn of FCF QTD from a combination of improving margins and working capital flush.

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

Shares of Tilly's closed at $9.71 yesterday.

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