Tilly's, Inc. (TLYS) Tops Q4 EPS by 11c, Revenues Beat
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Tilly's, Inc. (NYSE: TLYS) reported Q4 EPS of $0.29, $0.11 better than the analyst estimate of $0.18. Revenue for the quarter came in at $177.9 million versus the consensus estimate of $176.23 million.
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.
"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 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.
For earnings history and earnings-related data on Tilly's, Inc. (TLYS) click here.
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