Tilly's, Inc. (TLYS) Tops Q2 EPS by 3c, Revenues Beat; Offers 3Q EPS/Revenue Mid-Points Above Consensus
Tilly's, Inc. (NYSE: TLYS) reported Q2 EPS of $0.29, $0.03 better than the analyst estimate of $0.26. Revenue for the quarter came in at $157.4 million versus the consensus estimate of $155.3 million.
“Tillys delivered its strongest comparable store net sales result since the third quarter of fiscal 2016, and we believe we have our e-com business back on track," commented Ed Thomas, President and Chief Executive Officer. "The back-to-school season is off to a strong start, and we feel optimistic about the back half of fiscal 2018."
- Total net sales were $157.4 million, an increase of $18.6 million, or 13.4%, from $138.8 million last year. As a result of the calendar shift impact of last year\'s 53rd week in the retail calendar, which caused a portion of the back-to-school season to shift into the second quarter, approximately $12.3 million of comparable net sales were realized in the second quarter this year rather than in the third quarter. The remaining net sales increase of approximately $6.3 million was primarily attributable to increased comparable store net sales and net sales from five net new stores.
- Comparable store net sales, which includes e-commerce net sales, increased 4.4% in total. Comparable store net sales in physical stores increased 3.8%. E-commerce net sales increased 8.1%. Comparable store net sales increased 2.1% in the second quarter last year.
- Gross profit was $50.1 million, an increase of 22.4% from $40.9 million last year, primarily due to the calendar shift noted above and increased comparable store net sales. Gross margin, or gross profit as a percentage of net sales, increased to 31.8% from 29.5% last year. This 230 basis point improvement in gross margin was primarily attributable to leveraging lower total occupancy costs on higher total net sales. Product margins were approximately flat.
- Selling, general and administrative expenses ("SG&A") were $37.6 million, or 23.9% of net sales, compared to $42.2 million, or 30.4% of net sales, last year. Last year\'s SG&A included an estimated $6.2 million provision related to a legal matter. This year\'s SG&A includes a $1.5 million reduction to this same provision as a result of the final settlement of the related legal matter in early August 2018. Taken together, these legal matter impacts accounted for 540 basis points of the total 650 basis point improvement in SG&A. The remaining 110 basis point improvement in SG&A was primarily due to leveraging store and corporate payroll costs against higher total net sales. On a non-GAAP basis, excluding the noted legal matter impacts from both years, SG&A increased to $39.1 million, or 24.8% of net sales, compared to $36.0 million, or 25.9% of net sales, last year. Primary dollar increases in SG&A were attributable to certain marketing and other selling expenses associated with a portion of the back-to-school season shifting from the third quarter to the second quarter, store payroll increases due to higher net sales and minimum wage increases, and corporate bonus provision increases due to improved year-over-year operations.
- Operating income was $12.5 million, or 7.9% of net sales, compared to an operating loss of $(1.2) million, or (0.9)% of net sales, last year. Of this $13.7 million improvement in year-over-year operating income, approximately $7.6 million was attributable to the aggregate year-over-year impact of the legal matter noted above, approximately $4.2 million was attributable to the retail calendar shift impact noted earlier, and approximately $1.9 million was attributable to increased comparable store net sales results. On a non-GAAP basis, excluding the legal matter impacts from both years, operating income was $11.0 million, or 7.0% of net sales, compared to $4.9 million, or 3.5% of net sales, last year.
- Income tax expense was $3.3 million, or 25.3% of pre-tax income, compared to income tax benefit of $(0.4) million, or 42.8% of pre-tax loss last year. Income tax expense/(benefit) includes certain discrete items associated with employee stock-based award activity in both periods.
- Net income was $9.7 million, or $0.33 per diluted share, compared to a net loss of $(0.6) million, or $(0.02) per share, last year. Of the $0.35 improvement in year-over-year earnings per share, approximately $0.17 was attributable to the aggregate legal matter impacts noted above, approximately $0.10 was attributable to the retail calendar shift impact noted earlier, and the remaining $0.08 was due to improved operating results. On a non-GAAP basis, excluding the impacts of the legal matter from both years, net income was $8.6 million, or $0.29 per diluted share, compared to net income of $3.1 million, or $0.11 per diluted share, last year.
Tilly's, Inc. sees Q3 2018 EPS of $0.20-$0.24, versus the consensus of $0.21. Tilly's, Inc. sees Q3 2018 revenue of $145-151 million, versus the consensus of $142.86 million.
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