Tilly's, Inc. (NYSE: TLYS) reported Q2 EPS of $0.18, $0.35 better than the analyst estimate of ($0.17). Revenue for the quarter came in at $135.8 million versus the consensus estimate of $130.68 million.

Second Quarter Results Overview

The following comparisons refer to operating results for the second quarter of fiscal 2020 versus the second quarter of fiscal 2019 ended August 3, 2019:

• Total net sales were $135.8 million, a decrease of $25.9 million or 16.0%, compared to $161.7 million last year. As previously announced, the Company began the second quarter with all 239 of its stores closed to the public as a result of the impacts of the COVID-19 pandemic. Beginning on May 15, 2020, the Company began reopening its stores in a phased approach. The Company reopened 144 of its stores during the second half of May, 88 more stores throughout the month of June, and 3 additional stores in early July to reach 235, or 98%, of total stores reopened. Following California state direction on July 13 to close indoor malls, the Company had 33 of its 98 California stores closed for the remainder of the quarter. Net sales from physical stores for the second quarter of fiscal 2020 were $83.9 million, a decrease of $55.1 million or 39.6%, compared to $138.9 million for the second quarter of fiscal 2019. Net sales from stores represented 61.7% of total net sales for the quarter compared to 85.9% of total net sales last year. Net sales from e-commerce for the second quarter of fiscal 2020 were $52.0 million, an increase of $29.2 million or 127.8%, compared to $22.8 million for the second quarter of fiscal 2019. E-commerce net sales represented 38.3% of total net sales for the quarter compared to 14.1% last year. The Company ended the second quarter of fiscal 2020 with 238 total stores, including one RSQ-branded pop-up store, of which 33 California stores were closed, compared to 229 total stores, including three RSQ-branded pop-up stores, all of which were open to the public without restrictions last year.
• Gross profit was $41.7 million, or 30.7% of net sales, compared to $51.7 million, or 32.0% of net sales last year. Product margins improved 360 basis points as a percentage of net sales primarily due to strong regular-priced selling upon the reopening of stores. Buying, distribution and occupancy costs deleveraged by 490 basis points collectively against lower total sales. Occupancy costs deleveraged 270 basis points as a percentage of net sales, despite being $0.4 million lower than last year, against lower total net sales. Distribution costs deleveraged 200 basis points as a percentage of net sales primarily due to an increase in e-commerce shipping costs of $3.0 million resulting from a greater volume of e-commerce orders. Buying costs deleveraged 20 basis points as a percentage of net sales.
• Selling, general and administrative expenses ("SG&A") were $34.0 million, or 25.0% of net sales, compared to $39.6 million, or 24.5% of net sales, last year. The $5.6 million decrease in SG&A was primarily due to reduced store payroll and related benefits expenses of $7.5 million resulting from the various periods of store closures during the quarter and reduced staffing levels upon reopening of stores. Most other expenses were also reduced compared to last year. These expense decreases were partially offset by higher e-commerce marketing and fulfillment expenses of approximately $3.9 million associated with significant growth in e-commerce orders compared to last year.
• Operating income was $7.7 million, or 5.7% of net sales, compared to operating income of $12.1 million, or 7.5% of net sales, last year. The decrease in operating income was primarily attributable to the impacts of the COVID-19 pandemic on our business as noted above.
• Income tax expense was $2.8 million, or 34.3% of pre-tax income, compared to $3.4 million, or 26.8% of pre-tax income, last year. Income tax expense for both periods includes certain discrete items associated with employee stock-based award activity. The increase in the effective income tax rate for fiscal 2020 is primarily due to the anticipated benefit from the Coronavirus Aid, Relief, and Economic Security Act enacted on March 27, 2020 (the "CARES Act"), which provides for net operating losses in fiscal 2020 to be carried back to earlier tax years with higher tax rates than the current year.
• Net income was $5.3 million, or $0.18 per diluted share, compared to $9.3 million, or $0.31 per diluted share, last year.

"I am very proud of our team's efforts managing through the unanticipated challenges we faced during the quarter," commented Ed Thomas, President and Chief Executive Officer. "Our second quarter results were much better than we anticipated considering that the quarter started with all stores closed. The third quarter has been significantly impacted by the delay in back-to-school dates thus far, but we continue to carefully manage our inventory levels and expenses to protect our long-term health to the best of our ability in this largely unpredictable environment."

For earnings history and earnings-related data on Tilly's, Inc. (TLYS) click here.