Tilly's, Inc. (TLYS) Tops Q2 EPS by 6c, Beats on Revenues; Offers 3Q EPS Guidance Above Consensus

Tilly's, Inc. (NYSE: TLYS) reported Q2 EPS of $0.11, $0.06 better than the analyst estimate of $0.05. Revenue for the quarter came in at $138.8 million versus the consensus estimate of $135.99 million.

Fiscal 2017 Third Quarter Outlook

Based on current and historical trends, the Company expects its third quarter comparable store sales to be in the range of flat to up low single-digits on a percentage basis, operating income to be in the range of approximately $9.0 million to $11.5 million, and income per diluted share to be in the range of $0.19 to $0.24. This compares to operating income of $10.7 million and income per diluted share of $0.22 for the third quarter of fiscal 2016. This assumes an anticipated effective tax rate of approximately 40% and weighted average shares of approximately 29 million.

GUIDANCE:

Tilly's, Inc. sees Q3 2017 EPS of $0.19-$0.24, versus the consensus of $0.17.

The following comparisons refer to operating results for the second quarter of fiscal 2017 versus the second quarter of fiscal 2016 ended July 30, 2016:

• Total net sales were $138.8 million, an increase of 1.8% from $136.4 million last year.
• Comparable store sales, which includes e-commerce sales, increased 2.1%. Comparable store sales increased 0.9% in the second quarter last year.
• Gross profit was $40.9 million, an increase of 5.4% from $38.8 million last year. Gross margin, or gross profit as a percentage of net sales, increased to 29.5% from 28.5% last year. The 100 basis point increase in gross margin was attributable to a 60 basis point increase in product margins as a result of reduced markdowns, and a 40 basis point improvement in buying, distribution and occupancy costs due to leveraging these costs against higher total sales.
• Measured in accordance with accounting principles generally accepted in the United States (\"GAAP\"), selling, general and administrative expenses (\"SG&A\") were $42.2 million, or 30.4% of net sales, compared to $36.6 million, or 26.8% of net sales, last year. This increase was attributable to a previously disclosed $6.2 million legal provision. On a non-GAAP basis, excluding the legal provision, SG&A decreased to $36.0 million, or 25.9% of net sales, primarily due to reduced marketing spend and lower non-cash store impairment charges, partially offset by expenses related to ongoing system implementations and increased store payroll as a result of minimum wage increases.
• On a GAAP basis, operating loss was $(1.2) million, or (0.9)% of net sales, compared to operating income of $2.2 million, or 1.6% of net sales, last year. The decline in operating results was attributable to the previously noted $6.2 million legal provision, offset by the combination of our comparable store sales growth, gross margin increase, and other SG&A reductions noted above. On a non-GAAP basis, excluding the legal provision, operating income was $4.9 million, or 3.5% of net sales.
• On a GAAP basis, income tax benefit was $(0.4) million, or 42.8% of pre-tax loss, compared to income tax expense of $0.9 million, or 38.3% of pre-tax income last year. On a non-GAAP basis, excluding the impact of the legal provision, income tax expense was $2.0 million, or 39.1% of pre-tax income.
• On a GAAP basis, net loss was $(0.6) million, or $(0.02) per share, compared to net income of $1.4 million, or $0.05 per diluted share, last year. On a non-GAAP basis, excluding the impact of the legal provision, net income was $3.1 million, or $0.11 per diluted share.
• Introduces Fiscal 2017 Third Quarter Outlook
• Second Quarter Net Sales of $138.8 Million; Comp Store Sales Increase 2.1%;
• GAAP Net Loss per Share of $(0.02), Including $6.2 Million Legal Provision;
• Non-GAAP Net Income per Share of $0.11, Excluding Legal Provision, Exceeds Outlook Range

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

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