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| 8-K - 8-K - TILLY'S, INC. | a8-kq42016earningsrelease.htm |
Exhibit 99.1
Tilly’s, Inc. Announces Fiscal 2016 Fourth Quarter and Full Year Results
Introduces Fiscal 2017 First Quarter Outlook
Fourth Quarter Net Sales of $160.2 Million; Comp Store Sales Increased 0.1%
Fourth Quarter Net Income per Diluted Share of $0.22
Irvine, CA – March 13, 2017 – Tilly’s, Inc. (NYSE: TLYS) today announced financial results for the fourth quarter (thirteen weeks) and full year (52 weeks) of fiscal 2016 ended January 28, 2017.
“We finished fiscal 2016 with three consecutive quarters of year over year operating income growth and our first annual improvement in operating income of the last five years," stated Ed Thomas, President and Chief Executive Officer. "Our strong balance sheet enabled us to reward shareholders with a $20 million special dividend in February. While we are encouraged by these results, we will continue to seek ways to improve profitability and continue our progress during fiscal 2017."
Fourth Quarter Results Overview
The following comparisons refer to operating results for the fourth quarter of fiscal 2016 versus the fourth quarter of fiscal 2015 ended January 30, 2016:
• | Total net sales were $160.2 million, an increase of 0.7% from $159.1 million last year. |
• | Comparable store sales, which include e-commerce sales, increased 0.1%. Comparable store sales increased 0.9% in the fourth quarter last year. |
• | Gross margin, or gross profit as a percentage of net sales, decreased to 30.6% from 31.4% last year. The 80 basis point decrease in gross margin was primarily attributable to a 60 basis point decline in product margins from increased markdowns and a 20 basis point increase in buying, distribution and occupancy costs. |
• | Selling, general and administrative expenses ("SG&A") were $38.7 million, a decrease of $1.8 million from $40.5 million last year. As a percentage of net sales, SG&A improved 130 basis points to 24.1% from 25.4% last year. This improvement was primarily driven by the combination of more efficient marketing spend, lower non-cash store impairment charges, and corporate payroll savings. |
• | Operating income was $10.4 million, or 6.5% of net sales, compared to $9.5 million, or 6.0% of net sales, last year. The 50 basis point increase in our operating margin was primarily attributable to the reductions in SG&A noted above. |
• | Our effective tax rate was 40.2% compared to 69.6% last year. Last year's tax rate was higher primarily due to increased discrete items related to stock option expirations. |
• | Net income was $6.3 million, or $0.22 per diluted share, compared to $2.9 million, or $0.10 per diluted share, last year. |
Fiscal 2016 Full Year Results Overview
The following comparisons refer to operating results for fiscal 2016 versus fiscal 2015 ended January 30, 2016:
• | Total net sales were $569 million, an increase of 3.3% from $551 million last year. |
• | Comparable store sales, which include e-commerce sales, increased 0.5%. Comparable store sales increased 1.2% in fiscal 2015. |
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• | Gross margin, or gross profit as a percentage of net sales, was 29.6% compared to 30.4% last year. This 80 basis point decrease was primarily attributable to a decline in product margins as a result of increased markdowns. |
• | SG&A was $149.1 million, a slight decrease from $149.2 million last year. As a percentage of net sales, SG&A improved 90 basis points to 26.2% from 27.1% last year. This improvement was primarily driven by the combination of more efficient marketing spend, lower stock-based compensation, and corporate payroll savings. |
• | Operating income was $19.3 million, an increase of $1.2 million from $18.1 million last year. Operating margin improved 10 basis points to 3.4% of net sales compared 3.3% last year. |
• | Income tax expense was $8.3 million, or 42.2% of pre-tax income, compared to $10.6 million, or 58.4% of pre-tax income, last year. Last year's tax rate was higher primarily due to increased discrete items related to stock option expirations. |
• | Net income was $11.4 million, or $0.40 per diluted share, compared to $7.5 million, or $0.27 per diluted share, last year. |
Balance Sheet and Liquidity
As of January 28, 2017, the Company had $134 million of cash and marketable securities and no debt outstanding under its revolving credit facility. This compares to $101 million of cash and marketable securities and no debt outstanding as of January 30, 2016. As previously announced, the Company paid a special cash dividend of approximately $20 million to shareholders on February 24, 2017.
Fiscal 2017 First Quarter Outlook
The Company's quarter-to-date comparable store sales, including e-commerce, have decreased by a high single-digit percentage due to a later Easter versus the comparable prior year period and significant weather issues in its heritage markets of California, Arizona and Nevada during February. As a result, the Company expects its first quarter comparable store sales to decrease by a low to mid single-digit percentage, operating loss to be in the range of $(3) million to $(7) million, and loss per share to be in the range of $(0.07) to $(0.15). This compares to a loss of $(0.10) for the first quarter of fiscal 2016. This assumes an anticipated effective tax rate of approximately 40% and weighted average shares of approximately 29 million.
Conference Call Information
A conference call to discuss the financial results is scheduled for today, March 13, 2017, at 4:30 p.m. ET (1:30 p.m. PT). Investors and analysts interested in participating in the call are invited to dial (877) 407-4018 at 4:25 p.m. ET (1:25 p.m. PT). The conference call will also be available to interested parties through a live webcast at www.tillys.com. Please visit the website and select the “Investor Relations” link at least 15 minutes prior to the start of the call to register and download any necessary software.
A telephone replay of the call will be available until March 27, 2017, by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) and entering the conference identification number: 13656838. Please note participants must enter the conference identification number in order to access the replay.
About Tillys
Tillys is a leading destination specialty retailer of West Coast inspired apparel, footwear and accessories with an extensive assortment of the most relevant and sought-after brands rooted in action sports, music,
Tillys is a leading destination specialty retailer of West Coast inspired apparel, footwear and accessories with an extensive assortment of the most relevant and sought-after brands rooted in action sports, music,
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art and fashion. Tillys is headquartered in Irvine, California and currently operates 222 total stores across 31 states and its website, www.tillys.com.
Forward Looking Statements
Certain statements in this press release and oral statements made from time to time by our representatives are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, statements regarding our future financial and operating results, including but not limited to future comparable store sales, future operating income, future net income, future earnings per share, future gross, operating or product margins, anticipated tax rate, future inventory levels, and market share and our business and strategy, including but not limited to expected store openings and closings, expansion of brands and exclusive relationships, development and growth of our e-commerce platform and business, promotional strategy, and any other statements about our future expectations, plans, intentions, beliefs or prospects expressed by management are forward-looking statements. These forward-looking statements are based on management’s current expectations and beliefs, but they involve a number of risks and uncertainties that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including, but not limited to, our ability to respond to changing customer preferences and trends, attract customer traffic at our stores and online, execute our growth and long-term strategies, expand into new markets, grow our e-commerce business, effectively manage our inventory and costs, effectively compete with other retailers, enhance awareness of our brand and brand image, general consumer spending patterns and levels, the effect of weather, and other factors that are detailed in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”), including those detailed in the section titled “Risk Factors” and in our other filings with the SEC, which are available from the SEC’s website at www.sec.gov and from our website at www.tillys.com under the heading “Investor Relations”. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. We do not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. This release should be read in conjunction with our financial statements and notes thereto contained in our Form 10-K.
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Tilly’s, Inc.
Consolidated Balance Sheets
(In thousands, except par value and per share data)
(unaudited)
January 28, 2017 | January 30, 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 78,994 | $ | 51,020 | |||
Marketable securities | 54,923 | 49,932 | |||||
Receivables | 3,989 | 5,397 | |||||
Merchandise inventories | 47,768 | 51,357 | |||||
Prepaid expenses and other current assets | 9,541 | 9,071 | |||||
Total current assets | 195,215 | 166,777 | |||||
Property and equipment, net | 89,219 | 99,026 | |||||
Other assets | 6,072 | 4,948 | |||||
Total assets | $ | 290,506 | $ | 270,751 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 17,584 | $ | 16,022 | |||
Accrued expenses | 23,872 | 18,426 | |||||
Deferred revenue | 10,203 | 8,649 | |||||
Accrued compensation and benefits | 7,259 | 5,751 | |||||
Current portion of deferred rent | 5,643 | 6,106 | |||||
Current portion of capital lease obligation | 835 | 858 | |||||
Total current liabilities | 65,396 | 55,812 | |||||
Long-term portion of deferred rent | 35,890 | 40,891 | |||||
Long-term portion of capital lease obligation | — | 835 | |||||
Total long-term liabilities | 35,890 | 41,726 | |||||
Total liabilities | 101,286 | 97,538 | |||||
Stockholders’ equity: | |||||||
Common stock (Class A), $0.001 par value; January 28, 2017 - 100,000 shares authorized, 13,434 shares issued and outstanding; January 30, 2016 - 100,000 shares authorized, 12,305 shares issued and outstanding | 14 | 12 | |||||
Common stock (Class B), $0.001 par value; January 28, 2017 - 35,000 shares authorized, 15,329 shares issued and outstanding; January 30, 2016 - 35,000 shares authorized, 16,169 shares issued and outstanding | 15 | 16 | |||||
Preferred stock, $0.001 par value; January 28, 2017 and January 30, 2016 - 10,000 shares authorized, no shares issued or outstanding | — | — | |||||
Additional paid-in capital | 138,102 | 133,550 | |||||
Retained earnings | 51,023 | 39,613 | |||||
Accumulated other comprehensive income | 66 | 22 | |||||
Total stockholders’ equity | 189,220 | 173,213 | |||||
Total liabilities and stockholders’ equity | $ | 290,506 | $ | 270,751 | |||
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Tilly’s, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
(unaudited)
Three Months Ended | Twelve Months Ended | ||||||||||||||
January 28, 2017 | January 30, 2016 | January 28, 2017 | January 30, 2016 | ||||||||||||
Net sales | $ | 160,215 | $ | 159,086 | $ | 568,952 | $ | 550,991 | |||||||
Cost of goods sold (includes buying, distribution, and occupancy costs) | 111,151 | 109,129 | 400,493 | 383,745 | |||||||||||
Gross profit | 49,064 | 49,957 | 168,459 | 167,246 | |||||||||||
Selling, general and administrative expenses | 38,667 | 40,481 | 149,129 | 149,150 | |||||||||||
Operating income | 10,397 | 9,476 | 19,330 | 18,096 | |||||||||||
Other income, net | 147 | 12 | 418 | 52 | |||||||||||
Income before income taxes | 10,544 | 9,488 | 19,748 | 18,148 | |||||||||||
Income tax expense | 4,240 | 6,604 | 8,338 | 10,607 | |||||||||||
Net income | $ | 6,304 | $ | 2,884 | $ | 11,410 | $ | 7,541 | |||||||
Basic earnings per share of Class A and Class B common stock | $ | 0.22 | $ | 0.10 | $ | 0.40 | $ | 0.27 | |||||||
Diluted earnings per share of Class A and Class B common stock | $ | 0.22 | $ | 0.10 | $ | 0.40 | $ | 0.27 | |||||||
Weighted average basic shares outstanding | 28,613 | 28,415 | 28,496 | 28,332 | |||||||||||
Weighted average diluted shares outstanding | 28,927 | 28,415 | 28,529 | 28,402 | |||||||||||
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Tilly’s, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
Fiscal Year Ended | |||||||||||
January 28, 2017 | January 30, 2016 | January 31, 2015 | |||||||||
Cash flows from operating activities | |||||||||||
Net income | $ | 11,410 | $ | 7,541 | $ | 14,075 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 23,266 | 22,808 | 21,237 | ||||||||
Stock-based compensation expense | 2,572 | 3,926 | 3,499 | ||||||||
Impairment of assets | 2,352 | 2,593 | 1,007 | ||||||||
Loss on disposal of assets | 16 | 304 | 118 | ||||||||
Gain on sales and maturities of marketable securities | (251 | ) | (100 | ) | (116 | ) | |||||
Deferred income taxes | (1,174 | ) | 1,554 | 1,150 | |||||||
Changes in operating assets and liabilities: | |||||||||||
Receivables | 1,395 | (715 | ) | 3,863 | |||||||
Merchandise inventories | 3,589 | 150 | (5,241 | ) | |||||||
Prepaid expenses and other assets | (449 | ) | (293 | ) | (255 | ) | |||||
Accounts payable | 1,623 | (6,993 | ) | 3,720 | |||||||
Accrued expenses | 6,562 | 6,199 | 3,506 | ||||||||
Accrued compensation and benefits | 1,508 | (160 | ) | 936 | |||||||
Deferred rent | (5,464 | ) | (948 | ) | (206 | ) | |||||
Deferred revenue | 1,554 | 1,079 | 1,017 | ||||||||
Net cash provided by operating activities | 48,509 | 36,945 | 48,310 | ||||||||
Cash flows from investing activities | |||||||||||
Purchase of property and equipment | (17,047 | ) | (23,100 | ) | (23,636 | ) | |||||
Proceeds from sale of property and equipment | 43 | 7 | 41 | ||||||||
Purchases of marketable securities | (99,675 | ) | (74,873 | ) | (59,884 | ) | |||||
Proceeds from marketable securities | 95,021 | 60,000 | 60,000 | ||||||||
Net cash used in investing activities | (21,658 | ) | (37,966 | ) | (23,479 | ) | |||||
Cash flows from financing activities | |||||||||||
Proceeds from exercise of stock options | 2,080 | 3,094 | 304 | ||||||||
Payment of capital lease obligation | (858 | ) | (807 | ) | (758 | ) | |||||
Taxes paid in lieu of shares issued for stock-based compensation | (99 | ) | (35 | ) | — | ||||||
Net cash provided by (used in) financing activities | 1,123 | 2,252 | (454 | ) | |||||||
Change in cash and cash equivalents | 27,974 | 1,231 | 24,377 | ||||||||
Cash and cash equivalents, beginning of period | 51,020 | 49,789 | 25,412 | ||||||||
Cash and cash equivalents, end of period | $ | 78,994 | $ | 51,020 | $ | 49,789 | |||||
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Tilly's, Inc.
Store Count and Square Footage
Stores Open at Beg of Quarter | Stores Opened During Quarter | Stores Closed During Quarter | Stores Open at End of Quarter | Total Gross Square Footage End of Quarter (in thousands) | |||||
2015 Q4 | 220 | 6 | 2 | 224 | 1,704 | ||||
2016 Q1 | 224 | — | — | 224 | 1,704 | ||||
2016 Q2 | 224 | 2 | 1 | 225 | 1,713 | ||||
2016 Q3 | 225 | 1 | 1 | 225 | 1,716 | ||||
2016 Q4 | 225 | — | 2 | 223 | 1,703 | ||||
Investor Relations Contact:
Michael Henry, Chief Financial Officer
(949) 609-5599, ext. 17000
irelations@tillys.com
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