Today, Tilly’s, Inc. unveiled its financial performance for the first quarter of fiscal 2024, concluding on May 4, 2024. Hezy Shaked, Co-Founder, Interim President, and Chief Executive Officer, acknowledged the persistent challenges posed by the broader economic landscape. However, he expressed confidence in the strides made to enhance product margins and bolster customer engagement through marketing initiatives. Despite anticipating ongoing hurdles in sales improvement in the short term, Shaked highlighted the ongoing efforts as investments poised to yield future benefits once market conditions ameliorate.
First Quarter Fiscal 2024 Operating Results Overview:
Comparing the operating results for the first quarter of fiscal 2024 ended May 4, 2024, with the corresponding period in fiscal 2023 ended April 29, 2023:
Total net sales amounted to $115.9 million, marking a decrease of $7.8 million or 6.3% from the prior year’s $123.6 million. Comparable net sales, encompassing both physical stores and e-commerce, witnessed a decline of 9.4% compared to the 13-week period ending May 6, 2023. Physical store net sales stood at $92.8 million, down by $5.0 million or 5.1% from the previous year’s $97.8 million, with a comparable store net sales decrease of 8.6%. Despite the decrease, physical store net sales represented 80.1% of total net sales, a slight uptick from the previous year’s 79.1%. The quarter concluded with 246 total stores, marginally lower than the 248 stores at the end of the first quarter of the preceding year. E-commerce net sales totaled $23.0 million, reflecting a decrease of $2.8 million or 10.8% from the previous year’s $25.8 million, constituting 19.9% of total net sales compared to 20.9% last year. Gross profit, encompassing buying, distribution, and occupancy costs, amounted to $24.3 million, equivalent to 21.0% of net sales, in line with the prior year’s figures. Product margins witnessed a 130 basis point improvement, primarily attributable to reduced markdown rates and enhanced initial markups. However, buying, distribution, and occupancy costs, though $0.8 million lower than the previous year, deleveraged by 130 basis points due to the lower net sales. Selling, general, and administrative (“SG&A”) expenses totaled $45.1 million, accounting for 38.9% of net sales compared to $43.2 million or 34.9% of net sales in the prior year. The $1.9 million increase in SG&A expenses primarily stemmed from heightened non-cash store asset impairment charges and increased store payroll and related benefits, offset partially by various smaller expense reductions. Operating loss stood at $20.8 million or 17.9% of net sales, compared to $17.3 million or 14.0% of net sales in the previous year, attributable to the combined impact of the aforementioned factors. Income tax benefit amounted to $13,000 or 0.1% of pre-tax loss, a decrease from $4.2 million or 26.1% of pre-tax loss in the prior year. The decrease was primarily due to the continuing influence of a full, non-cash deferred tax asset valuation allowance. On a non-GAAP basis, excluding the valuation allowance, income tax benefit stood at $5.2 million or 26.4% of pre-tax loss. Net loss totaled $19.6 million or $0.65 net loss per share, compared to $12.0 million or $0.40 net loss per share in the prior year. On a non-GAAP basis, excluding the valuation allowance, this year’s net loss was $14.5 million or $0.48 net loss per share. Weighted average shares amounted to 30.0 million this year compared to 29.8 million shares last year.
Non-GAAP Financial Measures:
In addition to GAAP financial measures, the Company provided certain non-GAAP financial metrics, including “non-GAAP income tax benefit,” “non-GAAP net loss,” and “non-GAAP net loss per share.” These metrics offer investors insight into comparable financial results by excluding items not indicative of the Company’s core operating results.
Balance Sheet and Liquidity:
As of May 4, 2024, the Company held $68.0 million in cash, cash equivalents, and marketable securities with no outstanding debt, compared to $93.4 million and no debt as of April 29, 2023. Total inventories increased by 1.8% compared to the prior year. Year-to-date capital expenditures at the end of the first quarter amounted to $2.1 million, down from $4.3 million last year.
Fiscal 2024 Second Quarter Outlook:
For the fiscal period ending June 1, 2024, total comparable net sales decreased by (8.4)% compared to the corresponding four-week period last year. Based on current quarter-to-date comparable net sales results and historical trends, the Company estimates the following for the second quarter of fiscal 2024:
Net sales in the range of approximately $160 million to $165 million, translating to an estimated comparable net sales decrease of approximately (10)% to (7)% relative to the comparable 13-week period last year; SG&A expenses in the range of $48 million to $49 million, excluding any non-cash store asset impairment charges; Near-zero effective income tax rate due to the ongoing impact of the valuation allowance; After-tax results in the range of a net loss of approximately $(3.9) million to $(0.9) million; Per share results in the range of a net loss of $(0.13) to $(0.03), respectively, with an estimated weighted average of approximately 29.9 million shares. The Company anticipates having 247 total stores open at the end of the second quarter of fiscal 2024, compared to 246 at the end of the prior year’s second quarter.
Conference Call Information:
A conference call to discuss these financial results is scheduled for today, June 6, 2024, at 4:30 p.m. ET (1:30 p.m. PT). Investors and analysts interested in participating may dial (877) 300-8521 (domestic) or (412) 317-6026 (international). The conference call will also be accessible via live webcast at www.tillys.com. Participants are advised to register and download necessary software at least 15 minutes before the call. A telephone replay will be available until June 13, 2024, accessible by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) using the conference identification number: 10188068.
