PRESS RELEASE:
Tilly’s, Inc. Announces Second Quarter Fiscal 2012 Results
Net Sales Increased 20.4%; Comp Store Sales Increased 5.1%
GAAP Net Loss of $1.2 million, Reflecting Expected One-Time Charges
Adjusted Net Income up 49% to $2.6 Million
IRVINE, Calif.–Aug. 22, 2012– Tilly’s, Inc. (NYSE: TLYS) today announced financial results for the second quarter of fiscal 2012 ended July 28, 2012.
For the thirteen weeks ended July 28, 2012:
- Total net sales for the second quarter were $105.1 million, an increase of 20.4% compared to the second quarter in the prior year.
- Comparable store sales, which include e-commerce sales, increased 5.1%. E-commerce sales were $9.8 million, an increase of 22% compared to the second quarter in the prior year.
- Gross profit increased 21.1% to $31.1 million. Gross margin was 29.6%, a 10 basis point increase over the second quarter of fiscal 2011.
- Operating loss on a GAAP basis was $3.3 million, including a one-time, non-cash charge to SG&A expense of $7.6 million, before tax, to recognize life to date compensation expense for stock options which was triggered by the consummation of the Company’s initial public offering in the second quarter.
- The annual tax rate for the second quarter was 33.6%. The quarter also included, as expected, a one-time net tax benefit of $1.0 million resulting from the Company’s conversion from an “S” Corporation to a “C” Corporation, the result of a $3.0 million deferred tax benefit and a nearly $2.0 million tax provision charge.
- On a GAAP basis, net loss was $1.2 million, or $0.04 per share, based on a weighted average share count of 27.3 million shares, which includes the non-cash charge to SG&A and the one-time net tax provision benefit mentioned above. This compares to net income of $3.5 million or $0.17 per diluted share based upon 20.5 million weighted average diluted shares in the second quarter of fiscal 2011.
- Adjusted net income for the quarter increased 49.3% to $2.6 million, or $0.09 per weighted average diluted share, compared to an adjusted net income of $1.7 million or $0.09 per weighted average diluted share in the second quarter of 2011.
These results adjust GAAP net income for the one-time, non-cash compensation charge to SG&A, assume an expected long-term effective tax rate of 40% for both this year and last year periods, and add back a charge for on-going non-cash compensation expense for stock options of $0.6 million, before tax, to the second quarter of 2011, which equals the charge for on-going non-cash compensation expense in the second quarter of 2012.
At the conclusion of this press release is a reconciliation of GAAP to non-GAAP results.
Daniel Griesemer, President and Chief Executive Officer, commented, “Our second quarter results were ahead of plan and reflected our continued focus on achieving sustainable, long-term, quality growth.
“Solid comp store sales gains along with prudent fiscal and inventory management resulted in a 49% increase in adjusted net income during the quarter. The strong performance was broad based across geographies and real estate venues.
“We are particularly pleased that the new stores opened this year are performing well above our expectations, demonstrating the strength of the Tilly’s concept on a national basis.
“We believe our progress also continues to validate the relevance of the Tilly’s brand and our unique business model that focuses on offering relevant brands and styles to our customers, and we believe we are well positioned for continued success in the second half of 2012 and over the longer term.”
For the twenty-six weeks ended July 28, 2012:
- Total net sales for the first two quarters were $201.6 million, an increase of 18.3% compared to the first two quarters of the prior year.
- Comparable store sales, which include e-commerce sales, increased 4.7%. E-commerce sales were $20.7 million, an increase of 26% compared to the first two quarters of the prior year.
- Gross profit increased 18.6% to $61.6 million. Gross margin was 30.5%, similar to the prior year period.
- Operating income on a GAAP basis was $2.7 million, including the non-cash compensation charge triggered by the Company’s consummation in the second quarter of its initial public offering.
- On a GAAP basis, net income was $4.8 million, or $0.20 per diluted share, based on a weighted average diluted share count of 24.1 million shares, which included the one-time, non-cash compensation charge to SG&A as well as a one-time net tax provision benefit which totaled $3.0 million for the two quarters year to date. This compares to net income of $8.3 million or $0.41 per diluted share based upon 20.4 million weighted average diluted shares in the prior year period.
- Adjusted net income increased 31.9% to $6.2 million, or $0.26 per weighted average diluted share, compared to an adjusted net income of $4.7 million or $0.23 per weighted average diluted share in the prior year period. These results adjust GAAP net income for the one-time, non-cash compensation charge to SG&A incurred in the second quarter of 2012, assume an expected long-term effective tax rate of 40% for both this year and last year periods, and add a charge for on-going non-cash compensation expense for stock options of $0.6 million, before tax, to the second quarter of 2011, which equals the charge for on-going non-cash compensation expense in the second quarter of 2012.
At the conclusion of this press release is a reconciliation of GAAP to non-GAAP results.
Balance Sheet and Liquidity
As of July 28, 2012, the company had $47.7 million of cash and marketable securities as compared to $25.1 million as of January 28, 2012 and $31.0 million as of July 30, 2011. The company ended the quarter with no long-term borrowings and no debt outstanding on its revolving credit facility.
Please see page 2 for Q3 and full-year outlooks
Third Quarter 2012 Outlook
For the third quarter, comparable store sales growth is expected to be in the range of 4% to 5%, on top of an 8.5% comparable store sales increase in the third quarter of 2011. On a GAAP basis, and using the anticipated effective tax rate of 33.6%, GAAP net income for the third quarter is expected to be in the range of $8.8 million to $9.3 million, or $0.31 to $0.33 per diluted share, and assumes a diluted share count of 28.2 million shares, compared to 20.5 million diluted shares in the third quarter of last year.
On an adjusted basis, using an anticipated on-going effective tax rate of 40%, adjusted net income in the third quarter is expected to be in the range of $7.9 million to $8.4 million, or $0.28 to $0.30 per diluted share.
Fiscal Year 2012 Outlook
The Company has revised its earnings per diluted share outlook upward to reflect the better than expected results achieved in the second quarter of 2012. Additionally, for fiscal year 2012, the company’s retail calendar includes a fifty-third week compared to a fifty-two week year in fiscal year 2011.
The Company continues to expect comparable store sales growth in the range of 4% to 5% for fiscal 2012, on a 52-week vs. a 52-week basis. On a GAAP basis, and using an anticipated full year effective tax rate of 33.6%, net income for fiscal year 2012 is expected to be in the range of $0.90 to $0.96 per diluted share, and assumes a diluted share count of 26.1 million shares, compared to 20.5 million diluted shares for the full year 2011.
On an adjusted basis, excluding the one-time charge in recognition of life-to-date stock-based compensation and excluding the one-time tax benefit stemming from the S-corporation to C-corporation conversion recorded in the second quarter of 2012, adjusted net income, using a 40% adjusted on-going effective tax rate for the full year, is expected to be in the range of $0.88 to $0.94 per diluted share.
About Tilly’s
Tilly’s is a fast-growing 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, art and fashion. Tilly’s is headquartered in Southern California and, as of July 28, 2012, operated 155 stores and through its website, www.tillys.com.
Non-GAAP Financial Measures
In addition to reporting financial measures in accordance with generally accepted accounting principles in the United States (“GAAP”), the company provides non-GAAP “adjusted selling, general and administrative expenses”, “adjusted operating income (loss)”, “adjusted income (loss) before income taxes”, “adjusted income tax provision (benefit)”, “adjusted net income (loss)”, “adjusted basic earnings (loss) per share” and “adjusted diluted earnings (loss) per share”. These amounts are not in accordance with, or an alternative to, GAAP. The company’s management believes that these measures provide investors with transparency by helping illustrate the financial results: (i) as if the company had been a publicly traded “C” Corporation during the relevant time periods, in order to provide a better comparison of past periods to current periods as a “C” Corporation; and (ii) to exclude items that may not be indicative of, or are unrelated to, the company’s core operating results, providing a better baseline for analyzing trends in the underlying business.
For a description of these non-GAAP financial measures and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP, please see the accompanying table titled ” Supplemental Information – Consolidated Statements of Operations; Reconciliation of GAAP to Non-GAAP Financial Measures” contained in this press release.
