Tilly’s, Inc. reported total net sales for the fiscal first quarter ended April 29 were $123.6 million, a decrease of 15.2 percent compared to $145.8 million in fiscal Q1 last year. Total comparable net sales, including both physical stores and e-commerce, decreased by 17.5 percent year-over-year.
Net sales from physical stores were $97.8 million, a decrease of 16.7 percent compared to $117.5 million in the year-ago period with a comparable store net sales decrease of 19.7 percent. Net sales from physical stores represented 79.1 percent of total net sales compared to 80.6 percent of total net sales in Q1 2022.
The company ended the first quarter with 248 total stores compared to 241 total stores at the end of the first quarter last year.
Net sales from e-commerce were $25.8 million, a decrease of 8.7 percent from $28.3 million in the year-ago quarter. E-commerce net sales represented 20.9 percent of total net sales compared to 19.4 percent of total net sales in Q1 last year.
“We believe the highly uncertain and inflationary economic environment continues to have a detrimental impact on our pre-teen, teen, and young adult customer demographic,” commented Ed Thomas, president and CEO of Tilly’s, Inc. “While we believe our product assortments are trend-right, the impact of inflation and potential recessionary concerns remain a risk to our business over the near term.”
Gross profit, including buying, distribution, and occupancy costs, was $25.9 million, or 21.0 percent of net sales, in Q1, compared to $43.8 million, or 30.1 percent of net sales, in Q1 last year. Buying, distribution, and occupancy costs were deleveraged by 620 basis points and increased by $2.4 million collectively, largely due to occupancy costs, as a result of operating 7 net additional stores. Product margins declined by 290 basis points primarily due to increased markdowns utilized to manage inventory levels.
Selling, general and administrative (SG&A) expenses were $43.2 million, or 34.9 percent of net sales, in the first quarter, compared to $42.7 million, or 29.3 percent of net sales, in Q1 last year. The $0.5 million increase in SG&A was primarily due to increases in corporate payroll, due to the impact of wage inflation, software as a service and recruiting expenses. Partially offsetting these increases was a $0.8 million reduction in store payroll and related benefits, despite operating 7 net additional stores and absorbing an average 8 percent hourly wage rate increase, compared to last year.
The retailer’s first quarter operating loss was $17.3 million, or negative 14.0 percent of net sales, in the period, compared to operating income of $1.1 million, or 0.8 percent of net sales, in Q1 last year, due to the combined impact of the factors noted above.
Other income was $1.1 million in Q1 compared to break-even in Q1 last year, primarily due to earning significantly higher rates of return on our marketable securities compared to last year.
Income tax benefit was $4.2 million, or 26.1 percent of pre-tax loss, compared to income tax expense of $0.3 million, or 26.9 percent of pre-tax income, last year. The decrease in the effective income tax rate was primarily attributable to a decrease in pre-tax income.
The first quarter net loss was $12.0 million, or a loss of 40 cents per share, in the fiscal first quarter, compared to net income of $0.8 million, or 3 cents per diluted share, in the prior-year first quarter.
Tilly’s Inc. had $93.4 million of cash and marketable securities and no debt outstanding at quarter-end compared to $111.0 million and no debt outstanding at the end of the first quarter last year. Since the end of last year’s first quarter, the company repurchased 366,297 shares of its common stock for a total of $2.7 million pursuant to its stock repurchase program, which expired on March 14, 2023.
The company ended the first quarter with inventories (at cost) up 1.6 percent per square foot while unit inventories were down 5.8 percent per square foot compared to the end of Q1 last year.
Total year-to-date capital expenditures at the end of the first quarter were $4.3 million this year compared to $2.6 million last year. For fiscal 2023 as a whole, the company expects its total capital expenditures to be approximately $15 million, inclusive of 7 new stores and upgrades to certain distribution and information technology systems.
Tilly’s reported that total comparable net sales through May 30, including both physical stores and e-commerce, decreased by 11.5 percent relative to the comparable period last year.
Based on current and historical trends, the company currently estimates that its fiscal 2023 second-quarter net sales will be in the range of approximately $148 million to $158 million, translating to an estimated comparable net sales decrease of approximately 10 percent to 15 percent for the second quarter of fiscal 2023 compared to last year’s second quarter.
The company currently estimates its SG&A expenses for the second quarter of fiscal 2023 to be in the range of approximately $49 million to $50 million, a pre-tax loss to be in the range of approximately $5 million to $11 million, and estimated income tax rate to be approximately 26 percent. The Company currently expects its loss per share for the second quarter of fiscal 2023 to be in the range of a loss of 13 cents to 27 cents based on estimated weighted average shares of approximately 29.9 million.
Tilly’s expects to have 248 stores open at the end of the current second quarter, a net increase of six stores from the end of last year’s second quarter.
Photo courtesy Tilly’s
