Tilly’s Inc. reported margins for the fiscal first quarter ended May 2 improved sharply compared with a year earlier thanks to modest growth in comparable store sales and favorable rent adjustments.

“Our first quarter results illustrate continued progress on our initiatives to increase sales and profitability, as we delivered positive comparable store sales and solid earnings growth over the prior year period,” said Daniel Griesemer, President and Chief Executive Officer. “We expanded our gross profit and ended the quarter with inventory well positioned for the summer and back-to-school seasons.”

For the first quarter ended May 2, 2015:

  • Total net sales were $120.2 million, an increase of 8.1% compared to $111.1 million in the first quarter of 2014.
  • Comparable store sales, which include e-commerce sales, increased 2.0% compared to the same 13-week period in 2014. The California-based retailer, which sells many popular action sports apparel, footwear and accessories brands,  ended the period with 213 stores compared with 194 a year earlier.
  • Gross profit increased 15.3% to $36.1 million compared to $31.3 million in the first quarter of 2014. Gross margin was 30.0% compared to 28.2% in the first quarter of 2014. The 180 basis point increase in gross margin was primarily due to a 90 basis point increase in product margins and lower buying, distribution and occupancy costs as a percentage of net sales due to positive comparable store sales, and a favorable rent adjustment related to prior years.
  • Operating income was $2.1 million, compared to operating income of $1.1 million in the first quarter of 2014.
  • Net income was $1.3 million, or $0.05 per diluted share, based on a weighted average diluted share count of 28.3 million shares and an effective tax rate of approximately 40%. This compares to net income in the first quarter of 2014 of $0.6 million, or $0.02 per diluted share, based on a weighted average diluted share count of 28.2 million shares and an effective tax rate of approximately 45%, reflecting a discrete item related to stock option forfeitures.

Balance Sheet and Liquidity
As of May 2, the retailer had $79.2 million of cash and marketable securities and no borrowings or debt outstanding on its revolving credit facility.

Second Quarter 2015 Outlook
Tilly's expects second quarter comparable store sales to be in the range of a decline of 2% to an increase of 2%, and net income per diluted share to be in the range of $0.01 to $0.05. This assumes an anticipated effective tax rate of approximately 40% and a weighted average diluted share count of 28.5 million shares. Second quarter 2014 net income per diluted share was $0.05, based on a weighted average diluted share count of 28.0 million shares and an effective tax rate of approximately 46%, reflecting a higher rate due to certain stock option forfeitures.