Tilly’s Inc. reported total net sales reached $130 million in the second quarter ended Aug. 1, up 6 percent from a year earlier on flattish comp store sales thanks largely to the opening of 13 new stores.
The action sports inspired retailer reported comparable store sales, which include e-commerce sales, increased just 0.5 compared with a year earlier. The retailer ended the quarter with 216 stores, up from 203 a year earlier.
“Second quarter results were in line with our outlook, with sales growth driven by new store openings over the past twelve months and a strong e-commerce business,” commented Daniel Griesemer, President and Chief Executive Officer. “We maintained our diligent inventory management, resulting in continued healthy product margins, and began the third quarter with inventory well positioned for the back-to-school season. Our merchandise offering is resonating well with our customers and we are encouraged by the solid start to the third quarter.”
Gross profit reached $36.6 million compared to $34.7 million, an increase of $1.9 million or 6 percent. Gross margin, or gross profit as a percentage of net sales, was 28.1 percent compared to 28.2 percent. This slight decrease was primarily due to a 40 basis point decline in product margins, partially offset by lower buying, distribution and occupancy costs as a percentage of net sales.
Operating income was $1.1 million compared to $2.3 million and included an aggregate of $0.9 million in non-cash store asset impairment charges and an accrual for a potential legal settlement.
Net income was $0.6 million, or $0.02 per diluted share, compared to $1.3 million, or $0.05 per diluted share. Our effective tax rate was 50 percent compared to 46 percent, and was higher primarily due to a tax settlement related to a prior tax year.
First Half Results Overview
The following comparisons refer to operating results for the first half of fiscal 2015 versus the first half of fiscal 2014 ended Aug. 2, 2014:
Total net sales were $250 million compared to $234 million, an increase of $16 million or 7 percent.
Comparable store sales, which include e-commerce sales, increased 1.2 percent.
Gross profit was $72.6 million compared to $66.0 million, an increase of $6.6 million or 10 percent. Gross margin was 29.0 percent compared to 28.2 percent. This 80 basis point increase was primarily due to lower buying, distribution and occupancy costs as a percentage of net sales and a 20 basis point increase in product margins.
Operating income was $3.2 million compared to $3.4 million and included an aggregate of $0.9 million in non-cash store asset impairment charges and an accrual for a potential legal settlement.
Net income was $1.8 million, or $0.06 per diluted share, compared to $1.9 million, or $0.07 per diluted share.
Balance Sheet and Liquidity
As of Aug. 1, 2015, the company had $77 million of cash and marketable securities and no debt outstanding under its revolving credit facility. This compares to $57 million of cash and marketable securities and no debt as of Aug. 2, 2014.
Third Quarter 2015 Outlook
The company expects third quarter comparable store sales to grow in the positive-low-single digits and net income per diluted share to be in the range of $0.12 to $0.16. This assumes an anticipated effective tax rate of approximately 40 percent and a weighted average diluted share count of 28.8 million shares.
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Tilly’s, Inc. Consolidated Statements of Income (In thousands, except per share data) (Unaudited) |
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| Thirteen Weeks Ended | Twenty-Six Weeks Ended | ||||||||||||||||
| August 1,
2015 |
August 2,
2014 |
August 1,
2015 |
August 2,
2014 |
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| Net sales | $ | 130,023 | $ | 123,060 | $ | 250,213 | $ | 234,194 | |||||||||
| Cost of goods sold (includes buying, distribution, and occupancy costs) | 93,427 | 88,405 | 177,565 | 168,212 | |||||||||||||
| Gross profit | 36,596 | 34,655 | 72,648 | 65,982 | |||||||||||||
| Selling, general and administrative expenses | 35,492 | 32,326 | 69,415 | 62,576 | |||||||||||||
| Operating income | 1,104 | 2,329 | 3,233 | 3,406 | |||||||||||||
| Other income, net | 10 | 4 | 18 | 3 | |||||||||||||
| Income before income taxes | 1,114 | 2,333 | 3,251 | 3,409 | |||||||||||||
| Income tax expense | |||||||||||||||||
