Tilly’s Inc. shrunk its loss in the first quarter while showing a 0.6 percent same-store gain, exceeding guidance.

“We believe our initiatives are gaining traction. After a tough February, our combined March/April comparable store sales were up 5.3 percent, resulting in a positive comparable store sales result for the first quarter as a whole and our fourth consecutive quarter of year-over-year operating income improvement,” commented Ed Thomas, president and chief executive officer.

First Quarter Results Overview
The following comparisons refer to operating results for the first quarter of fiscal 2017 versus the first quarter of fiscal 2016 ended April 30, 2016.

  • Total net sales were $120.9 million, an increase of 0.6 percent from $120.2 million last year.
  • Comparable store sales, which include e-commerce sales, increased 0.6 percent. Comparable store sales decreased 4.1 percent in the first quarter last year.
  • Gross margin, or gross profit as a percentage of net sales, increased to 27.2 percent from 27.1 percent last year. The 10 basis point increase in gross margin was attributable to a 80 basis point reduction in buying, distribution and occupancy costs, offset by a 70 basis point decline in product margins from increased markdowns.
  • Selling, general and administrative expenses (SG&A) were $33.2 million, a decrease of $3.3 million from $36.6 million last year. As a percentage of net sales, SG&A improved 290 basis points to 27.5 percent from 30.4 percent last year. Last year’s SG&A included $2.4 million for the combination of a legal provision and non-cash store asset impairment charges that were not repeated this year, which accounted for 200 of the 290 basis point improvement in SG&A this year. The remaining $0.9 million, or 90 basis points, of improvement in SG&A was primarily attributable to reduced marketing expenses.
  • Operating loss was $0.3 million, or 0.3 percent of net sales, compared to an operating loss of $4 million, or 3.3 percent of net sales, last year. The 300 basis point improvement in our operating margin was primarily attributable to the reductions in SG&A noted above.
  • Income tax expense was $0.1 million compared to an income tax benefit of $1.1 million last year. Despite our operating loss for the quarter, we incurred income tax expense due to certain discrete charges related to employee stock grant activity and required estimated tax payments in certain states.
  • Net loss was $0.2 million, or 1 cent per share, compared to a net loss of $2.7 million, or 10 cents per share, last year.

Tilly’s had expected same-store sales in the first quarter to decline in the low to mid single-digit percentage rate, operating loss to be in the range of $(3) million to $(7) million, and loss per share to be in the range of 7 to 15 cents a share.

Balance Sheet And Liquidity
As of April 29, 2017, the company had $105.6 million of cash and marketable securities and no debt outstanding under its revolving credit facility. In February 2017, the company paid a first-ever special cash dividend to its stockholders of approximately $20.1 million in the aggregate. This compares to $88.4 million of cash and marketable securities and no debt outstanding as of April 30, 2016.

Fiscal 2017 Second Quarter Outlook
Based on current trends, the company expects its second quarter comparable store sales to be in the range of flat to up low single-digits, operating income to be in the range of $1.2 million to $3.5 million, and income per diluted share to be in the range of 3 cents to 7 cents. This compares to income per diluted share of 5 cents for the second quarter of fiscal 2016. This assumes an anticipated effective tax rate of approximately 40 percent and weighted average shares of approximately 29 million.

Photo courtesy Tilly’s