Tilly’s, Inc. reported net sales were $123 million in the second quarter, an increase of 17.1 percent compared
to the second quarter of 2012. This included incremental sales that
shifted into the second quarter from the third quarter when compared to
the 2012 fiscal calendar.
Comparable store sales, which include
e-commerce sales, decreased 0.5 percent compared to the second quarter
of 2012. E-commerce sales were $12.8 million, an increase of 30 percent
compared to the second quarter of 2012.

Gross profit increased 22.5
percent to $38.2 million compared to the second quarter of 2012. Gross
margin was 31.0 percent, a 140 basis point increase over the second
quarter of 2012.

Operating income was $7.2 million. This compares to a
GAAP operating loss of $(3.3) million in the second quarter of 2012,
during which the Company recognized a one-time non-cash SG&A charge
of $7.6 million, before tax, related to stock-based compensation expense
triggered by the company’s initial public offering.

Net income was
$4.3 million, or 15 cents per diluted share, based on a weighted average
diluted share count of 28.1 million shares. This compares to a GAAP net
loss in the second quarter of 2012 of $(1.2) million, or $(0.04) per
share, based on a weighted average share count of 27.3 million shares.
Excluding the non-cash SG&A charge and applying the expected
long-term effective tax rate of 40 percent as a “C” corporation,
adjusted net income in the second quarter of 2012 was $2.6 million, or
$0.09 per diluted share.

“Our unique offering of the most sought-after brands coupled with disciplined adherence to our pricing strategy led to quality earnings that were above our expectations. During the quarter we grew net sales, expanded gross margin, and increased net income compared to the prior year quarter on a comparable basis,” commented Daniel Griesemer, President and Chief Executive Officer. “We are encouraged by our customers’ positive response to date to our back-to-school merchandise, which reaffirms the continued relevance of our assortment and the Tilly’s concept during this important shopping period. We believe our inventory is well positioned to drive sales in our stores and on our website.”

For the twenty-six weeks ended August 3, 2013:

Total net sales were $232.2 million, an increase of 15.1 percent compared to the first two quarters of the prior year.

Comparable store sales, which include e-commerce sales, increased 0.2 percent compared to the first two quarters of 2012. E-commerce sales were $25.4 million, an increase of 22 percent compared to the first two quarters of 2012.

Gross profit increased 14.3 percent to $70.4 million. Gross margin was 30.3 percent, slightly lower than the prior year period.

Operating income was $11.1 million. This compares to a GAAP operating income of $2.7 million in the first two quarters of 2012, during which the Company recognized a one-time non-cash SG&A charge of $7.6 million, before tax, related to stock–based compensation expense triggered by the company’s initial public offering.

Net income was $6.6 million, or $0.23 per diluted share, based on a weighted average diluted share count of 28.1 million shares. This compares to a GAAP net income in the first two quarters of 2012 of $4.8 million, or $0.20 per diluted share, based on a weighted average diluted share count of 24.1 million shares. Adjusting for non-cash stock-based compensation charges and applying the expected long-term effective tax rate of 40 percent as a “C” corporation, adjusted net income was $5.8 million, or $0.24 per diluted share, in the first two quarters of 2012.

Balance Sheet and Liquidity

As of August 3, 2013, the Company had $50.8 million of cash and marketable securities and no borrowings or debt outstanding on its revolving credit facility.

Third Quarter 2013 Outlook

We expect comparable store sales to be flat compared to a 1.9 percent comparable store sales increase in the third quarter of 2012. Using an anticipated effective tax rate of 40 percent, net income for the third quarter is expected to be in the range of $5.4 million to $6.3 million, or $0.19 to $0.22 per diluted share, and assumes a weighted average diluted share count of 28.3 million shares, compared to 28.1 million weighted average diluted shares in the third quarter of last year.

Third quarter 2012 adjusted net income was $8.3 million, which includes a 40 percent effective tax rate to make that quarter comparable. (See reconciliation of non-GAAP results to GAAP results at the end of this release.)

Fiscal Year 2013 Outlook

The Company continues to expect comparable store sales growth in the low-single digit range for fiscal 2013, on a 52-week vs. 52-week basis. Using an anticipated full year effective tax rate of 40 percent, net income for fiscal year 2013 is expected to be in the range of $21.5 million to $23.3 million, or $0.76 to $0.82 per diluted share, and assumes a weighted average diluted share count of 28.2 million shares, compared to 26.1 million weighted average diluted shares for the full year 2012.

Full year 2012 adjusted net income was $22.9 million, which includes four quarters of ongoing stock-based compensation expense totaling $2.7 million and a 40 percent effective tax rate for the entire year, and excludes the one-time SG&A charge and the one-time tax benefit resulting from the conversion to a “C” corporation described above.

Chief Financial Officer Appointment

Tilly’s, Inc. announced today that it has appointed Jennifer Ehrhardt as the Company’s Chief Financial Officer, effective September 14, 2013. Ms. Ehrhardt will replace Bill Langsdorf, who announced his intended retirement earlier this year. Ms. Ehrhardt previously served as Vice President of Finance for Tilly’s.

“We are very pleased that our Board of Directors has appointed Jennifer as Chief Financial Officer,” said Daniel Griesemer, President and Chief Executive Officer. “Jennifer brings the right talents and her great experience in retail apparel and accounting to the role. Since joining us, Jennifer has become an integral member of our senior management team and a great fit for Tilly’s. We are confident Jennifer will continue to make strong contributions in her new role as we execute on our long-term strategy.”

Prior to joining the Company, Ms. Ehrhardt was Vice President and Corporate Controller at The Wet Seal, Inc. Ms. Ehrhardt spent over 12 years with Deloitte & Touche LLP, most recently as Senior Manager. Ms. Ehrhardt holds an M.B.A. from Xavier University and a B.S. in business administration from Northern Kentucky University.

“I would also like to thank Bill Langsdorf for his years of service to the company. Among Bill’s many contributions, his talent and dedication have been instrumental to Tilly’s growth and successful transition to a public company, and his financial stewardship has helped position us for the long term. We wish him the very best in his retirement.”