Tilly’s, Inc. lowered its comp store and earnings forecasts after comp store growth fell well below expectations in the third quarter and Hurricane Sandy forced the temporary closure of 17 of its stores in the Eastern United States.
The Irvine, CA-based action sports retailer reported comparable store sales increased just 1.9 percent in the third quarter ended Oct. 27, well below the 4 to 5 percent forecast in August.
TLYS reported total net sales for the third quarter ended Oct. 27 increased 16.4 percent to $124.9 million compared to the third quarter in the prior year as it continued to roll out new stores in the eastern United States. E-commerce sales increase 17 percent as higher average transaction value offset lower transaction volume.
Gross margin inched up 10 bps to 33.5 percent. Operating income was $13.9 million compared to $12.3 million in the third quarter of 2011. SG&A reached 22.4 percent of sales, down 50 bps from a year earlier. Operating margin slipped 40 basis points (bps) to 11.1 percent. Net income was $9.3 million, or 33 cents per diluted share, based on a weighted average diluted share count of 28.1 million shares. This compares to net income of $12.2 million, or 59 cents per weighted average diluted share, based on 20.5 million weighted average diluted shares in the third quarter of 2011.
The company, which raised more than $100 million in an IPO last year, ended the quarter with no debt and no borrowings outstanding under its revolving credit facility. Inventory on a per-square-foot basis decreased 9 percent compared to the third quarter last year, reflecting a shift in vendor deliveries to early November this year compared to late October last year.
TLYS opened seven new stores during the quarter, including its first stores in Michigan, Ohio and North Carolina. The retailer has since opened the remaining seven stores planned for fiscal 2012, including its first two stores in Massachusetts, bringing its total store count to 168 stores in 28 states. Hurricane Sandy forced 17 stores to close for between one day and more than a week, which will likely shave 1 percentage point off comps growth in the fourth quarter.
TLYS slightly lowered its comp store growth forecast for the fourth quarter to 1 to 3 percent, which would come on top of the 4.9 percent increase reported for the fourth quarter of 2011. The company also slightly lowered its outlook for comp store growth and adjusted net income for the full fiscal year. President and CEO Daniel Griesemer said the company’s outlook has become more cautious in part because sales remained choppy through November.
“The whole season is — really depends on Friday through a few days post-Christmas,” Griesemer said.