Tillys Inc.s became the second action sports retailer in as many weeks to warn that comparable store sales declines accelerated in February.
The company said net sales increased 14.5 percent to $140.9 million in the fourth quarter ended Feb. 2 thanks to the opening of 29 new stores. Comparable store sales, including e-commerce sales and excluding an extra week in the most recent fiscal quarter, decreased 0.9 percent compared to 2.2 percent growth for the full fiscal year.
Those declines accelerated in February, eased in March and prompted TYLS to forecast warn that comp store sales will likely decline in the low- to middle single-digit range in the first quarter.
President and CEO Daniel Griesemer said the forecast takes into account the increasingly choppy results the retailer has seen in recent years.
We saw strong comp store growth during peak back-to-school and holiday periods and similar to other retailers, much more muted traffic on either side of these major selling periods, he said.
The outlook tracked that issued by rival Zumiez Inc., which reported a 9 percent decline in February comp store sales. Zumiez forecast March 15 that its comps would decline in the mid-single-digit range in the first quarter.
Griesemer said while colder weather contributed to the decline, he sensed broad macro-economic headwinds. It was across the board and it was across multiple retailers multiple age brackets and it was broad-based, he said.
E-commerce sales remained strong, growing 20 percent during the quarter, but the company disclosed that a new e-commerce fulfillment center wont go live until the fourth quarter due to both an expansion in the scope of the project and a time-consumer government permitting process. The cost of the project has doubled to $14 million.
Gross profit increased 13.2 percent to $46.8 million. Gross margin dipped 60 basis points to 33.3 percent, while operating income on a GAAP basis rose 4.7 percent to $14.8 million. Operating margin fell 90 basis points to 10.5 percent, reflecting a higher mix of newer stores. SG&A expenses totaled $32 million, or 22.7% of net sales, up 50 basis points from a year earlier due largely to non-cash stock compensation.
Adjusted net income for the quarter increased 10.8 percent to $8.9 million, or 32 per diluted share, compared to adjusted net income of $8.0 million, or 39 cents a year earlier.
The retailer ended the year with inventory of $46.6 million, up 27.5 percent from a year earlier. On a square footage basis, inventory declined 4 percent due to the opening of 28 stores since the fourth quarter of 2011.
The company said it expects comparable store sales in the first quarter to decline in the low- to mid-single digit range compared to a 4.3 percent comparable store sales increase in the first quarter of 2012. ZUMZs full-year outlook calls for comparable store sales growth in the low-single digit range for fiscal 2013, on a 52-week vs. 52-week basis.
