Tilly’s Sees 5.8 Percent Increase In Holiday Sales

Tilly’s Inc. announced comparable store net sales results for the nine-week period ended January 5, 2019 and provided updates on its fiscal 2018 fourth quarter earnings outlook and fiscal 2019 new store expectations in advance of its attendance at the annual ICR Conference in Orlando, Florida on January 14-15, 2019.

“Tillys delivered its strongest holiday period comparable store net sales increase since 2011, driven by strong e-commerce growth,” commented Ed Thomas, president and chief executive officer. “We are on track to deliver our third consecutive year of operating margin expansion despite a challenging retail environment.”

Total net sales of $142.4 million increased by 8.3 percent for the holiday period from $131.5 million for last year’s comparable nine-week holiday period ended January 6, 2018.

Comparable store net sales, including e-commerce, increased by 5.8 percent for the holiday period compared to an increase of 0.4 percent for last year’s holiday period.

E-commerce net sales increased by 42.8 percent and represented approximately 19.3 percent of total net sales for the holiday period. E-commerce net sales decreased by 9.7 percent and represented approximately 14.6 percent of total net sales during last year’s holiday period.

Comparable store net sales in physical stores decreased by 0.7 percent and represented approximately 80.7 percent of total net sales for the holiday period. Comparable store net sales in physical stores increased by 2.4 percent and represented approximately 85.4 percent of total net sales during last year’s holiday period.

The company’s operating results for the holiday period were driven by strong e-commerce net sales, resulting in an increase in e-commerce shipping, marketing and fulfillment costs compared to last year. The strength of the company’s branded merchandise assortment resulted in an increase in the sales penetration of third-party brands relative to proprietary brands, resulting in incrementally lower product margins compared to last year due to lower initial markups.

Based on its operating results during the holiday period and historical trends, the company now expects its earnings per diluted share for the fiscal 2018 fourth quarter ending February 2, 2019, to be approximately $0.24 to $0.26 per diluted share, within the upper half of its original earnings outlook range of $0.22 to $0.26 per diluted share. This outlook assumes an anticipated effective tax rate of approximately 27.3 percent and weighted average diluted shares of approximately 29.9 million based on the latest available information.

Based on the latest lease negotiations and available information, the company now expects to open approximately 10 to 15 new, full-size stores during the fiscal 2019 year ending February 1, 2020. The company had previously announced its intentions to open approximately 15 to 20 new stores during fiscal 2019, subject to obtaining appropriate lease economics.

As previously disclosed, the company issued nontransferable discount coupons to approximately 612,000 of its existing customers in early September 2018 pursuant to the settlement terms of a legal matter. These coupons allow for a one-time 50 percent discount on a single, future purchase transaction of up to $1,000. Any unused coupons will expire on September 4, 2019. From original issuance through the holiday period, approximately 1.3 percent of these coupons had been redeemed, resulting in no material impact on the company’s comparable store net sales or operating results as a whole. Although redemptions have been very low in number thus far, there can be no assurance that the impact of any future coupon redemptions during fiscal 2019 will remain immaterial.

The company’s actual financial results for the fiscal 2018 fourth quarter and full fiscal year are subject to completion of the period, finalization of its normal quarter-end and year-end accounting procedures, and the audit of its fiscal 2018 financial statements. The company currently expects to report its actual results for the fiscal 2018 fourth quarter and full fiscal year on or about March 14, 2019.

The company will be presenting at the ICR Conference 2019 on Monday, January 14, 2019 at 8:30 a.m. Eastern Standard Time.