Tilly's Inc., which entered the Chicago, Minneapolis and Atlanta markets in the second quarter, is accelerating its store expansion plans.
The So Cal-based action sports retailer said it now plans to open 28, rather than 25 new stores this year, because new stores are exceeding expectations of a 1.5-year payback. The company, which expects to be operating 500 stores by 2022, affirmed its 2013 forecast of square footage growth in the mid-teens.
“As a group, the new stores opened in the first quarter and in the second quarter are performing well above our expectations,” said Daniel Griesemer, Tilly's president and CEO.
TLYS reported total net sales increased 20.4 percent in the second quarter ended July 28 to $105.1 million. The growth came from 24 new stores and 5.1 percent growth in comp store sales, including a 22 percent increase in e-commerce sales, which reached $9.8 million, or 9.3 percent of net sales. Comps growth was driven by higher average transaction size on flat transaction volume across all geographies and categories.
Gross margin increased 10 basis points (b.p.) to 29.6 percent compared with the second quarter of fiscal 2011 as increased sales more than offset a 30 b.p. decline in merchandise margins. SG&A costs reached 32.8 percent of revenue, up 740 basis points due to charges taken for the company’s initial public offering (IPO).
On a GAAP basis, operating loss was $3.3 million, including a one-time, non-cash charge to SG&A expense of $7.6 million, before tax, to recognize life to date compensation expense for stock options which was triggered by the company’s IPO. On a GAAP basis, net loss was $1.2 million, or 4 cents per share. This compares to net income of $3.5 million or 17 cents per diluted share based in the second quarter of fiscal 2011.
On an adjusted basis, excluding those charges, SG&A declined 60 basis points and contributed to a 70 b.p. expansion of adjusted operating margin. Adjusted net income increased 49.3 percent to $2.6 million, or 9 cents per weighted average diluted share, compared to $1.7 million, or 9 cents in the second quarter of 2011.
TLYS expects comp store sales growth of 4 to 5 percent in the third quarter on top of an 8.5 percent gain seen in the third quarter of 2011. The company upped its earnings guidance for the full fiscal year to reflect the better than expected second quarter results, but executives declined to comment on August/back-to-school sales trends.
Tilly’s shares were trading near $19 Friday, up more than 20 percent from their price May 4, when they began trading on the New York Stock Exchange.
