Tilly’s Inc. reported net sales rose 17.1 percent to $123.0 million in the second quarter ended Aug. 2 compared with the year earlier quarter, as the opening of 30 new stores and stout e-commmerce growth more than offset a 3.0 percent decline in comparable store sales at its bricks-and-mortar stores.



The Irvine, CA-based action sports retailer reported comp store sales decreased 0.5 percent compared to the second quarter of 2012, as a 30 percent increase in e-commerce sales to $12.8 million nearly offset a 3.0 percent decline at its bricks-and-mortar stores, said SVP and CFO Bill Langsdorf. The biggest comps declines occurred from late June through early July in the weeks leading up to back-to-school (BTS) promotions. Overall comps were flattish in apparel for men's, juniors, and kids and in accessories and slightly negative in footwear. Promotional levels were basically flat with the prior year. TLYS opened seven new stores in six new markets and one new state during the quarter.

 

 

Gross profit increased 22.5 percent to $38.2 million, or 31.0 percent of net sales, up 140 basis points from a year earlier. Despite the store expansion, SGA declined 30 basis points to 25.2 percent of sales. Operating income was $7.20 million compared with an 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 reached $4.27 million compared with a net loss in the second quarter of 2012 of $1.16 million. 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.

 

 

The earnings exceeded expectations in what President and CEO Daniel Griesemer called “an inconsistent retail environment that has clearly affected teen retailers.”

 

“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.”

 

 

TLYS ended the quarter with merchandise inventory valued at $63.4 million, up 39 percent from a year earlier but only 3.9 percent on a square footage basis. It expects comparable store sales in the third quarter to be flat compared with a 1.9 percent increase in the third quarter of 2012, reflecting both a calendar shift that pulled $8 million in sales from the third to the second quarter and uncertainty about what will happen after BTS promotions wind down. While Tilley’s stores have comped positively in August, Griesemer said he shares the concern that traffic may drop off sharply after Labor Day. Regardless, the company still expects comparable store sales growth in the low-single digit range for all of fiscal 2013, on a 52-week vs. 52-week basis.