Tilly’s, Inc. Announces Fourth Quarter Fiscal 2014 Results

Tilly’s, Inc. (NYSE:TLYS) today announced financial results for the fourth quarter of fiscal 2014 ended January 31, 2015.

“I am very pleased with the continued progress we have made on our initiatives to increase sales and profitability, which delivered positive comparable stores sales and fourth quarter earnings above our upwardly revised expectations and up 32% year-over-year. We achieved healthy product margins and exited this period with inventory well positioned for the Spring season,” commented Daniel Griesemer, President and Chief Executive Officer. “I am very proud of the hard work and disciplined execution of our team during the past year. The fundamentals of our business are strong and I believe we are prepared to take advantage of the opportunities we see to further improve our business performance in fiscal 2015 and the longer term.”

For the fourth quarter ended January 31, 2015:

• Total net sales were $152.8 million, an increase of 9.2% compared to $139.9 million in the fourth quarter of 2013.
• Comparable store sales, which include e-commerce sales, increased 2.9% compared to the same 13-week period in 2013.
• Gross profit increased 13.2% to $49.0 million compared to $43.3 million in the fourth quarter of 2013. Gross margin was 32.1% compared to 30.9% in the fourth quarter of 2013. The increase was primarily due to a 40 basis point increase in product margins and lower buying, distribution and occupancy costs as a percentage of net sales due to positive comparable store sales.
• Operating income was $11.2 million and included $1.0 million in non-cash store asset impairment charges recorded in the fourth quarter. This compares to operating income of $8.5 million in the fourth quarter of 2013, which included $1.8 million in non-cash store asset impairment charges.
• Net income was $7.1 million, or $0.25 per diluted share, based on a weighted average diluted share count of 28.1 million shares and an effective tax rate of approximately 37%, reflecting a lower rate than expected primarily due to certain tax credits. This compares to net income in the fourth quarter of 2013 of $5.4 million, or $0.19 per diluted share, based on a weighted average diluted share count of 28.2 million shares and an effective tax rate of approximately 36% due to a one-time tax benefit related to return to provision adjustments.

For the fifty-two weeks ended January 31, 2015:

• Total net sales were $518.3 million, an increase of 4.5% compared to $495.8 million for the prior year.
• Comparable store sales, which include e-commerce sales, decreased 2.8% compared to the prior year.
• Gross profit increased 3.1% to $155.5 million compared to $150.8 million in the prior year. Gross margin was 30.0%, compared to 30.4% in the prior year. The decrease was primarily due to a 20 basis point increase in product margins, offset primarily by higher buying, distribution and occupancy costs as a percentage of net sales due to negative comparable store sales.
• Operating income was $23.2 million compared to $29.7 million in the prior year.
• Net income was $14.1 million, or $0.50 per diluted share, based on a weighted average diluted share count of 28.1 million shares. This compares to net income in the prior year of $18.1 million, or $0.65 per diluted share, based on a weighted average diluted share count of 28.1 million shares.

Balance Sheet and Liquidity

As of January 31, 2015, the Company had $84.7 million of cash and marketable securities and no borrowings or debt outstanding on its revolving credit facility.

Company Appoints E-Commerce Executive to the Board

The Company also announced that Jason Nazar was appointed to the Company’s Board of Directors on March 12, 2015. Mr. Nazar is the Co-Founder of Docstoc, Inc., an online subscription service for small businesses, where he served as Chief Executive Officer from August 2006 through Docstoc’s sale to Intuit Inc. in December 2013. Prior to founding Docstoc, Mr. Nazar was a Partner with Venature, LLC, a venture consulting firm, and currently is a Director of Carelinx Inc., a private health care company.

“We are pleased to welcome Jason Nazar to the Tilly’s Board of Directors,” said Hezy Shaked, Executive Chairman. “Mr. Nazar’s executive experience with e-commerce and online business strategy will be of immense value as we continue to focus on that important aspect of our business.”

First Quarter 2015 Outlook

The Company expects first quarter comparable store sales to increase in the low single digits, and net income per diluted share to be in the range of $0.03 to $0.05. This assumes an anticipated effective tax rate of approximately 40% and a weighted average diluted share count of 28.2 million shares. First quarter 2014 net income per diluted share was $0.02, based on a weighted average diluted share count of 28.2 million shares.

Conference Call Information

A conference call to discuss the financial results is scheduled for today, March 18, 2015, at 4:30 p.m. ET (1:30 p.m. PT). Investors and analysts interested in participating in the call are invited to dial (888) 468-2440 at 4:25 p.m. ET (1:25 p.m. PT). The conference call will also be available to interested parties through a live webcast at www.tillys.com. Please visit the website and select the “Investor Relations” link at least 15 minutes prior to the start of the call to register and download any necessary software.

A telephone replay of the call will be available until April 1, 2015, by dialing (877) 870-5176 (domestic) or (858) 384-5517 (international) and entering the conference identification number: 1076080. Please note participants must enter the conference identification number in order to access the replay.

About Tilly’s

Tilly's is a fast-growing destination specialty retailer of West Coast inspired apparel, footwear and accessories with an extensive assortment of the most relevant and sought-after brands rooted in action sports, music, art and fashion. Tilly’s is headquartered in Southern California and, as of March 18, 2015, operated 211 stores and through its website, www.tillys.com.

Forward Looking Statements

Certain statements in this press release and oral statements made from time to time by our representatives are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, statements regarding our future financial and operating results, including but not limited to future comparable store sales, future net income, future gross, operating or product margins, anticipated tax rate, and market share and our business and strategy, including but not limited to store expansion, expansion of brands and exclusive relationships, development and growth of our ecommerce platform and business, promotional strategy, and any other statements about our future expectations, plans, intentions, beliefs or prospects expressed by management are forward-looking statements. These forward-looking statements are based on management’s current expectations and beliefs, but they involve a number of risks and uncertainties that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including, but not limited to, our ability to respond to changing customer preferences and trends, attract customer traffic at our stores and online, execute our growth and long-term strategies, expand into new markets, grow our ecommerce business, effectively manage our inventory and costs, effectively compete with other retailers, enhance awareness of our brand and brand image, general consumer spending patterns and levels, the effect of weather, and other factors that are detailed in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on April 1, 2014, including those detailed in the section titled “Risk Factors” and in our other filings with the SEC, which are available from the SEC’s website at www.sec.gov and from our website at www.tillys.com under the heading “Investor Relations”. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. We do not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. This release should be read in conjunction with our financial statements and notes thereto contained in our Form 10-K.