Retail and Business news :Tilly's Expansion Fuels Double-Digit Third Quarter Sales Growth

Tilly’s, Inc. reported total net sales for the third quarter ended Oct. 27 were $124.9 million, an increase of 16.4 percent compared to the third quarter in the prior year. Comparable store sales, which include e-commerce sales, increased 1.9 percent. E-commerce sales were $12.9 million, an increase of 17 percent compared to the third quarter in the prior year.

Gross profit increased 16.6 percent to $41.8 million. Gross margin was 33.5 percent, which was slightly higher than the third quarter of 2011.
Operating income on a GAAP basis was $13.9 million compared to $12.3 million in the third quarter of 2011. Operating margin for the quarter was 11.1 percent as compared to 11.5 percent in the third quarter of 2011.

On a GAAP basis, net income was $9.3 million, or $0.33 per diluted share, based on a weighted average diluted share count of 28.1 million shares. This compares to net income of $12.2 million, or $0.59 per weighted average diluted share, based on 20.5 million weighted average diluted shares in the third quarter of 2011.

Adjusted net income for the quarter increased 19.0 percent to $8.3 million, or $0.30 per weighted average diluted share, compared to adjusted net income of $7.0 million, or $0.34 per weighted average diluted share, in the third quarter of 2011. These results assume an expected long-term effective tax rate of 40 percent for both this year and last year periods, and add back a charge for on-going non-cash compensation expense for stock options of $0.7 million, before tax, to the third quarter of 2011, which equals the charge for on-going non-cash compensation expense in the third quarter of 2012.

“Strong execution on the controllable elements of our business resulted in quality earnings that were at the high end of our outlook range and inventory appropriately positioned for the holiday season,” said President and CEO Daniel Griesemer. “We opened seven new stores and expanded into three new states including Ohio, Michigan and North Carolina, and these stores are off to a good start. While we are cautious in our outlook for the fourth quarter, I am confident that the fundamentals of our business, the strength of our business model and the disciplined execution of our management team will enable us to make steady progress on our long-term growth initiatives.”

Nine months peformance
For the thirty-nine weeks ended Oct. 27, 2012, the company reported total net sales for the first three quarters were $326.5 million, an increase of 17.6 percent compared to the first three quarters of the prior year. Comparable store sales, which include e-commerce sales, increased 3.6 percent. E-commerce sales were $33.6 million, an increase of 23 percent compared to the first three quarters of the prior year.

Gross profit increased 17.8 percent to $103.4 million. Gross margin was 31.7 percent, slightly above the prior year period. Operating income on a GAAP basis was $16.6 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 consummation of the company’s initial public offering in the second quarter.

On a GAAP basis, net income was $14.1 million, or $0.55 per weighted average diluted share, based on a weighted average diluted share count of 25.4 million shares. GAAP net income includes the one-time non-cash compensation charge of $7.6 million to SG&A as well as a one-time net tax provision benefit of $3.0 million, both triggered at the initial public offering effective date in the second quarter of 2012. This compares to net income of $20.5 million, or $1.00 per diluted share, based on 20.5 million weighted average diluted shares in the prior year period.

Adjusted net income increased 24.2 percent to $14.5 million, or $0.57 per weighted average diluted share, compared to adjusted net income of $11.7 million or $0.57 per weighted average diluted share in the prior year period. These results adjust GAAP net income for the one-time, non-cash compensation charge to SG&A incurred in the second quarter of 2012, assume an expected long-term effective tax rate of 40 percent for both this year and last year periods, and add back a charge for on-going non-cash compensation expense for stock options of $1.3 million, before tax, for the second and third quarters of 2011, which equals the charge for on-going non-cash compensation expense in the second and third quarters of 2012.

As of Oct.  27, 2012, the company had $49.8 million of cash and marketable securities as compared to $25.1 million as of January 28, 2012 and $15.7 million as of Oct.  29, 2011. The company ended the quarter with no long-term borrowings and no debt outstanding on its revolving credit facility.

Fourth Quarter 2012 outlook
Given some recent variability in sales trends and the importance of the upcoming holiday period to our quarterly results, we believe it is prudent to be slightly more cautious in our near-term outlook. Based on this, comparable store sales growth is assumed to be in the range of 1 percent to 3 percent, on top of a 4.9 percent comparable store sales increase in the fourth quarter of 2011. On a GAAP basis, and using the anticipated effective tax rate of 32.9 percent, GAAP net income for the fourth quarter is expected to be in the range of $9.3 million to $10.3 million, or $0.33 to $0.36 per diluted share, and assumes a diluted share count of 28.2 million shares, compared to 20.5 million diluted shares in the fourth quarter of last year. The company’s 2012 fourth quarter includes one additional week compared to last year, and our 2012 fiscal year is a 53-week year compared to a 52-week fiscal 2011.
On an adjusted basis, using an anticipated on-going effective tax rate of 40 percent, adjusted net income in the fourth quarter is expected to be in the range of $8.4 million to $9.2 million, or $0.30 to $0.33 per diluted share.

Fiscal Year 2012 Outlook
The company has revised its earnings per diluted share outlook to reflect fourth quarter guidance.
The company now expects comparable store sales growth in the range of 2.5 percent to 3.5 percent for fiscal 2012, on a 52-week vs. 52-week basis. On a GAAP basis, and using an anticipated full year effective tax rate of 32.9 percent, net income for fiscal year 2012 is expected to be in the range of $0.90 to $0.93 per diluted share, and assumes a diluted share count of 26.1 million shares, compared to 20.5 million diluted shares for the full year 2011.
On an adjusted basis, excluding the one-time charge to recognize life-to-date stock-based compensation recorded in the second quarter of 2012, adjusted net income, using a 40 percent adjusted on-going effective tax rate for the full year, is expected to be in the range of $0.88 to $0.91 per diluted share.

Tilly’s is headquartered in Southern California and, as of Oct. 27, 2012, operated 161 stores and through its website, www.tillys.com.

( Through SportsOneSource Media )