“Earnings results were in line with our expectations and reflect the continuation of a tough retail environment and the planned reduction in our clearance merchandise, which put pressure on our comparable store sales. We delivered strong product margin improvement through careful inventory management and operating discipline, and our inventory is well positioned for the summer selling season. We also advanced our strategic initiatives including the opening of our new dedicated e-commerce fulfillment center,” commented Daniel Griesemer, President and Chief Executive Officer.
“We remain focused on maintaining the continued health and relevance of our brand, and are confident in our ability to capitalize on the long-term opportunities to grow our business.”
For the first quarter ended May 3, 2014
Total net sales were $111.1 million, an increase of 1.8% compared to $109.1 million in the first quarter of 2013.
Comparable store sales, which include e-commerce sales, decreased 6.8% compared to the same 13-week period in 2013. E-commerce sales were $12.7 million, an increase of approximately 1.2% compared to the same thirteen-week period in 2013.
Gross profit was $31.3 million compared to $31.8 million in the first quarter of 2013. Gross margin was 28.2% compared to 29.1% in the first quarter of 2013. Product margins increased approximately 60 basis points, offset primarily by deleverage in occupancy costs as a result of the negative comparable store sales.
Operating income was $1.1 million and compares to operating income of $3.9 million in the first quarter of 2013.
Net income was $0.6 million, or $0.02 per diluted share, based on a weighted average diluted share count of 28.2 million shares and an effective tax rate of approximately 45%, reflecting a discrete item related to stock option forfeitures. This compares to net income in the first quarter of 2013 of $2.3 million, or $0.08 per diluted share, based on a weighted average diluted share count of 28.0 million shares and an effective tax rate of 40%.
Balance Sheet and Liquidity
As of May 3, 2014, the Company had $52.4 million of cash and marketable securities and no borrowings or debt outstanding on its revolving credit facility.
Second Quarter 2014 Outlook
We continue to experience weak traffic trends and a highly promotional environment in teen retail. If these trends continue, we would expect second quarter comparable store sales to decline in the high single digits, and net income per diluted share to be in the range of $0.03 to $0.07. This assumes an anticipated effective tax rate of 40% and a weighted average diluted share count of 28.2 million shares. Second quarter 2013 net income was $4.3 million, or $0.15 per diluted share, based on a weighted average diluted share count of 28.1 million shares.
Conference Call Information
A conference call to discuss the financial results is scheduled for today, May 28, 2014, at 4:30 p.m. ET (1:30 p.m. PT). Investors and analysts interested in participating in the call are invited to dial (800) 239-9838 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 June 11, 2014, by dialing (877) 870-5176 (domestic) or (858) 384-5517 (international) and entering the conference identification number: 7837315. 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 May 28, 2014, operated 201 stores and through its website, www.tillys.com.
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