TLYS - Earnings call transcript Q3 2017

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Operator

Greetings and welcome to the Tilly's Incorporated Third Quarter Fiscal 2017 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Gar Jackson, Investor Relations.

Gar Jackson

operator. you, Thank and earnings everyone Tilly's XXXX fiscal Good welcome quarter call. third afternoon, to President Michael Q&A Ed discuss CEO; and Thomas, and results then the Henry, and host a session. Company's will CFO;

forward-looking the Tilly's earnings be of a also forward-looking should judgment section, XX number be actual you section a website next current shortly will place For a the not XX, of made Company's statements from that call during replay copy press on on you please of of Investor and the the visit reflect From tillys.com. and find today, will conclusion of undue Certain reliance this able factors recorded release, Tilly's results XXXX statements. the at as after materially based call may to affecting Relations the same differ for days. analysis these call, Tilly's only expectations of Accordingly, November business. the

Today's For statements, and a that in more thorough third with our the forward-looking which furnished SEC fiscal see quarter is to disclaimer please any on today statements included was XXXX risks regarding associated uncertainties release, the earnings discussion with of to a well over the forward-looking Ed. X-K, other Form now the that be I after turn our SEC session one call Q&A to will filings as in referenced disclaimer. hour as and include call limited the will prepared remarks.

Ed Thomas

we review providing operating joining comp driven growth and outlook. update our sixth quarter by income in thank XX% then detail for expense quarter positive continued and quarter afternoon, us I initiatives. before Gar. quarter improvement management. Thanks, a In traffic XXXX delivered introduce our of everyone and more store key inventory in strict the consecutive our Mike on consecutive third fourth of sales, quarter of fourth an year-over-year you third and will today. Good operating results results our will summarize fiscal

to We midpoint the the Store of the to X.X% single-digits, Demandware associated completed merchandise comp were increased over which retailers. low sales Our of transitionary was the website e-comm our comps platform our course due range. with our year increased early sales certain flat issues brands outlook assortment about new launch was broad Tilly's diverse of over of from XXX many continues believe in and differentiate other which November. just

percentage branded the men's drove and were and assortment with third in third Accessories, footwear women's growth our down results our and was and flat sales due our all mid-single-digit down quarter, tops to mid-single-digits quarter X% increases boy's During high business single-digit weakness comp respectively. and to dresses. fashion

to to new enhance Black package we we Turning Friday are comp encouraged of stores results single-digits. fixture stages Cyber out this In seen Monday early a from quarter; our up the assortment rolled the new including the have by to-date accessory briefly sales presentation of are fourth low we and weekend early the November, to package. accessories early all and

We a this optimistic are fourth bodes for well cautiously solid quarter. that

well as Aptos new customer place. systems, platform all in our Demandware are point integrated now management of order relationship our as technology, and to sale management new Turning website

the opportunities As no engagement implementations. negative customer and going material improve with are systems bugs any new to to on our increased but business excited work from systems, we have forward. impacts We're out there about drive new had sales of these these capabilities

and launch in mobile XXXX. deployments fiscal an ship-to-store of Our of app first a the enhanced the be next will technology program half

big Media quarter excitement reinvigorated our efforts hit the have Hunt Reality with Turning prior a in on all-store partnership calls, about engagement customers. as marketing an driving with third to star consumer direct traffic. Early Scavenger Social improved our in We towards store customer which more discussed launched additional marketing, a was Augmented believe we interactions, we we Tilly's. generate

work details share in-store just continue yet. We I'm to to collaborations but able not new still on

for in of needed Houston their be I the internal for team Harvey the delivering third in our much aftermath Hurricane the thank clothing will want during the a and to quarter. Lastly, efforts store Houston supplies area to the upon opening new the of real our us mention help wanted and there market we quarter the brings soon-to-be-neighbors me during new to our estate. begin process. The recovery to Houston fourth of

store just the two first opened two will fourth new We during the Island, Black of in weekend. Providence, Friday new in-time the have stores quarter, for openings Rhode

store The next open week. second is be in to new scheduled Houston

back mode we that new Now a XXXX. around, the opening turned in growth to stores moderate XX of get into business our XX fiscal approximately plan by we have store trend operating margin to

stores We also pop-up during plan the a branded rescue number fiscal XXXX. limited of to open

existing will line leverage we believe bottom where additional brand Tilly's recognition markets enhanced be with stores. We would and

One newer of our store developed have these Alderwood, will the Washington, smaller new last that stores be to first year. in format we

our Alderwood square as assortment feet; as full square As little be is format present to approximately will a in X,XXX reminder, the X,XXX feet. designed

will work progress this for occupancy have and actions is made fiscal XXXX. in continue store on We driving renegotiation, down as process existing slow on also lease allow some stores to we cost but

make over have which additional the teams lease our occupancy during efforts environment ever. half proud results In retail improved has XXXX further structure. and closing, progress arguably we past and over of driving We was a year our challenging the remain and dedication an of intend most the of XXX course complicated and make been cost in and in to one decisions XXXX I to optimizing

the operating can are We to believe holiday start momentum season continue a to fiscal the our and off XXXX. decent we into through quarter fourth we and

operating provide turn outlook. over will earnings to and introduce fourth details our call quarter on quarter more performance to the Mike our Mike? I third Now,

Michael Henry

Thanks, Ed. Good everyone. afternoon,

sales XX.X% quarter. just X.X% ending X.X%. comparable from compared with increased store X.X% third were year $XXX.X despite compared were increased sales Our e-commerce due stores store third million for to million XXX up increased the a website year Total ago. ago. the sales earlier total Net and stores quarter a results to noted quarter X.X% of of sales operating year's quarter our traffic as $XXX.X issues Ed versus the Store follows. including comps XXX transitionary E-comm last XX.X% total positive represented with to

Although time year was e-comm of improvement was million X.X% our growth management. this due improved last or of to soft, profitable last $XX was and inventory expense year's to million an e-comm more business meaningfully profit million. $XX.X Gross $X.X compared

improvement. $XX.X were year's of margin points XX XX.X% distribution XX.X%, from or XXX gross $X.XX million $X.X to million of $XX.X of payroll comp combination pretax expenses XX.X% year's this $XX to expense and sales. net margins or basis SG&A $X.XX to were income to points or $X.X rate generated coming was or sales diluted diluted XXX million occupancy $X.X the Our million shares year. Weighted million expenses SG&A pretax last million per basis higher The and million improved basis to $XX.X share of Operating year. of growth, the product or of of of sales or $XX.X decreased of to sales compared margins. and X% reductions quarter compared with XXX corporate versus $XX to in average of last on or million in compared point $X.X year. tax remaining million $X.X Net This share sales million improvement diluted XX.X% XX.X% gross for from XX.X% of income was and income points million per or marketing net improved was points improvement basis million sales income costs. attributable or X.X% cost Income net compared last and last XXX year. an XX.X% basis last improved improved buying last reduced SG&A primarily reduced $X.X

top year. this cash $XX.X last marketable noted no more which XXXX to the current debt XX.X% securities totaling expenditures increase quarter special is $XX.X despite sheet in $XXX.X we Year-to-date, last X.X% cash time This year having million decrease aging a first year. for is per square year. remodeled increase compared were compared and with foot to and and this balance compared $X.X last our inventory to which and first the dividend earlier stockholders was million and $XXX.X for strong to and debt investments decreased paid Turning primarily stores. February no ever to a of ended remains last million fiscal of year's quarters Inventory of million our X% three IT million on were the of capital at

year's Operating and $XX per million sales $X.XX. of low Turning $XX.X comparable compared to current be to outlook; and be of by single-digit on to last million $XX.X quarter $X.XX in a range to income to fourth historical our the diluted in $X.XX trends, last based to to percentage. to year's earnings million compared share we approximately expect the increase store range

be tax We approximately expect shares XX% approximately be million. weighted our average to $XX.X and rate to

inventories expenditures are per below to foot capital last to now year's square year levels. $XX expected remain be million. XXXX approximately expect We full Fiscal

expect existing X We which compared stores the year the last of stores closing the total end year during with quarter. to and includes to XXX new fourth XXX two stores fiscal opening

now fiscal Our earlier. is we approximately $XX as to take XXXX to which million preliminary mentioned $XX stores will includes XX CapEx expectation for Operator, new XX million the questions.

Operator

ROTH Instructions] question. from first proceed Our [Operator Capital. Dave Please King, question is your with

Dave King

off, first guess for I Mike. maybe

that's the Can operating you're know, is between Thanks. leverage, of be I guess looks to guess of quarters. down helpful. now few In would points up? like guidance, quarters, few looks I has what to if should been points last like color be talk there just terms for I -- that some of more about margins, now merch assumes that think a XXX midpoint, or improvement basis use don't -- guiding basis looks the any XX improvement; reason you there margin trending BDO SG&A about like over I

Michael Henry

Sure.

land in have so to We things quarter with continue a up LY SG&A new we we reasons. been the just down. couple for assuming all modestly those that would expenses present be it whether why of some the systems of on contracts, quarter be for are there to alike fourth would present maintenance are based couple be new that; this system noted profit be in the those wouldn't are necessarily bonus anticipating to One, side, range; for implemented fourth different have been year a present that last depreciation, wouldn't not systems bonus and associated the that expect we we with SG&A within as and

Dave King

Okay. versus And margins merch BDO? then on the

Michael Henry

points, similar the to and the would were basis side XX margin, fall up assuming quarter Merch the product margin the on we're through up in points maybe BDO. XX we third out basis LY, so net

Dave King

in then, there Friday, Black the anything Cyber started off quarter; call you guys, the -- looks of earlier quarter-to-date, then, the are for e-comm demand having terms now biz like the single-digits of trended about you a Weekends in And to? Thanks. low reaccelerate? the any those you're the in terms regional have like seen -- how you outs e-comm well share are point that you pretty being sounded can And third, like is resolved, where quarter can versus those hiccups business, sounds

Michael Henry

are were platform, we specifically, that issues the behind new more e-comm that our to having issues now so On we we're us. we platform, have some new good, old transition resolved the operating on been system; the those so we're that's having have before that issues onto with

as referenced You comments. then, and Cyber weekend a just that has of Ed quarter-to-date I performed that we And asked basically about would low how as Friday weekend Black say Monday, couple single-digits our well.

Ed Thomas

cadence abnormal most comps of a less in e-comm and we that we do it either anything we of in-store also really out didn't on people there. and a lot than didn't buy lot promotional we And promotional our we retailers terms buy or the probably of saw; -- are didn't

Operator

Sinderen, is Riley proceed Van next from B FBR. with question. question Our your Jeff Please

Jeff Van Sinderen

year? the things I then, of And Congratulations, a color locations wondering sort many great we you're could. closures know of the year on terms estate; would mentioned on approaching XX to I of delve for guess it see how kind couple strong know you're negotiations wondering you XX landlords, how P&L. anticipating into for next maybe the just real A just with foreseeable of or far process, I wanted to you're us etcetera clustering future? as just how on as you next any to you give a flow-through if can I seeing, things the characterize the number for what new is

Ed Thomas

It's made lease. exploration in we've we've certainly on next progress is progress, progress that's in process made with us sheet, economics some be not our Well, some renegotiating up closing that, we're very we're deal better made for as but not pleased easy a terms on have a what it obviously; renew stores Sure. But to achieve. but the of some slow we've we anticipating however, planning lease said been before, we've to to any are renewal stuff a we've it. than coming and able others balance with but for the there, not to right some year,

So it's a unusual, as that's I'm process will lot a slow there is process speak but that and now. that anticipating is nothing there certainly we happen as in

the we filling-in week The strategy planned time will several with be only stores but store with of we of one terms In is that next existing into could going up the our XX we're opens XX that which after markets. and we're follow sticking stores, new in long have market really Houston for a that. certainly to that

which teed for an number have we that's or one of a know Utah, Midwest, that, open market we existing England, that us, Jeff. there, for New will what then, got market; two is so far Chicago deals and we've up stores

Jeff Van Sinderen

then, that should maybe be something business little else slower of I was And to for aware is on turn that off? just bit we girls or starts categories thinking for the around going terms are girls QX; you that that in in in know there QX, a you

Ed Thomas

less the women's Well, both -- our spring business we -- girls, -- some into haven't of for branded see that the lot both girls terms we're -- on up, was think more excited and heading pretty quarter, in coming the was terms in seen the girls of a that and In in the I we side of about merchandise side. decent has pretty been the it and see of which than proprietary business, decent was and women's a in women's we a newness of our expected. that lot newness while performance really a we

Jeff Van Sinderen

something little bit tweak -- that? where is thinking to or that's need the how you you're do you Okay. And it of feel like some maybe merchandise a proprietary about

Ed Thomas

changes of I -- apparel business on we think what will in is the bring really that we retailers look. mean, necessary again, drive work and where that help silhouette and it's made like our we've there that see a customer that and coming something a I both color newness, most think constantly, that I to would is lot but drive fresh up in business

Jeff Van Sinderen

could have I sheet? -- any just year, guys, mean, you dividend, then potentially great how paid should special give another a helpful. but that on this would on the any us know think And we I wondering special any you thoughts thoughts you dividend cash thoughts on it, you be about balance the it's

Ed Thomas

There many the we've nothing fact that our do the regularly and something of before, other than that balance that the through that on really quite said continue we'll reviews it’s new times year. as is to Board

So Jeff I there point more is say at nothing could this than that.

Operator

Please question proceed JJK next Research. Kloppenburg, Janet from with question. Our is your

Janet Kloppenburg

in impressive you could you that. have during should talk little the that a booking that of lot you and so stores, comments it's quarter the maybe the of expect did maybe And traffic Ed, category, could California I then, to about and come you if about continue? was bit talk think hot a what market. -- So is And mode some know, that perhaps on we you footwear anything off thanks. driving awfully know

Ed Thomas

performance a and bit then regional about start little it. more the So I'll Mike let with I'll talk

Michael Henry

Sure.

mid-XXs regionally softer in a little around particularly those of [ph] we have where didn't disparity see was wide tents weeks So during did here. we outside but California, than bit California the

nothing of in bit of regions outside California but in California. out little concern it major, nothing softer So than a was here

Janet Kloppenburg

out been say warm awfully about for well as there November? Okay. because quarter-to-date it's anything you Can

Michael Henry

said low the quarter-to-date the as prepared in our we've current Well, on we're single-digits provide we're and up that's all to remarks, color going business. quarter

Ed Thomas

okay, competitive say how have are some a for as stores some say anything mean our brands it we which although think quite others, certainly and state California, Footwear; some but of brands always won't I reasons a obviously, we And in so drastically that's of than business I outperformed bit; we the can didn't our point. brands harder our different Janet. I was portion gives see others footwear substantial this results at the

Michael Henry

And got there there. middle part, was another you part a

Ed Thomas

part. was we did middle Yes, there a What miss?

Janet Kloppenburg

traffic, good. that the I Just about brick-and-mortar thought pretty was

Ed Thomas

consistently we've So something months. seen that this for is

us Our can means everybody for also, been We sensitive one and that bringing we're very like and driving the in or store, very traffic driving traffic good, very and what back it that marketing, is statistics, to in has that's it, in Media a as new that the the like other outpaced has thing, so what industry and stores. to if we traffic more about stuff we've something of it try really representation. done to and have own stores pleased And about concerted worked; nothing awareness to starting brand but seen so driving it you we've the events markets come. pretty just have where which about which do so is and to fact event effort put into don't do drives major we've in-store just and the sit Social and to far -- for we're difficult primarily traffic with terms successful then traffic, we're

Janet Kloppenburg

around year; what And stores [indiscernible] that planning like pop-up what's about the for feeling the that? next

Ed Thomas

may our about good a really representation. is us, to bringing Rescue very marketing very, it's own little brand. and brand It's awareness have brand where we driven markets The for brand

The do to be concept, of a do very -- is primarily stores stores. to denim. available, real pop-up is, will be it my it's one will guess of will but be feet than estate inexpensive availability stores about will have The As the the there we're these it's be denim. things small Rescue will other be brand it only we and square not that denim which also X,XXX definitely and tops other so obviously, targeting

it using knows. -- eventually it it could we're turn something into a think we will as who So bigger, tool and marketing

Janet Kloppenburg

yes? I become mean permanent of stores, could could, these some you

Ed Thomas

Tilly; for are name have and proper the Yes, eventually; size, good the -- or so us to mall, get proper will we be location there. you entry we'll by an it looking concept proper before -- entry for it's and out be a brand location a know, -- we be that if the in Tilly's might Rescue particular of will the it

Janet Kloppenburg

could to as a well? you second your be developing So concept maybe

Ed Thomas

that's but more not happen is it that yes, concept. -- now, could a Yes, intent it's primary potentially the new it's but right the than brand building

Janet Kloppenburg

And should we think that are e-comm now should issues behind that transitory accelerate these you?

Ed Thomas

our opportunity year I it's sure. for biggest Yes, think for next

we had we [ph] of the that and opportunity the it think mobile go challenges quarter. up biggest in the us with bunch of had mentioned our and as challenges transitioning until app we to the that on we soon. in hold-off opportunity system new had that know with will the missed some -- of we've we platform So is we transitioning definitely -- we've of new which next call year, our had We mentioned and implementation it's other with half our including terms Mike up, a rolling of of the platform things end new towards as think first quarter for

Operator

Our Blair. is Please proceed from with question. next Zackfia, question your Sharon William

Sharon Zackfia

as guidance share and any were asked And the any assume for should wondering for from quarter? you apologize can I cut-off quarter, the will going margin had about and for returns, reaccelerate that recognize I I in gross I units, margin afternoon. or up the growth, was comes new we you targets were a growth? think you good for whether in to you these moment. questions revenue be year-over-year. call specific the about if in the be pressure you inherent looking how gave looking from it's fourth reacceleration actually still I then, Hi, if anything targets you got a

Michael Henry

the was into couple quarter, a the not down, had with dollar And would we to new systems, basis of depreciation were the fourth two be operating a and would is whether been that so we that there up those flat couple the go our was that quarter, year. the XX XX%, anticipating LY noted not fourth strong for not to and product And SG&A rogue contemplates in expense quarter One to on that terms fourth noted are last SG&A out like then fourth larger year-to-date just not year -- year-over-year income rest there quarters gross systems then were of up the have the why of given launched, we SG&A where points new falls count up the have XX we there cost. side, the last some a systems row margin on pieces for bonuses so that baked quarter third into our relative that So were we've then continue in maintenance raw up support a through we the the expenses it's we've of margin; for just reasons. the [ph] basis obviously had, contract of those being points year; would quarter, profit-based basis. BDO guidance

in a a going derive years. and of the sales couple first to confident, an store it's and develop individual is so think to market applicable economic to performance the that a then short location, opportunity, stores, every yet On say reasonable, specific given payback in gate model that too -- really I us we rents that order store be that we going would each double-digit look feel situation. terms seemed each of we store within that because on each negotiate get targets to it we What don't we're conservative relatively assumption [ph] out we to terribly is and our profit a precise the in static at use new that is not fairly

Sharon Zackfia

with will about ramp at side, to reaccelerate margin the point at us you growth? this when on And a there reopen you not point share or is just something talk start that that's some to store prefer you or would

Michael Henry

I'm the not question. is exactly sure what

Sharon Zackfia

up than the units; are new they typically units lower and mature volumes the particularly just lower Well, open markets. more so home at margins outside of

to there out XXXX know that in reshare interested you I been kind while so what was growing company forward? the think opportunity will new be you're at -- So to know there I'm store pace was it's anticipating since the of growing if if didn't a going the ramps the

Ed Thomas

the I'll mean modeled the reality and because around smaller that's environment. what's in I start. somewhat deals this we've stores, the growth historical

conservative day very so not our alignment continue open, in think I'm stores different been knowing accretive, was today. -- breakeven anything that's is company few any than anticipate until drastically challenges operate one; I be we've of we that is the I but going different get approach has challenged don't so terms to but be the will in what what way careful the don't it So a there we'll including and on be we historically from the negotiated, been the rent we and is stores extremely this to conservative the

Michael Henry

for now, opened open three first is there store been It the the just since year one the in the the rampup; last Those are in-lease, usually signed new quarter is or I -- sometime haven't new we'd and think is you know, with yet the or on and as that the half rest it two, so then – and would than range the is only this are of rest until any we've typically have the many know going what lifecycle is year it how the being solidified. and how that know think in QX a question this that going quarter stronger part many those of we the would store. number open year put determined, we store a of yet has so. bit so in of at are ones what stores, it's difficult don't five a Right obviously about you as back they your moment. involved and year about to to six preceding first and than of QX, year that little and in -- weaker year typical in actually it's second in have new a half a or it kind is would in you to anticipate cadence natural the more be probably been

Operator

the Ladies end and reached gentlemen, we of question-and-answer session. the have

call I turn closing to remarks. back Thomas for Now, would the Ed to like

Ed Thomas

us. with for again you joining mid-March. discussing results Have to our look a everyone. quarter forward We Thanks fourth in evening good

Operator

This today's concludes conference.

disconnect You at you lines time. may Thank this now your for participation.

Tilly's (TLYS) 29 Nov 172017 Q3 Earnings call transcript