TLYS - Earnings call transcript Q2 2019

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Operator

Greetings and welcome to Tilly's, Inc.

Second Quarter 2019 Earnings Results Conference Call. At this time all participants are in a listen-only mode.[Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Gar Jackson with Investor Relations. Please go ahead.

Gar Jackson

to fiscal welcome earnings second and call. afternoon, the XXXX Tilly's quarter Good and Henry, session. and the Thomas, CEO; Ed President Michael and host company's then CFO the Q&A results discuss will

release, XX recorded For of able will next section the for conclusion section, website a company's also of replay to call same the tillys.com. the the after Tilly's press be of From copy at of shortly Investor this please days. earnings the Relations a visit find the you call,

statements today, forward-looking during results on these call XXXX, not Certain factors current be will this of Tilly's statements. analysis forward-looking actual number from affecting that made should and place judgment business. expectations undue only reflect a you based may and August reliance Tilly's differ materially as on of XX, Accordingly,

second more is our a statements, forward-looking looking see For and risks other discussion in that SEC well was the the referenced disclaimer. today included filings with Form our in earnings statements thorough uncertainties X-K, regarding as SEC on any associated XXXX as furnished to the quarter forward that release, the disclaimer with which please of fiscal

will Today's prepared to limited will hour a one our call session Q&A after remarks. and be include

to I will Ed. call now turn the over

Ed Thomas

Thanks today. thank Gar. Good you afternoon, everyone us and for joining

comps, second share. better-than-expected Following of with June each during in a to comps May, the start stores to quarter and online quarter and both and tough margins, the we in earnings posted positive finish product July per

quarter. girls negative. flat-to-positive all positive accessories, men’s quarter was posted and comps, quarter our were the footwear, for second XXth boys, with The consecutive comps and Women’s

encouraged are better turned business has has one positive our in momentum has our As of the women’s season, back-to-school continued, that departments weeks. of and been recent and we performing positive most our

give despite up half X.X% and tougher XX against fiscal August XXXX, comp comparisons. the optimism positive. online and comping up both going These of comps quarter the company with back stores us are results for Total through third some

the one to estate, more Turning which third new already quarter, year. to total has Thanksgiving expect new real the prior four to fourth for seven a openings for open during XX of of quarter and stores store we during the Tilly's full-sized opened

Our to our expanding and Texas we in presence focused that store existing Northeast markets. achieve penetration, be the primarily we growth continues on particularly which in can further market believe within Chicago markets,

to in permanent store California plan also at Irvine XXXX. May open We the our first Spectrum here of RSQ-branded in

continuing addressed our the stores, anticipated of XX% terms go-forward this of efforts to all for cost approximately have improve occupancy structure, year, existing retail In our we considering environment. these decisions and current

known time, no although the for occur have possible leasing as that we decisions. of may remaining this the at We year some remainder still our is it closures finalize store

during an loyalty their very than rewards the an been program technology. redeem received. take for Turning to customers enhanced instant faster quarter well before, has launched includes that to feature We second advantage of which

convenience We with investing now, also to technologies to committed of and customer sales. strengthen in more buy We launch further customer-facing pay the remain before a program the season. holiday to engagement later goal driving expect

introduce second the third the Mike third our Mike? prospects our half now of outlook. quarter to earnings our in I back optimistic us quarter operating as XXXX. quarter more quarter earlier, leaving performance closing, about third off provide In start promising for on details noted the a is will and

Michael Henry

Ed. Thanks,

$X.X results $XXX.X second X.X% million million to increased as second compared last last year. by of from Our quarter Total fiscal quarter XXXX were sales or net follows: operating million $XXX.X year's

our X.X% increase represented Total to and year sales sales X.X%. increase of of of of increased sales an this total X.X% comparable last net compared top store and net up XX.X% year. share net our net including sales on e-commerce XX.X% of year's approximately were total a E-comm XX.X% last

stores started our in having XX.X% negative positive quarter July each Comps of this sales after high-single June with down for total in net compared and were approximately physical Stores X.X% represented total of the of shops. X.X% year and increase year, but quarter digits sales the were included in RSQ-branded in the We two a stores stores, pop-up total compared XXX year. XX.X% three of total stores with to XXX stores, comp to including net ended last which quarter RSQ May. last

$XX.X profit, million occupancy sales which was year. our were expected $XX.X soft as to we million flat of of net better sales compared expenses including and was or buying, last the Product or net percentage distribution, than Gross margins XX.X% net considering start sales, XX.X% a of to quarter.

leveraged Buying, distribution, million occupancy Improved the points costs $X.X e-commerce shipping net growth. costs total. sales increase e-comm in offset of basis and and a with XX in costs leverage associated occupancy buying XX.X%

next settlement week. have material Regarding no on in redeemed we the issued legal coupons X impact September year, approximately on business. last resulting X.X% life-to-date, All such expire been coupons our

compared expenses or increase primarily to favorable $XX.X a of previously million XX.X% sales the of last matter. in $X.X million was XX.X% sales $X a SG&A credit to million year's resolution net The last million to were SG&A attributable year. $XX.X net disclosed Total of due legal in or SG&A,

associated and $X.X higher The growth wage and from costs current payroll increases. million store merit year fulfillment annual approximately expenses arising with minimum of marketing, of e-comm also net included approximately and higher million income, $X sales

was was by operating $X.X charges lower were or million X.X% sales non-cash to increases net $X.X net matter year's to bonus X.X% compared million primarily income $XX.X Operating offset of of expenses legal primarily of This attributable of decline year. $X.X million $XX.X lower credit. sales million last or last in million. These income and slight

$X.X per of last million $X.X pre-tax $X.X year. million per or XX.X% was share income last XX.X% or or compared year. Income or to pre-tax of million income $X.X million diluted tax to income compared expense was share Net diluted $X.XX $X.XX

quarter the income consistent million, per year. matter. with previously $X.X of the diluted to approximately resolution net were Weighted relating includes legal year’s XX.X disclosed or favorable last after $X.XX average million share Last tax shares for diluted the

our million last $XXX.X to the debt last and Turning marketable with per million ended We inventories and debt ended to sheet, balance $XXX.X and foot year. X.X% the compared quarter square we down no totaling to cash quarter securities with no year.

Total year. were compared $X.X expenditures last capital million $X.X million to

fiscal not capital We for million. exceed expenditures XXXX $XX expect will total

Now, our turning to quarter outlook third for XXXX. fiscal the of

range trends, through earlier, to store sales of As sales are on sales approximately X.X% net total increase Ed noted X% expect net our on up million quarter. current based XX. comparable to $XXX total and we store including approximately the to Based $XXX net e-commerce X% million from August comparable a historical for

approximately and million. million to range million, $X.X from from XX% This expect to approximately store $X.XX range of no tax XX.X of per $X.XX. diluted and assumes earnings income asset rate to We $X.X effective charges approximately outlook and operating impairment approximately average non-cash share weighted diluted income to shares

comp foot We to with our sales consistent remain performance. inventories per expect square

Operator, we’ll Q&A now go session. to our

Operator

this of Thank be Partners. your first King proceed we Our conducting Dave the with question. question [Operator from now ROTH you. At time, Capital session. line will comes a question-and-answer Instructions] Please with

Dave King

Thanks. Good afternoon, guys.

Ed Thomas

Hi.

Dave King

some guidance, margins basis we're of basis, and that on a on stronger positive or think on I comp. a guess a on core I off just the sort to margins, the of yet at takes down or slightly I conservatism, points outlook? so puts Is the XX comp, operating up what least assumes are that think first

Ed Thomas

You're referring to QX.

Dave King

Yes.

It down you've X.X, looks if midpoint income. for guidance like the Sorry, got I QX. margins of the the Op use

Ed Thomas

points XXX last I to basis X.X slightly from income No. not get that quite was suggesting mean year's would range we're Op that. better below the and anywhere you than

to there a the tweak might just need bit. individual in you So, be items that something line

Dave King

Okay. year to secondary offering The mean, had fair. offering. that's I think the results I last costs some related

basis. on the So was I guess, I thinking core

Ed Thomas

Yes.

on like... it looks So, basis I a was core thinking

Michael Henry

got I numbers GAAP what Yes, would the saying. there year. you. Yes, Yes. you're last for I in follow be

year e-comm talked in You to e-comm payroll million in think for added end because if significant and on And we've roll There’s our that. that know three costs about SG&A close be row growth extra minimum expense over e-comm would particular. better of go little with there marketing $X shipping that again, the comes would whole of $X.X into guidance, the fulfillment, of from probably wage as million seen of again expense comp increases. you're now, I as we've quarters a year-over-year line with probably for e-comm a a

year those pieces movement of that So, the not kind on expense of into top might the have specifically your model. layered are you year primary of

Dave King

June Okay, July to traffic you so then how the how trended that into timeframe, helps. was gears, particularly August And then and has versus maybe know that far? the switching conversion,

Michael Henry

the total down in for traffic Our low-single digits. was quarter

was Conversion then the down So, up quarters quite average less in down the it's It than sale, quarter. was not X%. down And now two less in slightly X%. the a QX. digits down low-single was It was in than row, been it quarter. second X% for for down on slightly actually

As you in transition those positive all metrics direction. the right direction, into in August, are a

seen we've positive month in so August. of each far traffic So, the week

of flat. of comping of being are positive slight thus in and the departments markets All accessories far our below positive the all barely are August, month exception with just

Dave King

would little you thinking dividend, down some whether be level last Okay. return, just the Thank capital maybe me How over It’s further potential for know regular guidance those high after you years, further high you of are dividends a special CapEx great the to for hear, about thoughts you. one bit, Ed. Looks like one last just took level. that's the helpful? three some

Ed Thomas

at And Well, look with pretty we the at always we’ll it do. Dave, we board. look quarterly that, like much

that. the certainly we'll time. we and now, right decision into evaluate There's get make think we'll year, as nothing proper we'll the but at right the we is So further planned evaluate what

Dave King

questions the for year. Fantastic. of Thanks taking rest luck the good the and for

Ed Thomas

Thank you.

Operator

of comes Jeff with Please the Sinderen question next your B. from Our FBR. question. Instructions] proceed Riley line with [Operator Van

Jeff Van Sinderen

overall say ask about Hi that have I branded on strong strong guess, congratulations thing of the the cycle wanted in first I everybody, been just sort to let you the is and me trends. that in. we've take the resurgence on you

how other Just opening RSQ that that's And RSQ wondering label, Irvine? maybe trending you? in you thinking also and you're then been can behind about the for about the store private talk

Ed Thomas

Okay.

couple have major didn't brand first stronger emerged say I there. strong and significant That's as any all, There’s being have didn't presence there's one be that -- strong, a a So us. to champions. performance champion, in have the most brands of probably out we the major changes wouldn't year, continues last like of that very brands. for changes

very back-to-school. brands going own It being in RSQ had have RSQ And women's perform been brands, little better our quite continues to brand. would a our frankly, bit some inventories of best top more to our results our very think well. And are had we I

will mix excited very store, stages we get as merchandise far It's early in further in come very as dedicated the more finally we and then of it of in have development. but standalone on and we're brand, building be, the development the to as stage that somebody still about what year. still So, to terms prospect of it's that that

Jeff Van Sinderen

Okay, then I app you've the great. And enhanced launched QX. think in mobile

to Just that. response wondering,

comments that be think seeing see in your I a loyalty. a of do impacting second and driver you things you the how that of your on you mentioned remainder business couple back-to-school Are in half? prepared for

Ed Thomas

Okay.

one app, which that haven't our redeem did still rewards, base. an well enhanced worthy customer really We the really has feature, by launched what received is really enhanced we But, on is, and mobile working do that. launched been that we new instant of we're

through related well and about or to omni-channel So well and too. next balance we're continue of the to we're going this of year into probably that's year that, in invest mobile as excited anything

Jeff Van Sinderen

same rewards with the for They the another to. how purchase, the And rewards at or purchase, that does an Okay. the that means time have register at incremental work? don't use they instant actually can

Ed Thomas

it might transaction have They they standing, you that on And you that can very it and their can dollar, oh, right it do do to right on want use then a tell use associate transaction. them, vary now? as they're

Jeff Van Sinderen

buy Okay you terrific. the pay. then mentioned And now

wondering that's you think said for how going to holiday. I just work? was pay buy I now later program

Ed Thomas

to with going that have many adopted, retailers we're that. that to pay after adapt and It's

trying on prospect the a get of it's So excited it's about that holiday, up working for we're really to pay, you after know that. we're but

Michael Henry

later value something that pay it they It's make the customer of into the the extra layaway, increase average XX% about every additional behind tool. metrics kind pays of week. modern buy unit the the XX% psychologically order really transcend And purchases for like now payment purchase that and then it indicate day an other that basically significantly, seems to with particular helps upfront

So see to looking it forward worse. getting does what and implemented it

Jeff Van Sinderen

in. one Okay, then great. squeeze have I just it could one And I final if

early, it's you single does comps, still if assume high longer next looking I assume seem but do feasible would you positive margin Just leverage target if digit toward and for think that year, operating modestly to know we we is the were to intact? term it

Michael Henry

that what continue here into that's since as that that four goal can drive we back both I online. about Yes three, of from still believe mean, business last talking that's to require the the believe stores well we get It comps is as we've we've to for we years performance. been been positive us level that consistently does the

We will minimum go January into of in another here have another on California increase will year wage X. effect dollar

cost that play. will pressures So into there are come some additional

happen the one's no obviously but know week. they asked about there, to whether yet when, change those You out and by actually tariffs, are and seems

model year's we But yet… hard really haven't a next at you we haven't know taken look

Ed Thomas

Jeff. it's achievable think, I But -- I think it's very very

Michael Henry

Yes.

Jeff Van Sinderen

for Thanks taking and my questions continued success. great. Okay,

Ed Thomas

Thank you.

Operator

Instructions] [Operator

Gar Jackson

are we’ll it if just wrap no guess up. there questions, I

Operator

gentlemen, question And CEO remarks. and to would back turn for Ladies I of session. closing end answer and like the the the Ed reached to we call have Thomas,

Ed Thomas

Thanks We for today. discussing joining look third a Thank us in quarter early Have everyone. with December. results evening you. our good you to forward

Operator

conference. today's concludes This

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

Tilly's (TLYS) 28 Aug 192019 Q2 Earnings call transcript