TLYS - Earnings call transcript Q2 2022

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Operator

Greetings, and welcome to the Tilly's, Inc.

Second Quarter 2022 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] And please note that this conference is being recorded. to Relations. conference like Jackson to now Investor with would turn over the Gar I sir. you, Thank

You may begin.

Gar Jackson

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

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

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

Edmond Thomas

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

to of sales our quarter the outlook for our continue results per face fell net highest the As of years, short inflationary second earnings both past estimated ranges share. just and XX our environment customers

a early of quarter. the to two season in to the once with the began. All in comp Our declined negative June comped throughout starting stages double-digit less quarter began final weeks the minus May of for moderate before geographic markets further performance comps which comp sales the back-to-school negative

believe double-digit the We disruptions high-single-digit well we this environment, We percentage. Swim the better for that payments departments Supply lap pandemic-related last compared geographies. which traffic time business of and high-single-digit to continue conversion by departments generating by cause percentages the merchandize and managed as for were except the declined and through year. decreased continue comped Customer challenges and product footwear, flows, both we challenges Despite fairly Our branded negative and we issues of children’s was record-setting most in declined our as growth. significantly last weak long-term by to stimulus across conversion apparel. improving other and to us particularly by of factors. both extent, seeing customers getting traffic been have chain believe same fueled to typical somewhat results have impact inflation on women’s and at particularly working year’s under these the towards indicative that circumstances. our a current footwear

of our X% is net us a good to a these bring offerings second to off We added believe and Our to represented quarter. business total can teens recently grow time. which sustainable category over start. students for to continue serve offerings college sales product We and the incremental home

season, previously. what holiday of an to compared upgraded mobile shopping engagements improve launch our to our improved expect mobile been ahead a customer which will we also through believe website App simple We of the has wrap experience

in are already in and one to ahead just four be estate, Thanksgiving. opened, scheduled we to of October open which open terms mid XX a of a real year, now four of of expect total new in this November two September, In stores mid have

store count current or general. challenges cost total we that inflation believe over more next to years per year stores continue construction We by ample and rising the despite grow ten our with have in to several opportunities

the as is that openings what However, lease open the we to will in to our new approach said our and believe to reflect environment we expect. intend only be we relative in past, stores be appropriate we economics new to store disciplined

including latter of XXXX, the comparable last e-com negative the August. year. to that before of the to stores negative net half first quarter versus of which latter through the half of by through Turning third The peak carried back-to-school the August and trend began period half July comparable returning double-digits of sales season, decreased fiscal of less includes XX.X% total physical XX comp in August both the in

perspective sales through relative fiscal net comparable X.X%. by of pre-pandemic comparable the additional to of August period XXXX, the quarter For increased XX third

the early our an While took that late believe year about significantly, this season particularly holiday these of of given represent our and we impacts have trend to results opportunity an the August are year. a concludes, the improvement year shopping assortment second third half to the We if to good quarter inflation decrease compared the to and holiday feel follows quarter. shop performance, we early last latter quarter back-to-school season expecting holiday traditional once the comp comp traditional period compared more have – fourth better the the for we last shopping performance in merchandize patterns,

performance thoughtfully call quarter quarter second manage third relative will more with operating results mind. to Mike in details. discuss environment turn to to over improved long-term our outlook in our now and the business I Mike? to We the continue

Michael Henry

Thanks, Ed.

Our million, Total to comparable second year last from million decrease company’s our sales of to of Net $XX.X million million were net sales, pent-up a a a compared decreased decrease sales net XX.X% year decrease were operating comparable net of e-commerce, stores $XX.X stimulus physical $XXX.X compared XX.X%. physical both XX.X%. compared unprecedented or XX.X% last and a a represented last E-commerce a physical XX.X% total We $XX.X increase year. represented year. net XX.X%, stores impacts. of $X.X last or demand quarter. and from net $XX.X last total Total quarter second year's million both results year sales and net this and sales to sales sales compared stores to with store stores, including the of with or record quarter up this $XXX.X both XXX year against $XXX million, Total by going XX.X% to total last the of year. million, year two stores ended $XXX.X last million year's quarter net of E-com net were last were due of sales as million follows: second net second end since of decrease sales

XX.X% of our which points, level second significant $XX.X bonus or Product relative SG&A expense of X.X% this to more rate reduced to year SG&A due and of were to year. quarter levels. $X.X fiscal offsetting of and and million a compared on profit, costs and the of second a fulfillment in distribution including occupancy Total sales to pre-pandemic in the decreased insurance XXX customers. in price was percentage expenses an quarter Product less related last compared XXXX. SG&A points last perspective, this reduction The XX.X% record net XX% this e-com comparable to indication last basis For our sales net and deleveraged compared compared net markdown due was margins is XX.X% primarily $XX.X year. year dollars against or a by expenses second sales net to to million marketing these XXXX distribution any attributable was for in selling down despite included the collectively by million quarter $XX.X technology Buying, Partially occupancy buying, increased then $X.X sales XXX primarily $XX to believe of by normalized the lower of million at store year. benefits, fiscal services, last despite by XXX million being or another and each significantly year. sales these Gross basis costs the year’s the additional million reductions declined we inflation margins reduction $X.X million net carrying May, our full of expenses. increases $X.X compared of sales points to million payroll company when basis high-single-digits impacts net that were had e-com expenses in were a accrual at record in quarter basis of pre-pandemic on corporate absence or starting

million compared income, than Our X% million offset million to use expense by X.X% a increase. store store The teams million more was sales, year. nearly sales labor income year or $X.X last to or in second tax compared tax last but record Operating managing or last compensation. to company’s XX.X% quarterly net tax did their average a per pretax of effective diluted to job record $XX.X $X.X stock-based shares compared million second million company’s this share rate $XX.X was year. Net $X.XX a $X.X related discrete XX.X% primarily and $X.XX of were due in million record million increase or impacts to to quarter diluted of was compared was quarter a of great or share, wage $XX.X XX.X% to was net last income year. last all-time of per income this pretax net rate income $XX.X Income $X.X an hourly of average year. average year, per hours Weighted of to lower compared income

million our at year This quarter, shares dividends no to stockholders XXXX total outstanding. quarter of the million second ended of last XXX,XXX of cash $XXX.X we stock no our common of marketable $X last debt and to debt total and $XX.X and balance we with $XXX.X a the year. the outstanding. cash compared end in sheet, of quarter of Turning end second for the second Since with million paid year's December also special to this repurchased securities million

X.X% at at the million share shares just significant our March under with inventories remaining authorization, per the the quarter of X ended second have end in XXXX. being quarter. first of We a foot, over expires improvement cost We XX.X% which from square repurchase

New X.X% to inventories foot last were relative down year. per square

million, inconsistent from to goal year, expenditures product reasonably to half to due with earlier compared $X.X resulting flows performance our remains relative we’ve thus sales to store performance the sales years. decrease for challenges, to capital last trends, continue we product ongoing million to rightsizing doing consistent first were primarily chain continue $X.X the that and openings margins As maintain being as our supply pre-pandemic are new last year. inventories Total contend while far our with continuing been anticipated this

total For range as of fiscal expenditures be $XX capital expect our to to $XX million a we XXXX million. currently in whole, the

which we earlier, XXXX, deceleration trends, net and a record quarterly of earnings last on per previous sales expect approximately by third $XX tax latter historical income total be results fiscal current $XX.X third quarter for $X.X million and and to based to be to in to the per income the share as Ed some company net of approximately earnings million of be quarter the approximately Turning diluted noted our to the half weighted to anticipating range rate range diluted and to per operating of based range of of the quarter approximately share third for currently $XXX.X fiscal sales company net third compares million, SG&A $X.X quarter-to-date to $X.XX in exceeded in share to our estimated for approximately year, diluted XXXX the our be $XXX XX% record of million on in of to $XXX of quarter million, to the record million. the million $X.XX. $X.XX This sales $XX estimated million, earnings average quarter shares $X.XX the

stores to session. at Q&A quarter. at total increase third the now of end Question-and-Answer total go We we'll XXX the four expect end last opened to Operator, year's net Session of stores quarter, of the XXX a have from third our

Operator

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

Jeff Van Sinderen

everybody. Hi, Yeah.

you I speak reorders of can for realized. and of the pace chain how maybe So, are that first that year, multi-part inventory consists far can experiencing, Kudos are touch if to managing most around inventory areas planning me. to really supply that excess question And how then, challenges me A there with holiday And a holiday. receipt maybe remainder your sort the then, and the that. you you you disruptive of any cancellations be let say, on what merchandize any of kind down. in of believe what here optimal But more do assortment sales are eyes an current of lot would have chain I where inventories, remains and have period on you overall ongoing inventory from your just make bear I inventory planned good adjust, you and supply folks inventory think that getting stability of? given work level?

Edmond Thomas

of very Hi, seen from to now –there be think are Jeff. I close total I inventory here where number, to would worked mix. I also to brands low-single-digits are we pretty an be and terms of who the hard from QX a adjust inventory within to are approach of supply in say to had will – the of you we’ll couple big to most manage have see having want there able more for to inventory we in. levels pretty the other single-digits, few, that that I number right up reasonable retailers’ whole a we’ll credit think report sure. But challenges challenges I that that get – team but and a the us sure as where now, chain but optimum get is inventory for categories to expect are it make am a right taking that be have when pretty a number behind good you to you There is it are we what but wish least feel into we conservative we overall the would right I going at holiday can sure we

Michael Henry

Yeah, Jeff, I’d add.

four where to can here year inflationary as environment fiscal expect forth all XXXX this anything an and we reduced is haven’t we think taken out deliveries and to and cancellation are just obviously at time cancel. incredible at now over into if tend from of line late what call normal has of that about but you’ve assortment fourth recovery what days. year in times decisions in overall level in normalized certainly times carefully finished last what swan and last of couple We expect them over and reduced the call be in to supply I’d pandemic I’ll XXXX is, the back real-time shutdown We quarter going with adapting XX about the inventory their some nothing original third the years things break been our regardless so the of six best time. job past you rights extent have outstanding like negatively delays key X.X think seen are I late the some normalized the years part we challenge, talk by the any distortions inventory last and delivery to moment years. as end – certain performance our to team enter highly to and want eight we do be at meaningfully disruptions would of the of have that done We’ve as are you overall at have making has that the I a to and The value. quarter weeks your and in we these kinds impacting to have we quarter those behavior still chain

standpoint. Black of we So our certain ammo Friday we’ve been go sure feel you while taking trying to well protect, situations, Ed holiday situations merchandizing those into as returns the mentioned also other making a advantage have about make and that to got from good we good assortment in weekend,

team under circumstances. constant under trying week, like So, turned yeoman’s control week keep has us change because balancing we work can as feel but multiple rapidly, at it’s times we a just both it that extremely to as difficult a again just things discussed single just every act. We’ve the

Jeff Van Sinderen

then, on, the And to speak I, touch promotional follow-up I your if own good. how as promotional there. is a little just just, extraordinarily more a Obviously, about could planning and wanted you you handling Okay, environment out levels? are

thoughts any around that. Just

Edmond Thomas

don’t great. and business promotions we But being not we one avoid – it. for we’ve goods. able of thing of to to has business that’s bottom Honestly, we long unusual promotion challenging many Well, others know, now. for promotions that overly the promote a right not control, they job And the think any out week think so one good, reasons the disciplined that’s our been way And been promotional where controlling no have hours are I dame. whole pretty driving or of We categories it’s the promotional promotional reason pretty main the denim not. have as not of continue why company expect the you would as don’t are turn back-to-school getting that good of and why want year. inventory I actually through into more to of balance matter was denim. such do to Certain been seems how have

Michael Henry

about move problem thankfully are we I’ve to increase inventory what any we being almost Yeah, relative we don’t very report seen size far. to had need anyone one different else surgical to really thankfully address so have out areas companies. over a of the and a percentage dozen there at we the high is year-over-year of There lot looked couple of I increases smallest. very are inventory and

Jeff Van Sinderen

as helpful all That’s for say, the of and taking of questions thanks best quarter Okay. the luck out. plays remainder my and

Michael Henry

you. Thank

Edmond Thomas

Thanks, Jeff.

Operator

with the next of from Kummetz Mitch question with Please our line proceed Seaport comes your And Research. question.

Mitch Kummetz

August to just years sales on a a Mike, a decrease a questions. sales to happen year-over-year and or starting August increase year-over-year question, you you gave my you happen Do year. know taking three that? also for ago, do and have thanks three also Yeah, with housekeeping comp to versus

Michael Henry

the comp XX.X% last down to August through gave XX, August We year.

Mitch Kummetz

but comp, also do though? Do on a and sales sales You a have on you you year? year-over-year the the the three have have number

Michael Henry

sales date, specific a have no. through to don’t specific I

Mitch Kummetz

for do to sales of need Do range. your that? the balance implied happen what you of to I the back Okay. have quarter and to sort you was get trying to

Michael Henry

keep – first Yeah, in are the tell week very I we can of mind, are that raw sales, we September. you in fiscal

as So the being speak. are we closed books

So just plus those August raw the e-com environment somewhat quarter. we not raw that inventory highly and for have of none god is we least final don’t sales, in did million yet. that years point Obviously, have of place in have pre-pandemic of of August August sales sales But we at over of in years point of have did XX% represented the in today. $XX numbers sales inflationary

a are as We slowdown we mentioned. contemplating

declined to more XX% than back school have here stores earliest by recently. Our

as the us off that business was that gives So And think you could never inflationary historically and some percentage unusual high pause I about been it’s any it facing. quarter. be fall a of year. in of was of that quarter last It third level October, XX% pre-pandemic how that from sales, which environment year’s was then the large total we about think that

of forward certainly middle year That’s we quarter had there and So, fourth history. pull than higher difficulties the was concerns happened supply about were never like our shopping last our noise quarter holiday that third feel chain in and a we sales. of sales and

lot challenges we in expecting back are more the So, a this half of quarter.

However, fourth assuming side we’ll indicate a have the in shopping positive of return. quarter the holiday the that normalized that, trend performance of that that should patterns flip better

quarter and October in in year or the anticipating the compares last we third it were last we that back as quarter. than tougher relates happened won’t August forward being be should were as mean even fourth particular. XXXX second for fiscal quite to we were quarter pull negative this year that as as year moving September was So into that the

better this we have an to fourth of do expect quarter So, this that mean the be should in but tough, have performance the quarter. we to opportunity remainder

Mitch Kummetz

Okay.

I be said, sort away comments, something don’t you your but know QX expect guidance, to from know That like accurate. I negative. it’s clarify just giving to if what take of my the QX less are not you Just you that’s

Michael Henry

unlike for year, every prior we’ve for history. margin quarterly our seen records sales right. in and that’s Last anything rates Yes, quarter set gross records

quarter still less So, will I should but sales think, quarter, below fourth total the be I last negative. year’s do fourth believe be it in

the into XXXs number consensus the a the it high the for reasonable I was look I number think in this fourth call this in at somewhere XXXs, think coming to early quarter is date.

isn’t consumer down something that there nature. or of leg or with some spending economically other Assuming

I think fourth probably for that the number quarter. is fair

gross I margin I too think think close to too light been margin pre – rate. We’ve the tracking is is fairly SG&A rate QX, and gross consensus XXXX high. the for think numbers for I the

rate So XXXX suggest above if quarter I’d adjust that high anything reasonably expect. fourth than at this point, for is we margin I’d would too consensus the what fiscal

Mitch Kummetz

you was quarter, store per Okay. this that last the from seen you’ve particularly Ed And improvement mentioned, swim quarter though then basis, the on inventory, you weak. on mentioned going that a

to that mean, question my is, end or guess is clear any I itself? in the I within quarter you inventory, seasonal really your quarter So through excess there were able

Edmond Thomas

inventory The very, clean. very is

here ended we going we shape there might we and There in be category. good quarter good by there – are always to in So, the be and pretty pockets that is some But but are. shape.

Michael Henry

to always risk approve be kind are and see point. we through perspective, consistent an in of where certain ever this inventory to rate we that we at have a Yes, our age anything ageing that we quarter. every all aged and goods, been has for and certain single any that discipline disciplined honest ever for turn From below very

Mitch Kummetz

three question, – ago do from you this been have you pressure three store a last point years any as quarter much then, have for the or know labor this And basis quarter versus I to Okay. has a is point. standpoint store sense – how years margin versus labor that what increase Mike, ago? Do pressure

Michael Henry

up from average last of years The X% lower versus versus on can was hours really versus XX%. basis, XXXX. we in was our to analysis I fiscal X% store, did ago hourly rate said managing did increase usage our year hours remarks, And last teams Yeah, and an of average are and on up job our prepared to as year per payroll it tight three as just an reduction number being a evaluate we has as basis. good rate the challenge – we a been

a with considerably up gone that has of it’s to So, and lot California. do

we’ve $XX a dollar years. already are and been for We absorbing several at here year increases

roughly our you that so XX. XXX in was at minimum a years stores They of are Three think about are XX California. all and So of ago, that’s…

Edmond Thomas

still I in the of anytime see don’t Yeah, and good has of labor it. of that the and rate terms It’s challenges increases [Indiscernible] are of soon. a changing we labor – managing job done but availability team through

Mitch Kummetz

guys. thanks luck. Alright, Okay. of Best

Edmond Thomas

Thanks, Mitch.

Operator

Thank Capital. you. And question line Koranda of proceed ROTH Matt Please the from with our next comes with your question.

Matt Koranda

Yes.

So, the put the here. point anything embedded a just observe and weakness the or like guide end toward of really a deceleration some sort incremental comp to of rest wanted you the the finer the guys that? not saying August on in It sort you issue that’s comp quarter anything more like of than necessarily for are of it’s sounds

Michael Henry

that Yeah, of I meaningful what a are finished, I off base, think think the and once customer is, having seeing impact. in my our inflation opinion, are we dropping really back-to-school the for stores need-based is period is

bit compares, being As then weeks back bit with comp the better of worst the easier second back-to-school week minus We at XX little we were were quarter of June. final look and at and season supposedly at and down first a quite XX the got July the two then started. minus the June June a the was XX. better June for July was of in our cadence that and our quarter

negative XX%, then to went July and minus single-digits. XX of we basically a first minus half XX% the from in As

their on weeks of are first week to – first three, one the we to into we stores XX% most we the half in very of two August the September of of seeing down I we when down questions, drop week finished four were then mentioned first single-digits The were group that here negative back-to-school, that had than XX%. and our down that and a XX% stores with response in week offs seen minus erode in in August of again, and latter started more of

that. trying are to with So, we stick

Edmond Thomas

yeah, we’ve vary to date forecast. fiscal geography to but significantly - be now enough relatively that Yeah, by accurately able seen

Matt Koranda

regional something… terms is of off Yeah, is and guess, store I like there or drop demographically is the in that difference different, demographic any the if that

Edmond Thomas

– the consistent throughout pretty pretty It’s consistent country,

Matt Koranda

Okay.

Okay. third is tough. That’s point then helpful a aware just the margin quarter. the well And Obviously, merchandize finer very environment everyone across in the promotional maybe trends on board guys. of is

great just talk Your guide here point it But and on inventory embedding That’s item for Any are relatively clean. maybe for we guide is operating embedded about the merch when to the in similar XQ? profit the or super is expecting a what’s point. that positive finer margins in us. incremental

Michael Henry

added also really QX. XXX opened It’s five - It’s adding to the XXX we pure July. are we QX from similar that relatively getting and QX, stores from then dollars in we had from two fact to are the of sequentially going stores in latter half

occupancy and that also business expense stores. and the expenses just When two of it’s the plus that which you supplies isn’t go taxes those. occupancy and property quarter all full license, distribution about rents, for think into things go a have you’ll those So with the utilities

in occupancy similar similar the combination quarter SG&A. add during the a two from openings, QX were the going we very rate third quarter sales in sequentially QX of second expenses in distribution and plus of result So, a that quarter store of $X rate of not and new to are five late are those we almost openings QX the there while to expecting as a million

So it’s that pretty directly movement.

Matt Koranda

words quarter of year to the but and That the sounds of put for in mouth, just inventory it sort And rest Mike, to Okay. expectation your the I to sounds the me understood cadence don’t I wanted sequentially sure sense. It then, make want like there. third again receipts sequentially – successive makes and I environment, it’s to be in and fourth But guess you each could? the maybe I that on - just inventory speak demand a down it quarter should and down sequentially the lot of then the if quarter. down volumes but in

Michael Henry

supposed Yeah, week every that to arrive next remind number that will does some looking think currently being up receipts and I timing plan weeks are I at is which anticipated single things you internal and of of week late. week change our this end our move

as with expected team inventory today the receipt they also third finish quarter. to in adapts as terms the finish and time be So, but quarter sales, fourth in as we we negative have, can position of a flows, being visibility the what best the we know expect by anticipating we that case are would markdowns, current of planned we

Matt Koranda

It average did Okay. back buy to in the Excellent. – rough of it here. shares Maybe calculations math here terms like seems a on we helpful. looks have willing point inclusion back the are moment that $Xs. you an special buy guys any low stock that the should of be on be the last the And willing you’d just I at that in like, now transact just like share, $X sort will on you’d front but more dividends of to thoughts logical versus to a is at just the

Michael Henry

down. down been unfortunately that thought almost of assumption. the we the it’s half likely that business four probably given down $X.XX that average strategic fair could go buyback we’ve things That’s price completed the seeing, was second what and okay, a how pretty quarter, in as We’ve on we, slowing about at it saw had are based slowing an our we stock are

a for get back pause wouldn’t we did that we program. to some So took I be if situations bit. opportunistic into little surprised

Matt Koranda

Appreciate guys. all the Okay. time Makes Thanks. perfect sense.

Edmond Thomas

Thank you.

Operator

End Ed and question the to the we I over of this back now you. turn remarks. Q&A the closing for answer time, like call any session At and Thank Thomas of would to reached end have

Edmond Thomas

our Have you Thank third look you today. evening. good in joining the We for with call forward to results December. us on sharing early a all quarter

Operator

today's conclude This you, does Thank conference. everyone.

your at great and disconnect you this day. have time. lines your You participation for may Thank a

Tilly's (TLYS) 2 Sep 222022 Q2 Earnings call transcript