Earnings call transcript Q4 2022

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Operator

Good afternoon, and welcome to the Tilly's Fiscal Fourth Quarter 2022 Results Conference Call. [Operator Instructions]. Please also note that this event is being recorded today. I would now like to turn the conference over to Gar Jackson, Investor Relations. Please go ahead.

Gar Jackson

to Fiscal welcome Earnings Fourth 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, a Q&A results discuss will

release, recorded For will of able will next be section the conclusion section, website a company's also expectations of analysis replay to may during as XXXX, XX that days. call Tilly's Tilly's same the the of from tillys.com. the X, after based statements reflect Tilly's press forward-looking for be factors affecting call of From made business. Certain copy at March of shortly current differ various materially Investor results this this please judgment earnings only on the Relations a and visit find the and actual today, you call,

Accordingly, statements. forward-looking on you undue not should reliance these place

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

to now will Ed. call the I over turn

Edmond Thomas

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

the particularly years. ranges ICR very in early customers, we XX of Our fourth conference. in outlook a us XXXX quarter the results environments fiscal worst was inflationary one for of challenging and provided earnings revised exceeded in over the and Overall, connection past the light January year sales our with annual

to also far have our in a unseasonably February Fiscal here wherein experiencing slow relative fourth last to while cold increase sales start XX% off over weeks, year's rate. stores XXXX meaningful seen a decline several of the of wet and run as and our we've XX.X% approximately has weather our California last we thus comparable in business net particularly anniversaried reside, gotten quarter

we a start results optimistic cautiously very the of March see year. about we we up And trend despite that going spring/summer business our negative roll against on remainder believe Consequently, the stores will monthly we newness comp From in the soon. quarter, overall onward, in first just based recent an product are double-digit improving to slow started the are weeks. out season the has to for to

and a continue pants variety tees and product In a men's, be we for short-sleeve in interest button-up expect last to shirts. men's Within expect year. of new to we silhouettes graphic fabrics leading improved inventory shorts have position see compared will non-denim in and we us, an growing to with bottoms,

women's, In silhouettes. and trend about optimistic are we color and newness

a expect tops emerging a to more in We ways, have with offerings in bottoms and to in complement fashion strong trend. we are investing compelling of number new silhouettes cargo

compared growing have also We in offerings seen swimwear, dresses last skirt to year. and our interest

in particular genders. we accessories, collection trends are and improved In brand with footwear, we current. have for strong we In our a feminine we portfolio that more believe have both women's believe

have will Additionally, we compared new sunglasses -- designer a to an we expanded optimistic sunglass are year, last about collection and lower-priced home business.

significantly based assortment on the comparable and the and see believe spring easier fiscal year of will for more supply last time, much be at we girls, remainder hereon we and our year we chain be expect going branded good a boys Altogether graphic position about feel in. we against comparisons For had the we this to issues. when in than better inventory tees will up quarter favorable from we experiencing on were results

X to open expected we during in In X back-to-school of terms finalizing March, fiscal XXXX, with approximately between holiday remainder open quarter case store the of estate, in the seasons, expect new subject XX third stores and expected currently each the to store and set the real end acceptable open terms. to to near lease

For make and year nearly through just existing halfway decisions. over lease stores, this those XX are decisions we to have

to current the these all with lease to environment, possible. much conservatism approach Given as we as continue renewals contain reasonable costs

profitability. be one status If are February. we what which closures in time, based necessary we closed of believe on negotiate protect in to are unable will our we lease as planned to X store of close the of aware current to negotiations, costs, we reasonable stores this late XXXX overall At

our our for our expenditure capital and to management anticipated efficient fiscal include IT allow app, security continuing systems inclusive cyber expect investments management future in growth. be currently new year, within for updating warehouse $XX to priorities expenditures $XX facilities infrastructure inventory beyond total mobile more XXXX million an upgrade Our new We for the stores to to across million in better of the stores, capital range. ourselves to position

to approach have outlays environment consider In improved before of to feel sales more outlays, cash other taking us we stable to or we are anticipate of capital we are that until significant additional and fiscal terms and dividends potential underneath of repurchase confident uses such any incur stock, a including not XXXX performance. economic wait-and-see would generate capital, able we

customers remainder XXXX, our relative our although results lower during comp about to significantly recessionary year. sales the against going we closing, cautiously for given In a of potential operating the are the prospects impacts for comparisons will up significant remain optimistic we improving be XXXX fiscal on concern,

quarter over details turn the quarter our outlook. additional to XXXX fiscal call Mike I fourth operating will now Mike? XXXX introduce provide our performance and on to fiscal first

Michael Henry

everyone. afternoon, Good Ed. Thanks,

stores, $XXX compared million a XX.X% last our to of million, fiscal fourth million company a last as sales were XX.X% year; fourth total sales Total of decrease fourth stores physical a represented to $XX.X E-com the $XXX.X $XX.X year total of compared of net decrease from end of XX.X% total X with stores XX.X% year. decrease were net last fiscal last fiscal sales total net XXX were net XX.X% from e-commerce compared to to total increase year; of last sales $XXX.X million, XXXX. represented the physical We compared quarter million to to year. XX.X% sales sales compared a total year; a compared of stores of net Our sales year's net sales results of $XXX.X net quarter net ended net record net follows: to quarter XX.X% were of sales compared million, XXXX last

to markdowns year peak near primarily higher occupancy inventory levels. to million fourth due net Buying, due XXX compared basis to of X margins, new needed declined stores deleveraged $XX.X Gross to basis costs despite including sales. lower XX.X% than quarter to last XXX costs collectively buying, of by manage sales and or distribution Product record million carrying distribution was these profit, lower compared $XX.X fourth net with $X.X margins sales product million and of points points net net being or occupancy year. XX.X% a last historical last year's quarter by against expenses,

Total any expenses were a of expense payroll net SG&A $XX.X in this corporate dollar million of XX.X% XX.X% of year. were compared the accrual bonus across or These $XX.X partially expenses and bonus were Primary last net sales, million store increases year. reduction $X offset due to increases lack or sales fulfillment. million by from labor-related payroll, e-com SG&A to in

certain $XX.X million as just the sales X.X% write-off a was expense last $X.X primarily last of was compared of last on to year, million million significantly million with factors of year, our return the to to or earnings X.X% noted. combined other rates compared of year and our compared year. associated income credit transitioning income net $X.X loss Operating unamortized last of result securities due of higher of facility or net operating marketable costs $X.X sales Other to

income income million $X.X last X.X% sales were million XX.X% last pretax allowable year. net tax benefit results year's deductions benefit or tax of due of Pretax compared $X.X of breakeven Income to tax of essentially compared to and credits. was income was income year. primarily tax to certain This million, or expense $XX.X pretax

$X.XX year. XX compared of per or Net shares year million compared income XX.X $XX.X share average share net diluted were per to income year. or million to last was this Weighted last million diluted million $X.XX diluted $X.X

Turning last at year. compared inventories of no million marketable cost sheet. store last in XX% square the down increased $XX cash and fiscal balance debt approximately no total X% year capital Total increase XXXX ended to to total million of We during fiscal the the cost the primarily year foot were with outstanding new being last million fiscal company year, repurchased and and fiscal stock million worth our down $XXX compared to $XX.X $XXX We with of We openings. to per units ended to year. for compared debt $XX.X and securities million XXXX. due expenditures total

decrease with far fiscal sales net comparable to Turning first decreased for in to sales and sales the XX.X% of that net in to XXXX. of XX.X% of year, range approximately XX.X% X historical estimate Total comparable currently decline to in XXXX year. the will a Based quarter XX% fiscal a by for and fiscal range last quarter last thus to decrease compared million our fiscal fiscal XXXX the first first of translating trends, $XXX million, current February quarter $XXX we compared the on March net the be of approximately through March. store total to in XX% a

report currently end At quarter an to quarter these range first of loss estimated of shares rate first total XXX we sales We XX.X at with year's end per million. to be the We in range an to at last have to the XXXX in expect of $XX fiscal expect levels, the the our of of stores would the and XX% quarter. SG&A for to tax $X.XX to $X.XX total outstanding million XXX of million. first share the estimated compared income of expect $XX

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

Operator

first come [Operator with question here Riley. Jeff Sinderen Instructions]. will B. And Van from our

Jeff Van Sinderen

far. follow so to on up wanted QX Just

kind California Just difference Maybe weather anything Obviously, hasn't wonderful. of in you're you would. been noticing also between if the on spectacularly promotional Southern in touch backdrop, regions. the the

inventory folks seems store into And on of store in touch could out that down your have plays plans. most XXXX that you and how kind performance their experienced then like brought new then inventory if And you It there. on touch maybe levels. opening

Edmond Thomas

Jeff, it's Ed.

seen being In we're a down regionally, weeks. it of down California, stores, regionally, across impact seeing weather of so down in amount is sales the terms in great we've with are of a of across the board. sure. for the the region That's where stores tough have bigger we last and the challenge for been chain country, are performance, the every Clearly, a we accordingly. California traffic But couple

have swim, terms beginning the at more really In with would of very I liked good like merchandise shape into being now. our And in a it coming had to quarter. categories that seen quarter, have that more have the a as clean great would newness probably spring/summer the we're sell-through newness of bit is some the honestly, has of inventory, inventory been. little weather as seasonal is not but challenging

think X asked I asked you me questions I X questions, might you've so have missed. like --

Jeff Van Sinderen

I did. did. I

Michael Henry

environment. asking was about He the promotional

Edmond Thomas

I anything far seeing not the promotions promotional stores. abnormal into I'm out driving as As customers environment, there. think are don't

is a a I lot more are of economic, customers think think of I partially where this -- economically. challenged

to sure it our a And mix. we do. compelling I you is make merchandise part actually, assortment think, in And have think that I of

more I think it's challenged our bit little customers' a than that some. just probably

the it market, -- from a in of the So see our lot there's don't clear promotionally, at in price to guys inventory I others. after

But what I as a over-inventoried that's we companies I challenge to than us think a we position. abnormal more -- lot expected company. tough But see. inventory that in many being been with normally believe don't any a being so There's

Jeff Van Sinderen

was one. about Okay. And just in a there, up wrapped into lot I had of I then asking -- questions one more

Just guess the store you new and plays store XXXX, experienced into opening in plans performance how that for that 'XX? your I

Edmond Thomas

was overall opened outperformed stores -- different that country. we new And in the stores The parts in their of plans.

Cerritos. One of for backyard, our store in That is most openings has store us. our recent record-breaking in been

feet. than been a square But results about store. the It's bit average there X,XXX It's bigger have the phenomenal. little

you as imagine. availability there's real there, would of plenty estate So of out

we the appropriate. think We on are expansion capitalizing where is

the right doing mall, we of see and probably could economics off-mall We're XX this now, business right. start with That of during turn we'll to year. faster. have strategy or the But still we're is, change stores if obviously very XX our both be being thoughtful. do year the to guess our staying course and My

Jeff Van Sinderen

to one then And more helpful. Okay, just quick one squeeze in.

any -- the for search think on for I Just new you're a looking update a CMO? new

Edmond Thomas

process. is It actively in

a of So lot good candidates.

Operator

question will with next from Our come Koranda ROTH Matt MKM.

Matthew Koranda

it the quarter into comp but for mine have like sounds -- just QX, asked guide and improve Some of to for maybe been you the things already, March April. expect

California? -- demand, of that you post assuming is there. some comparisons recapture easier the weather of curious of in the just we've have if that some lapping? you're bad that us you give could assumptions had Just maybe Are So sort here you

Michael Henry

Sure, our compares meaningfully Matt, from this is Mike. get forward. Yes, easier here

to that noted XX%, remarks into negative March year, the year. that down XX%. we double positive And XX%, XX.X% minus long. a X%, February. April down then as in prepared with you just we X, were And up our last very finish way So March month really then a XX% were the all was And carries week X%. comp with minus through a digits going go then Then from consistent against then all down we XX%

rest the year. So negative of month the double-digit for comps every

West pretty double-digit against last on in so that month QX. weakest had last performance year. We from do of comps largest of drop here on and where the us, Northern, were Southern are in out going top off from a areas had performance they up impact far, of the California, of both the our they think and negative weather X our

our all mentioned, particular, was But now in in quarter, the areas weakest. fourth Ed our It market. strongest As California, Southern performing negative. are is

So big points XX the negative. to there's swing there been a of really comp

was run second QX. points the or third worst, now performing by comp now. Somewhat it far area dropped X.X it our similar has Northern in so second to our It and QX in from rate California, best is

more this type of had of here we've business out the and go dynamic to at as we several past up weaker understanding get weather craziness and comparisons weather, that weeks, for some believe the we'll just that we normalized turn. the those time seeing against start do see spring-ish So hopefully the

in It hasn't stores yet. happened

tell as a opposed there, e-com, you. But seen and to would positive has days stores is not still are digits negative had few We point. minus some consistently. in the have it I XX this at movement in at here E-com single

side So it's it signs of over of stores the another life thing, yet. see like e-com the to we're starting business, hasn't carried on to just

we're sit right about So as here we that's things thinking how now.

Matthew Koranda

And very feel basis. Q&A you clean think, bit color. a footage I obviously inventory, a helpful on then Very little mentioned mean, in I here the guys on Ed, just But feeling fourth -- as something consumer? Okay. kind you just newness square it and to in more you of the good like on maybe feel need you about better of serve inventory about But didn't needs the quarter. anywhere you your about

at should then for through And terms throughout the expect return just -- to Is how this would in that maybe just bit year? in inventory a seasonally and you guess, pretty should normal helpful. that the year first little inventory we year, expect Any quarter? to Mike, it a I trends, trend we build normal, the can mention of of trends expectations be the

Edmond Thomas

now. our Matt, the of right I content about good feel really inventory

the in or weeks good. ago, than current more newness lot there a more there's mix X So was

feel I really good. So

whether accessories, women's, all they're new footwear, There's with goods. very it's men's, current no category,

-- been really And some reads have on it's good. sell-throughs early early,

the about ramp-up So that. good what really expect. I and Mike feel talk inventory about the can we of

Michael Henry

you as Yes, that we the you're we manage to trends seeing expect possible. everything I to think closely discipline should as from will used sales inventory do us can normal to that

minus on in were X% cost We per at That's finished a units. in dollars. basis. year We are XX% we -- the square foot down

a feel into quarter. and overhang of didn't coming least like ending the first too we we inventory last much So at have big year

of plans quarter. single results every the we're to leading first for then week. rest making rest And we're inventory changes of year, the better our constantly into certainly the So expecting the

to make So from say, normal expect us we as as a discipline of tight being I'll sales just can it.

Operator

Our Mitch question with next Kummetz will Research. come Seaport from

Mitchel Kummetz

got a on couple Just the margin.

margins for Let me with gross start QX.

question the I in didn't and is QX. a or guess the I give number think But gave into puts my to range release, on you takes enough something. You back but us more a press in

sort as a by us you give the bigger your break margin, of you buckets, expense, for those can sense gross you playing better quarter? if distribution out see occupancy, margin of whether out Like how kind to product it's

Michael Henry

end of our to on aggressive sales from product markdowns be better variability contemplated very more The largely to be is clean that. lower, million are going margins. Sure. the our worst to range end If inventory we're the to keep $XX we've and going

that fixed. these relatively At dollars of much. the distribution sales Occupancy levels, don't change buying all really and is occupancy and

our the move sit to the from our we XXX now. right be don't But this will There'll dollars of the stores a much. have later of bottom range as top We range store here month. that that open really

So occupancy of dollars. million $XX about you've got

of much. You've not going of $XX there, little costs, by all thousand got to million A million a and millions. buying move not under got a distribution couple little costs, here really $X that's under and of you've that hundred or

margins the to clean. really it to that exist So variability be responsive inventory keeping isn't would product

Mitchel Kummetz

you the on helpful. SG&A, million the I'm of number. And decline. expense I SG&A year-over-year are $XX interested up Okay, trends, bit sales a of that's in might store? of any little dollar you wage kind I'm there's like there fixed range a you what seeing And especially lot believe in gave, call to in guess Thanks, that's then sure I so out? that mean despite terms in But are want other I mostly to Mike. expenses the $XX again, million,

Michael Henry

store it, payroll. Yes, thing you're is Mitch. on The key

average in up are ago. Obviously, but hourly is comps problem XX.X%, your a than that's wage the higher year rate when first a down your our far rate X%. quarter, So X% is

we as ago stores as through usage last have hours hours can, than payroll did store on tight as quarters the we lower average year. be and year all with to trying operated a we're we So

up that after so But been that dollars operational in hours X as years But those you keep efficiencies that before. increases, I expensive years. your just it and effectively. many able down, wage that move way what's last than wages you're know a generating still a sales over with on puts you're because minimum much is more have it's in hour payroll -- minimum anymore something to don't the jumping lot But pressure more was the used, up normal retail, each it in hides of actually that flex terms

Compared an to it's about, I than that's So higher. think in number to extraordinary compared to just percentage-wise. higher XX% last year, pre-pandemic, it's it mean XXXX. X% was

So as not to on you might want naturally that's SG&A why favorable see to side movement might quite much as the assume. you

Operator

concludes remarks. question-and-answer closing to session. our Thomas the This to I'd over conference Ed like turn any for back

Edmond Thomas

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

Operator

now very Thank The concluded. conference much for has presentation. today's you attending

You may now your disconnect lines.

Gar Jackson	Global IR Group
Edmond Thomas	President, CEO & Director
Michael Henry	EVP, CFO & Corporate Secretary
Jeff Van Sinderen	B. Riley Securities
Matthew Koranda	ROTH MKM Partners
Mitchel Kummetz	Seaport Research Partners

Tilly's (TLYS) 9 Mar 232022 Q4 Earnings call transcript