Earnings call transcript Q2 2023

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Operator

Hello, and welcome to Tilly's Second Quarter 2023 Results Earnings Conference -- Earnings Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation there will be opportunity to ask questions. [Operator Instruction] Please note, this call is being recorded.

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

Gar Jackson

company's welcome visit earnings and Michael Tilly's XXXX the Tilly's at discuss Fiscal Executive Q&A website host Good Per company's Investor session. Ed to Relations Thomas, quarter copy the will CFO, call. President release, and and President second then Vice a please afternoon, earnings and the results the and tillys.com. Henry, of CEO; section

to during affecting statements will XX, judgment find and XXXX. Tilly's shortly section, business. made based the of materially also after analysis August results reflect this actual be expectations you today, for differ may days. able recorded of From next the call this And same call from a that the conclusion factors of will only replay various Tilly's XX call, the current as on Certain be forward-looking

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

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

I to now turn the over call Ed.

Ed Thomas

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

negative digits ranges each both per The comp July. share. second and improved sales our quarter our earnings high and for Our net trend sales estimated single exceeded June announced to for results of previously of outlook results

in fiscal Following a negative May. start XX.X%

line produced we coupled expense management, results for quarter. sales with comp the performance, better sequential improved than This anticipated diligent bottom

geographic of we first Our spring/summer all of during resulting have home relative state our significant stores from in in better improved performed second of California, reside. performance the the across with improvement product coming markets the our fiscal than this quarter year, most quarter categories XX%

single-digit in For X and markets. the comps our on negative markets, basis, geographic Northwest in negative a the Southern in the of quarter, both and percentage remaining X Northern California double-digit were positive including

In double terms were on transactions basis, a percentage metrics, total low digits. of down store transaction

increased average the digits single value transaction last by compared low While to year.

the merchandising from the a during and most negative for footwear accessories August. were positive, while have All girls performance and were From and their further comped single-digit performance perspective, quarter boys on quarter, quarter second first and basis. from improved then second a men's sequentially double-digit departments each percentage women's negative improved

Officer will that are our President us Chief joined forward. We us whom Merchandise new both help in Merchandising optimistic of our improve May performance going to in Planning, continue new Vice of

terms each fourth the We stores closed store bringing store total of and second expect to new count quarter. real to our in third stores X In during of new open estate, for X we X quarters, the year. the

our to years. that next continue the to ample count over opportunities have We total grow several we store believe

and past, to relative will we the However, be open stores sales to our we new what openings only we lease to in said selective appropriate as believe environment to will approach we've new store the reflect profitability acceptable economics that expect. drive very in be

in stores which Turning recent comparable versus August through includes season. of X.X% including by the sales sales e-com, trends to quarter last fiscal XX, of the continuing improvement year, in of third XXXX, and our Total back-to-school net months. period the physical comparable the the comp decreased sequential peak both

the post results we be years, weeks start results anticipated back-to-school before seen in them certain that have this for shopping period. following even stronger the than back-to-school indicate later our stores been back-to-school shopping that to what patterns We to customers seeing seem prior shopping year have in to seeing soften peak

Given environment, amid the revert economic results to pre-back-to-school this sales our levels. may likely are backdrop that anticipating we comp broader

Overall, about during store a are was ongoing period feel cautiously we in produce we what sales better we year despite the good than purchasing first half challenges, can our a optimistic back-to-school merchandise need-based what half. that trend macroeconomic comp Following back of the we August. over assortment. and And produced the holiday

We the will environment improving continue relative to with of over to manage our time. the business diligently goal performance

our quarter the turn outlook. Mike? our now results Mike and second will to I to more operating discuss over introduce to third detail in call quarter

Michael Henry

Ed. Thanks,

decreased represented -- Net net quarter stores year. second Net as operating total were to sales compared sales from X.X% of results follows: $XXX last sales of to and compared XX.X% XX.X% Our decrease year X%. were by physical a sales million, net last

total represented net sales X.X%. last and physical to X.X% XX.X% decreased XX.X% e-commerce and both total was XX.X% with compared sales stores e-commerce, sales, distribution of by margin, year. to XX.X% including sales XXX by to last occupancy last compared of We the and Comparable expenses, net year. quarter net stores net net ended of second stores decreased including buying, While sales year. XXX compared total Gross

XXX basis valuation margins quarter, increased to by of costs a this occupancy occupancy reserves, by of declined XXX of as net inventory second additional compared improved sequentially operating these result last deleveraged quarter. million costs collectively, and as this markdowns result and by year's basis and costs and higher stores estimated primarily against distribution level Product by sales points lower from $X.X year's a points Buying, carrying first XX predominantly but from year. a points basis

wage sales SG&A Total carrying noncash $XX total sales increased charges costs largest corporate million, store million due SG&A against impairment lower and million net to of of for $X.X net a impact of the due increases as year. and sales XX.X% employee of of percentage SG&A expenses these $X.X of were The compared million $XX.X or sales. retention. were deleverage increases to from net payroll XX.X% to benefits primarily net or last

net of $X.X several Operating line across rates million our sales to higher year. was $X.X X.X% smaller variety of compared due of of savings million $X.X operating items. year, million securities sales income on this Other of these year. increases last $X.X expense income or loss offsetting Partially to X.X% compared return or last were earning a net was million primarily to marketable

loss Income income compared decrease $X.X and sequentially tax tax $X.X to $X.XX of and income was was million loss results. discrete attributable tax last million quarter expense or share $X.X Net benefit low primarily was $X.XX an or per income our $X.XX of improvement loss the first tax compared per stock-based in The year of pretax or with net diluted associated to income of $X.X of year. million share of impacts XX.X% compensation. from million level per certain XX.X% share pretax pretax last or rate to

to XX.X diluted were average year. Weighted shares last year this $XX.X shares million compared million

no our inventories units. to debt of foot the second and in foot balance X% the $XXX We million total at year. outstanding to $XXX the at quarter sheet. per square quarter ended the cash and with than no securities cost end less up compared Turning down second and second and quarter ended marketable with million debt of square X% We last per

range and expenditures $XX technology information approximately the year. systems million for We Total first last the primarily of to expenditures compared and for capital enhancements. expect $XX distribution be million $X.X in for total our fiscal currently $X.X million store to XXXX construction million, to were half capital new

$XX in range to the XXXX quarter-to-date for sales including total be third over be quarter million. pretax $XXX and million of million historical and to the to the on August range of quarter to million. quarter fiscal be XXXX. typically Based net of results approximately half $X.X current sales the currently our third sales approximately fiscal to volume. net our representing of third to approximately Turning We trends, just net $XXX $X.X expect in million loss of SG&A

$X.XX estimated Our to and rate range to shares tax estimated of in XX% average per weighted $X.XX be of approximately based approximately and million. on be the income XX.X loss share to

expect have the of X an total of the We total quarter. third of stores year's opened increase XXX third XXX the stores at last from quarter, end to at end

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

Operator

Matt from Roth Please Instructions] with Koranda go MKM. [Operator ahead. question first Today's comes

Matt Koranda

Thanks question. for the

wanted Just you when looks bit like a buying bit maybe rest said a got that know think get quarter. drop expect need-based in maybe when easier But just dynamics of off. It a away correct the wrong, for more think I last the comps of I expected we about speak the a year on drop-off there? expecting could goes to we -- Can I me bit just I'm why if you if we're to see comps color the October. September,

Michael Henry

already Matt. it. Sure, We're seeing

is over, before, soon slow peak consistent tracking the So are and when -- down. the pattern the seeing performance and on during schools as back we've back-to-school various depending of the period peaks, back-to-school as after we've a seen went that business we been

the deterioration regardless the compare but the the going final same in months was X of fact and August that compares. we're compares You best we're against are easier had the actually we right, are of months. toughest that our still up easier seeing quarter,

that purely but from kind a seeing. of comparable counterintuitive standpoint, the is it's basis we're So that pattern

second single week were we the then -- in having and week week. week minus of the high August, in the So final of negative were a were of August barely week XX plus this of August in we first X% down in and then minus third the August X after digits

heard it to other the need were appear the mention closer of peak. in seeing So to in that we've companies of -- much as well, back-to-school performance a tighter us does as stores. the And shopping patterns it we're kind

at And completed concluded, that done, then peak. period. less key than already back-to-school rest once has and are period is stage, XX% need The that back-to-school peak over in currently this have XX there's their of stores

contemplating So the and outlook. that's we're seeing our that results, dynamic in in that we're the just

Matt Koranda

And basis? talk there outlook. just within changes less in any about a call to -- anything versus what front contemplated out kind then in to what's XQ. that ticket you ticket of on I the Or you maybe could the experienced benefit transaction the on maybe relative year-over-year from mean just comp

Michael Henry

decline pretty been The been of value has and average the year. Our actually comp decline transaction have transactions dynamics consistent up period. most a traffic interestingly. slightly in It's been a in

So even at transactions they are occurring, a -- there's just occurring or but higher slightly fewer similar rate.

Matt Koranda

that from coming from AUR? Or bigger coming that's is basket? a And

Michael Henry

low change. a single-digit It's

dramatic nothing item. out on call there's So either to

Matt Koranda

explicitly of quarter but seems put know don't margin look second. basis. despite a the the then third to the one noted me And flat can out implied gross revenue. in just margins. And one on uptick it just kind in outlook, an And just you that the back it I relatively other versus into on for you gross I

if the What's dynamic on margin. D&O speak there? Mike just or dynamics merge you wondered the pressure just maybe, to can on costs, the maybe So more

Michael Henry

Sure.

of deleverage as of continues So the to third stores it it's quarter occupancy -- X the nonproduct quarter. the recent part cost within starting in it We're with quarters, year's has major sold be last is goods more than been

X the dollars So are negative with last going those carrying We're what we're quarter. end And third added. a expecting than the year. be more stores costs to for to against comp quarter

deleverage. So it's kind of

So it. that causes of it's occupancy most

than be third again, margins second versus was third product to sequentially anticipating somewhat are We quarter but lower in quarter, and improved improved last quarter. sequentially quarter year's second quarter, first from

end be outlook, end. of the the of XXX margin basis XXX less basis worst product on So be will points points decline. might it on than It our better

Operator

from ahead. comes Seaport. Please next Mitch question go Kummetz The with

Mitchel Kummetz

just about guys? was working you talk can And for you for bit back-to-school what little a

Ed Thomas

to saw We brand improvement there. category dominant was all We saw quarter sure. no pretty improvement apparel, second There much footwear, being single Sure. quarter accessories. that or from across first was categories, for

brand I anything would it. out call single It drove I continued was that But the improvement category any August into into Girls in Boys board. and category. say a can't the or across the

Mitchel Kummetz

and you in then I comp correctly, did girls quarter? positive that you And the footwear say were hear did

Michael Henry

second For Girls footwear. quarter, yes, and the

Matt Koranda

correct. That's

Mitchel Kummetz

I you strength the Can mean rest are you of to What compared elaborate those pretty the good segments? that? on just business. seeing within that's

Ed Thomas

improved over assortment The year. Girls last was definitely

driving that it's driving Nike, So that decent that multiple that's business. business. some the and us are drove that for all brands pretty some year, Footwear has been that, part of Converse

Mitchel Kummetz

think you about feeling like holiday, pipeline about are Okay. into how And the when you going product that?

Ed Thomas

they've at is good of made really go-forward identified new in been the feel I really but they've whatever make. our also good they it. think they're just assortment. able I looking merchandising leadership opportunities editing while making ago, a changes mean, a I feel they about to with Based trends, -- obviously, coming short that the what And job on the right they've business. and have done

assortment going for sure. a we're think really I to So we'll in be -- really have for holidays good

Mitchel Kummetz

much pretty the that heavy swim how played how were And inventory seasonal product that on anticipating on call, quarter? that the a seasonal know drag in activity I the you of was coming some I'm short of promotional your out, are last categories, margin? lastly, you then situated And of earnings sandals. with how wondering kind out

Michael Henry

I second quarter one way don't think and a dramatic other. sequentially the first performance had The or be in quarter categories continued August. to improved better it in seasonal impact the their from

Generally speaking than the in second they quarter. were

start California torrential all terrible rain especially with to had You'll and the through February just quarter here remember how was, the in the that just of we repetitively March. first

So ago. we we merchandise a did bit to we do start little slow a spring have and did than -- more a really have right year spring/summer season, the now

was what in narrow it quarter. and versus the third But quarter quarter was again, last we're the in expecting sequentially second and than improved third quarter in second the it margins versus what decline to to for quarter year the be product first

think contemplated close everything and contemplate with into moves the deal deal anything we fall we we've the season we to that spring/summer need need out on. third to as that quarter So get as to with we deeper

Ed Thomas

shape we have be We'll to in of pretty good shorts and of just that that, be Yes. the in in to quantity swim. -- inventory terms add we'll

it And we negative August, we made But seasonal so forth really flow helps the degrees on when most early those to on trends into which categories the been because continued wherever we and XXX adjustments in the two could. last of country weeks. inventory anticipated has so that

Operator

Please Van go comes next Riley. The Jeff with Sinderen B. ahead. from question

Jeff Van Sinderen

situation. me congratulations say improving circle on the let trend. you CMO can back Maybe the to And

Just actually new going be the to assortment wondering much of how the holiday speak, to so is by owned, CMO.

Ed Thomas

would taken say into honestly, percentage lot to are I about a of don't already And we really in Jeff. there's it, on that of action. deeper that put than us diving But we've stronger would order know how that had on the for making adjustments to was things good she that a what some think it's trends area felt brands I -- where are there to That are on, to again, be she say be think that heavier adjusting X areas be stronger. forecast going -- we order. in maybe we're be I going the where receipts, forward going that we doing would to going we thinks were that but some to

Jeff Van Sinderen

see If the back do of circle to inventory your to a that we of would QX roughly assume at end of think inventory wanted just be kind I for where second. you per then And midpoint the foot guidance, we QX?

Michael Henry

down I think some per to foot, extent. it will be

to to always, can possible. As try inventory trends were as sales we we sales do X%. tightly the to down everything as manage QX

per as and to was Our we that going aim pretty foot close can. there. down tight unit keep X%, to square inventory we're relationship as so

Jeff Van Sinderen

renewals? guess, those then far just on year? And as far seeing how lease as through this decisions, we then are decisions And I the are for you what

Ed Thomas

for year done unusual, We're see unless this opportunistic. much it's something pretty we

and really accelerate going the quickly. of we -- been significant pretty when be pretty turn to we're good to that decide a able working our be as to part number of that stores that on expansion, flip switch in we've have We shape pipeline to

in are renewals lease what As we'll good. make we're go, that every renewals been really we're with sure is far -- the continue economics happen the far, economics economics -- The so the as to have renewal scrutinize and think happy we're where -- going seeing to to so we future.

Operator

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

Ed Thomas

look the Thank forward a results November. end at call you the to quarter third evening. Have us today. our of on you all great joining sharing We with for

Operator

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

lines. your disconnect now may You

Tilly's (TLYS) 31 Aug 232023 Q2 Earnings call transcript