TLYS - Earnings call transcript Q2 2024

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Operator

Hello, and welcome to Tilly's Second Quarter 2023 Results Earnings Conference -- Earnings Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Gar Jackson, Investor Relations. Please go ahead.

Gar Jackson

Good afternoon, and welcome to the Tilly's Fiscal 2023 Second Quarter Earnings Call. CEO; discuss Henry, then the Q&A and and Vice host President session. will CFO, company's Thomas, and Executive Michael President a Ed results and

section please of the earnings copy company's release, For Investor at Tilly's Relations of tillys.com. the website visit

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

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

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

Edmond Thomas

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

in our The single of announced negative of ranges high start fiscal both for each and trend and sales to previously per outlook exceeded following estimated June second our share. results May. a for Our quarter net sales results XX.X% digits earnings July negative comp improved

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

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

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

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

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

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

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

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

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

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

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

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

and broader Overall, year the following are feel purchasing cautiously back we what results what amid during anticipating that ongoing that a comp was good may holiday August. pre-back-to-school produced to trend backdrop produce need-based economic levels period comp we this half a our sales over likely environment, we better about assortment. the revert challenges, sales Given macroeconomic optimistic of back-to-school store the half. than can merchandise we And are in first despite the we our

to outlook. our time. with environment to We Mike? improving I and will the over will detail call business the discuss continue to second now in more our quarter performance to goal our third operating of over manage quarter relative Mike the to turn results diligently introduce

Michael Henry

Thanks, Ed.

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

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

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

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

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

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

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

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

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

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

total last have our third Operator, of at increase we'll third an session. from Q&A to stores to go now XXX the total the opened expect year's We of at quarter. X of end stores XXX end quarter, the

Operator

[Operator question Matt with MKM. Koranda ROTH from Instructions] comes Today's first

Matt Koranda

for question. Thanks the

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

Michael Henry

Sure, Matt. We're seeing already it.

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

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

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

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

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

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

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

Matt Koranda

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

Michael Henry

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

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

Matt Koranda

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

Michael Henry

single-digit change. low a It's

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

Matt Koranda

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

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

Michael Henry

Sure.

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

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

So it's deleverage. kind of

it's causes most of that it. occupancy So

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

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

Operator

comes question with next Seaport. from Kummetz The Mitch

Mitchel Kummetz

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

Edmond Thomas

improvement second I the in brand was across from board. category saw anything Sure. single that across We accessories. We There category much into that there. the first out being to a all quarter or or saw the but and brand would for Boys categories, improvement Girls drove I dominant it. quarter footwear, any continued no was single improvement say call pretty category, was August It can't sure. apparel,

Mitchel Kummetz

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

Michael Henry

Girls footwear. and the quarter, second For yes,

Edmond Thomas

That's correct.

Mitchel Kummetz

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

Edmond Thomas

so multiple and all that some that's that part The Nike, has driving girls assortment of us it's that, some year that was the business. pretty for over definitely that last been drove are brands business. year, decent driving Converse Footwear improved

Mitchel Kummetz

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

Edmond Thomas

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

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

Mitchel Kummetz

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

Michael Henry

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

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

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

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

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

Edmond Thomas

good that, forth shape swim Yes. and helps so We'll those to we weeks. made on have wherever the categories in of the terms has and trends But we'll pretty in to continued could. X flow shorts just and add August, quantity into it that of to we anticipated in the be be inventory of in we -- so that country and adjustments most we seasonal degrees on been early last XXX the which inventory negative really because

Operator

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

Jeff Van Sinderen

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

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

Edmond Thomas

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

Jeff Van Sinderen

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

Michael Henry

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

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

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

Jeff Van Sinderen

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

Edmond Thomas

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

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

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

Operator

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

Edmond Thomas

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

Operator

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

may now You disconnect lines. your

Tilly's (TLYS) 31 Aug 232024 Q2 Earnings call transcript