8-K
Tilly's, Inc. (TLYS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________
FORM 8-K
_______________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): March 12, 2020
_______________________________________________
TILLY’S, INC.
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 1-35535 | 45-2164791 |
|---|---|---|
| (State of Incorporation) | (Commission File Number) | (IRS Employer<br><br>Identification Number) |
10 Whatney
Irvine, California 92618
(Address of Principal Executive Offices) (Zip Code)
(949) 609-5599
(Registrant’s Telephone Number, Including Area Code)
______________________________________________
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|---|
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Class A Common Stock, $0.001 par value per share | TLYS | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
On March 12, 2020, Tilly’s, Inc. (the “Company”) issued an earnings press release for the fourth quarter ended February 1, 2020. The press release is furnished as Exhibit 99.1 and is incorporated herein by reference. Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language in such filing.
| Item 9.01 | Financial Statements and Exhibits |
|---|
The following exhibit is being furnished herewith.
(d) Exhibits.
99.1 Press Release of Tilly's, Inc., dated March 12, 2020
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| TILLY’S, INC. | ||
|---|---|---|
| Date: March 12, 2020 | By: | /s/ Michael L. Henry |
| Name: | Michael L. Henry | |
| Title: | Executive Vice President, Chief Financial Officer |
Exhibit
Exhibit 99.1
Tilly's, Inc. Announces Fiscal 2019 Fourth Quarter and Full Year Results
Irvine, CA – March 12, 2020 – Tilly’s, Inc. (NYSE: TLYS, the "Company") today announced financial results for the fourth quarter and full year of fiscal 2019 ended February 1, 2020.
"A deeper than expected drop in store traffic and comparable store net sales during the second and third weeks of December resulted in a disappointing fourth quarter overall, which was our first negative comp quarter in over three and a half years," commented Ed Thomas, President and Chief Executive Officer. "Comparable store net sales are off to a positive start thus far in the first quarter of fiscal 2020. However, due to the uncertainty of the potential near-term impacts of the coronavirus situation, we are unable to provide specific earnings guidance at this time."
Fourth Quarter Results Overview
The following comparisons refer to operating results for the fourth quarter of fiscal 2019 versus the fourth quarter of fiscal 2018 ended February 2, 2019:
| • | Total net sales were $172.5 million, an increase of $1.9 million or 1.1%, compared to $170.6 million last year. The Company ended the quarter with 240 total stores, including one RSQ-branded pop-up store, compared to 229 total stores, including four RSQ-branded pop-up stores, last year. |
|---|---|
| • | Comparable store net sales, which includes e-commerce net sales, decreased 2.0% compared to last year's increase of 6.4%. Comparable store net sales in physical stores decreased 2.2% and represented approximately 80.7% of total net sales, compared to a decrease of 0.9% and an 80.3% share of total net sales last year. E-commerce net sales decreased 1.2% and represented approximately 19.3% of total net sales, compared to an increase of 49.6% and a 19.7% share of total net sales last year. |
| --- | --- |
| • | Gross profit was $52.1 million, or 30.2% of net sales, compared to $52.2 million, or 30.6% of net sales last year. Product margins decreased 20 basis points as a percentage of net sales due to increased markdowns. Occupancy costs deleveraged 70 basis points as a percentage of net sales, primarily due to opening 11 net new stores compared to last year and the negative comparable store net sales result. Distribution costs improved 50 basis points primarily due to lower e-commerce shipping charges compared to last year. |
| --- | --- |
| • | Selling, general and administrative expenses ("SG&A") were $43.6 million, or 25.3% of net sales, compared to $41.2 million, or 24.2% of net sales, last year. The $2.4 million increase in SG&A was primarily due to higher store payroll expenses of approximately $1.5 million resulting from minimum wage increases and store count growth, higher worker's compensation claims reserves of $0.8 million, and higher marketing expenses of approximately $0.4 million primarily relating to e-commerce. These expense increases were partially offset by lower corporate bonus provisions of $1.2 million compared to last year. Last year's SG&A also included $0.9 million in expense reductions related to negotiated resolutions of certain vendor disputes. |
| --- | --- |
| • | Operating income was $8.5 million, or 4.9% of net sales, compared to $10.9 million, or 6.4% of net sales, last year. The $2.4 million decrease in operating income was primarily due to the net SG&A increase noted above relative to net sales growth noted above. |
| --- | --- |
| • | Income tax expense was $2.8 million, or 30.9% of pre-tax income, compared to $3.1 million, or 26.4% of pre-tax income, last year. Income tax expense for fiscal 2019 includes approximately $0.5 million of discrete items related to the acceleration and expiration of certain employee stock options. |
| --- | --- |
| • | Net income was $6.3 million, or $0.21 per diluted share, compared to $8.7 million, or $0.29 per diluted share, last year. |
| --- | --- |
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Year-to-Date Results Overview
The following comparisons refer to operating results for the fifty-two weeks of fiscal 2019 versus the fifty-two weeks of fiscal 2018:
| • | Total net sales were $619.3 million, an increase of $20.8 million or 3.5%, compared to $598.5 million last year. |
|---|---|
| • | Comparable store net sales, which includes e-commerce net sales, increased 0.8% compared to last year's increase of 4.0%. E-commerce net sales increased 9.7% and represented approximately 15.9% of total net sales compared to an increase of 21.7% and a 15% share of total net sales last year. Comparable store net sales in physical stores decreased 0.7% and represented approximately 84.1% of total net sales compared to an increase of 1.4% and a 85% share of last year's total net sales. |
| --- | --- |
| • | Gross profit was $186.7 million, an increase of $5.8 million or 3.2%, compared to $180.9 million last year. Gross margin, or gross profit as a percentage of net sales, slightly decreased to 30.1% from 30.2% last year. Product margins were flat compared to last year. Occupancy costs deleveraged 10 basis points primarily due to opening 11 net new stores. |
| --- | --- |
| • | SG&A was $158.3 million, or 25.6% of net sales, compared to $149.4 million, or 25.0% of net sales, last year. The $8.8 million increase in SG&A was primarily due to higher store payroll expenses of approximately $3.7 million resulting from minimum wage increases and store count growth, higher marketing expenses of approximately $2.6 million primarily due to e-commerce net sales growth, increased temporary labor expenses of approximately $1.5 million, and higher worker's compensation claims reserves of approximately $0.9 million. These increases were partially offset by a $2.4 million reduction in bonus expenses. Last year's SG&A also included a $1.5 million credit for the favorable resolution of a legal matter and $0.9 million in expense reductions related to negotiated resolutions of certain vendor disputes, which were partially offset by $0.7 million in secondary offering expenses. |
| --- | --- |
| • | Operating income was $28.5 million, or 4.6% of net sales, compared to $31.5 million, or 5.3% of net sales, last year. The $3.0 million decrease in operating income was primarily due to the net SG&A increase relative to the net sales increase noted above. |
| --- | --- |
| • | Income tax expense was $8.7 million, or 27.9% of pre-tax income, compared to $8.9 million, or 26.2% of pre-tax income, last year. Income tax expense for fiscal 2019 includes approximately $0.5 million of discrete items related to the acceleration and expiration of certain employee stock options. |
| --- | --- |
| • | Net income was $22.6 million, or $0.76 per diluted share, compared to $24.9 million, or $0.84 per diluted share, last year. Of the $0.08 decline in year-over-year earnings per diluted share, approximately $0.04 was attributable to the aggregate non-recurring impact of last year's favorable legal matter resolution, negotiated expense reductions and secondary offering costs, in each case noted above. The remaining $0.04 was attributable to the net SG&A increase noted above relative to net sales growth during fiscal 2019. |
| --- | --- |
Balance Sheet and Liquidity
As of February 1, 2020, the Company had $139.9 million of cash and marketable securities and no debt outstanding under its revolving credit facility. This compares to $144.1 million of cash and marketable securities and no debt outstanding under its revolving credit facility as of February 2, 2019. For the fourth consecutive year, the Company paid a special cash dividend to its stockholders in February 2020. This year's special cash dividend was approximately $29.7 million in the aggregate, or $1 per share.
Fiscal 2020 First Quarter Outlook
Through March 10, 2020, total comparable store net sales, including e-commerce, have increased by a low single-digit percentage with comparable store net sales in stores slightly negative and e-commerce net sales up high single-digits on a percentage basis. Given the unpredictability of the effects of the coronavirus on, among other things, consumer behavior, store traffic, production capabilities, timing of
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deliveries, our people, economic activity and the market generally in the coming weeks and months, the Company is unable to provide specific earnings guidance at this time.
Conference Call Information
A conference call to discuss these financial results is scheduled for today, March 12, 2020, at 4:30 p.m. ET (1:30 p.m. PT). Investors and analysts interested in participating in the call are invited to dial (877) 407-4018 (domestic) or (201) 689-8471 (international) at 4:25 p.m. ET (1:25 p.m. PT). The conference call will also be available to interested parties through a live webcast at www.tillys.com. Please visit the website and select the “Investor Relations” link at least 15 minutes prior to the start of the call to register and download any necessary software.
A telephone replay of the call will be available until March 26, 2020, by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) and entering the conference identification number: 13699476. Please note participants must enter the conference identification number in order to access the replay.
About Tillys
Tillys is a leading, destination specialty retailer of casual apparel, footwear and accessories for young men, young women, boys and girls with an extensive selection of iconic global, emerging, and proprietary brands rooted in an active, outdoor and social lifestyle. Tillys is headquartered in Irvine, California and currently operates 239 total stores, including one RSQ-branded pop-up store, across 33 states, as well as its website, www.tillys.com.
Forward-Looking Statements
Certain statements in this press release and oral statements made from time to time by our representatives are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, statements regarding the potential near-term impacts of the coronavirus situation, our future financial and operating results, including but not limited to future comparable store sales, future operating income, future net income, future earnings per share, future gross, operating or product margins, anticipated tax rate, future inventory levels, and market share and our business and strategy, including but not limited to expected store openings and closings, expansion of brands and exclusive relationships, development and growth of our e-commerce platform and business, promotional strategy, and any other statements about our future expectations, plans, intentions, beliefs or prospects expressed by management are forward-looking statements. These forward-looking statements are based on management’s current expectations and beliefs, but they involve a number of risks and uncertainties that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including, but not limited to, our ability to respond to changing customer preferences and trends, attract customer traffic at our stores and online, execute our growth and long-term strategies, expand into new markets, grow our e-commerce business, effectively manage our inventory and costs, effectively compete with other retailers, enhance awareness of our brand and brand image, general consumer spending patterns and levels, the effect of weather, epidemics, pandemics, or other public health issues, and other factors that are detailed in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”), including those detailed in the section titled “Risk Factors” and in our other filings with the SEC, which are available from the SEC’s website at www.sec.gov and from our website at www.tillys.com under the heading “Investor Relations”. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. We do not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. This release should be read in conjunction with our financial statements and notes thereto contained in our Form 10-K.
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Tilly’s, Inc.
Consolidated Balance Sheets
(In thousands, except par value)
(unaudited)
| February 1,<br>2020 | February 2,<br>2019 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 70,137 | $ | 68,160 |
| Marketable securities | 69,780 | 75,919 | ||
| Receivables | 7,485 | 6,082 | ||
| Merchandise inventories | 56,901 | 55,809 | ||
| Prepaid expenses and other current assets | 4,561 | 11,171 | ||
| Total current assets | 208,864 | 217,141 | ||
| Operating lease assets | 263,649 | — | ||
| Property and equipment, net | 66,176 | 73,842 | ||
| Other assets | 7,951 | 2,185 | ||
| Total assets | $ | 546,640 | $ | 293,168 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 20,562 | $ | 24,207 |
| Accrued expenses | 20,755 | 18,756 | ||
| Deferred revenue | 11,761 | 10,373 | ||
| Accrued compensation and benefits | 7,190 | 8,930 | ||
| Dividends payable | 29,677 | 29,453 | ||
| Current portion of operating lease liabilities | 55,321 | — | ||
| Current portion of deferred rent | — | 5,540 | ||
| Total current liabilities | 145,266 | 97,259 | ||
| Noncurrent operating lease liabilities | 240,755 | — | ||
| Noncurrent deferred rent | — | 30,825 | ||
| Other | 718 | 1,757 | ||
| Total liabilities | 386,739 | 129,841 | ||
| Stockholders’ equity: | ||||
| Common stock (Class A) | 22 | 21 | ||
| Common stock (Class B) | 8 | 8 | ||
| Preferred stock | — | — | ||
| Additional paid-in capital | 153,377 | 149,737 | ||
| Retained earnings | 6,280 | 13,335 | ||
| Accumulated other comprehensive income | 214 | 226 | ||
| Total stockholders’ equity | 159,901 | 163,327 | ||
| Total liabilities and stockholders’ equity | $ | 546,640 | $ | 293,168 |
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Tilly’s, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
(unaudited)
| Thirteen Weeks Ended | Fifty-Two Weeks Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| February 1,<br>2020 | February 2,<br>2019 | February 1,<br>2020 | February 2,<br>2019 | |||||
| Net sales | $ | 172,479 | $ | 170,612 | $ | 619,300 | $ | 598,478 |
| Cost of goods sold (includes buying, distribution, and occupancy costs) | 120,345 | 118,455 | 432,592 | 417,582 | ||||
| Gross profit | 52,134 | 52,157 | 186,708 | 180,896 | ||||
| Selling, general and administrative expenses | 43,639 | 41,223 | 158,253 | 149,416 | ||||
| Operating income | 8,495 | 10,934 | 28,455 | 31,480 | ||||
| Other income, net | 589 | 856 | 2,901 | 2,313 | ||||
| Income before income taxes | 9,084 | 11,790 | 31,356 | 33,793 | ||||
| Income tax expense | 2,811 | 3,113 | 8,734 | 8,850 | ||||
| Net income | $ | 6,273 | $ | 8,677 | $ | 22,622 | $ | 24,943 |
| Basic income per share of Class A and Class B common stock | $ | 0.21 | $ | 0.29 | $ | 0.77 | $ | 0.85 |
| Diluted income per share of Class A and Class B common stock | $ | 0.21 | $ | 0.29 | $ | 0.76 | $ | 0.84 |
| Weighted average basic shares outstanding | 29,628 | 29,451 | 29,533 | 29,278 | ||||
| Weighted average diluted shares outstanding | 29,926 | 29,836 | 29,788 | 29,768 |
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Tilly’s, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
| Fifty-Two Weeks Ended | ||||||
|---|---|---|---|---|---|---|
| February 1,<br>2020 | February 2,<br>2019 | |||||
| Cash flows from operating activities | ||||||
| Net income | $ | 22,622 | $ | 24,943 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 20,948 | 22,485 | ||||
| Stock-based compensation expense | 2,136 | 2,212 | ||||
| Impairment of assets | 282 | 786 | ||||
| Loss on disposal of assets | 908 | 30 | ||||
| Gain on sales and maturities of marketable securities | (1,660 | ) | (1,552 | ) | ||
| Deferred income taxes | (5,720 | ) | 953 | |||
| Changes in operating assets and liabilities: | ||||||
| Receivables | 3,204 | (1,730 | ) | |||
| Merchandise inventories | (1,092 | ) | (2,783 | ) | ||
| Prepaid expenses and other assets | 557 | (1,641 | ) | |||
| Accounts payable | (4,227 | ) | 3,195 | |||
| Accrued expenses | 1,369 | (4,438 | ) | |||
| Accrued compensation and benefits | (1,740 | ) | 2,811 | |||
| Operating lease liabilities and deferred rent | (2,541 | ) | (195 | ) | ||
| Deferred revenue | 1,388 | 1,667 | ||||
| Net cash provided by operating activities | 36,434 | 46,743 | ||||
| Cash flows from investing activities | ||||||
| Purchase of property and equipment | (14,299 | ) | (14,923 | ) | ||
| Proceeds from sale of property and equipment | — | 3 | ||||
| Purchases of marketable securities | (126,526 | ) | (136,198 | ) | ||
| Proceeds from marketable securities | 134,316 | 144,859 | ||||
| Net cash used in investing activities | (6,509 | ) | (6,259 | ) | ||
| Cash flows from financing activities | ||||||
| Dividends paid | (29,453 | ) | (29,067 | ) | ||
| Proceeds from exercise of stock options | 1,590 | 3,652 | ||||
| Taxes paid in lieu of shares issued for stock-based compensation | (85 | ) | (111 | ) | ||
| Net cash used in financing activities | (27,948 | ) | (25,526 | ) | ||
| Change in cash and cash equivalents | 1,977 | 14,958 | ||||
| Cash and cash equivalents, beginning of period | 68,160 | 53,202 | ||||
| Cash and cash equivalents, end of period | $ | 70,137 | $ | 68,160 |
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Tilly's, Inc.
Store Count and Square Footage
| Stores<br><br>Open at<br><br>Beginning of Quarter | Stores<br><br>Opened<br><br>During Quarter | Stores<br><br>Closed<br><br>During Quarter | Stores<br><br>Open at<br><br>End of Quarter | Total Gross<br><br>Square Footage<br><br>End of Quarter<br><br>(in thousands) | |
|---|---|---|---|---|---|
| 2019 Q1 | 229 | 1 | 1 | 229 | 1,708 |
| 2019 Q2 | 229 | 1 | 1 | 229 | 1,710 |
| 2019 Q3 | 229 | 4 | 1 | 232 | 1,732 |
| 2019 Q4 | 232 | 8 | — | 240 | 1,776 |
Investor Relations Contact:
Michael Henry, Chief Financial Officer
(949) 609-5599, ext. 17000
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