Delaware | 1-35535 | 45-2164791 | ||
(State of Incorporation) | (Commission File Number) | (IRS Employer Identification Number) |
¨ | 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)) |
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 |
Item 2.02 | Results of Operations and Financial Condition. |
Item 9.01 | Financial Statements and Exhibits |
TILLY’S, INC. | ||
Date: June 3, 2020 | By: | /s/ Michael L. Henry |
Name: | Michael L. Henry | |
Title: | Executive Vice President, Chief Financial Officer |
• | Total net sales were $77.3 million, a decrease of $53.0 million or 40.7%, compared to $130.3 million last year. As previously announced, the Company temporarily closed all of its 239 stores on March 18, 2020 in response to the COVID-19 pandemic. All stores remained closed to the public for the final 45 days of the 91-day fiscal quarter, including during the peak weeks of the quarter surrounding normal school spring breaks and Easter. Net sales from physical stores for the first quarter of fiscal 2020 were $47.0 million, a decrease of 57.5% compared to $110.6 million for the first quarter of fiscal 2019. The Company's e-commerce business continued to operate throughout the first quarter, and increased significantly following the closure of the Company’s stores. Net sales from e-commerce for the first quarter of fiscal 2020 were $30.3 million, an increase of 54.2% compared to approximately $19.7 million for the first quarter of fiscal 2019. The Company ended the quarter with 239 total stores, including one RSQ-branded pop-up store, all of which were closed as of the end of the first quarter of fiscal 2020, compared to 229 total stores, including three RSQ-branded pop-up stores, last year. |
• | Gross profit was $1.6 million, or 2.1% of net sales, compared to $35.7 million, or 27.4% of net sales last year. Product margins decreased 770 basis points as a percentage of net sales primarily due to an estimated inventory valuation reserve of $4.7 million and increased markdowns. Occupancy costs deleveraged 1,250 basis points as a percentage of net sales despite being $0.5 million lower than last year, primarily due to the significant net sales decline resulting from the store closures noted above. Distribution costs deleveraged 440 basis points as a percentage of net sales primarily due to an increase in e-commerce shipping charges of $0.9 million resulting from a greater volume of e-commerce orders. Buying costs deleveraged 70 basis points as a percentage of net sales despite being $0.1 million below last year. |
• | Selling, general and administrative expenses ("SG&A") were $30.0 million, or 38.8% of net sales, compared to $35.5 million, or 27.3% of net sales, last year. The $5.5 million decrease in SG&A was primarily due to reduced store payroll expenses of $4.9 million resulting from furloughing all non-management store associates in connection with the store closures noted above, as well as other reductions in most other expenses. These expense decreases were partially offset by higher e-commerce fulfillment and marketing expenses of approximately $1.3 million associated with significant e-commerce net sales growth compared to last year and non-cash store asset impairment charges of $0.3 million resulting from the impact of the COVID-19 pandemic on certain of our stores. |
• | Operating loss was $28.4 million, or 36.7% of net sales, compared to operating income of $0.1 million, or 0.1% of net sales, last year. The decrease in operating results was directly attributable to the impacts of the COVID-19 pandemic on our business, including as noted above. |
• | Income tax benefit was $10.6 million, or 37.9% of pre-tax loss, compared to income tax expense of $0.3 million, or 30.6% of pre-tax income, last year. Income tax (benefit)/expense for both periods includes certain discrete items associated with employee stock-based award activity. The increase in the effective income tax rate for fiscal 2020 is primarily due to the anticipated benefit from the Coronavirus Aid, Relief, and Economic Security Act enacted on March 27, 2020, which provides for net operating losses in fiscal 2020 to be carried back to earlier tax years with higher tax rates than the current year. |
• | Net loss was $17.4 million, or $0.59 per share, compared to net income of $0.7 million, or $0.02 per diluted share, last year. |
May 2, 2020 | February 1, 2020 | May 4, 2019 | |||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 65,133 | $ | 70,137 | $ | 33,864 | |||||
Marketable securities | 45,981 | 69,780 | 75,953 | ||||||||
Receivables | 13,421 | 7,485 | 6,288 | ||||||||
Merchandise inventories | 67,650 | 56,901 | 58,963 | ||||||||
Prepaid expenses and other current assets | 2,092 | 4,561 | 5,294 | ||||||||
Total current assets | 194,277 | 208,864 | 180,362 | ||||||||
Operating lease assets | 252,554 | 263,649 | 244,139 | ||||||||
Property and equipment, net | 61,941 | 66,176 | 70,608 | ||||||||
Other assets | 7,422 | 7,951 | 2,176 | ||||||||
Total assets | $ | 516,194 | $ | 546,640 | $ | 497,285 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 24,837 | $ | 20,562 | $ | 23,479 | |||||
Accrued expenses | 13,591 | 20,755 | 17,044 | ||||||||
Line of credit | 23,675 | — | — | ||||||||
Deferred revenue | 10,719 | 11,761 | 9,105 | ||||||||
Accrued compensation and benefits | 5,098 | 7,190 | 7,019 | ||||||||
Dividends payable | — | 29,677 | — | ||||||||
Current portion of operating lease liabilities | 65,595 | 55,321 | 52,600 | ||||||||
Total current liabilities | 143,515 | 145,266 | 109,247 | ||||||||
Noncurrent operating lease liabilities | 229,127 | 240,755 | 222,086 | ||||||||
Other | 558 | 718 | 1,422 | ||||||||
Total liabilities | 373,200 | 386,739 | 332,755 | ||||||||
Stockholders’ equity: | |||||||||||
Common stock (Class A) | 22 | 22 | 22 | ||||||||
Common stock (Class B) | 8 | 8 | 8 | ||||||||
Preferred stock | — | — | — | ||||||||
Additional paid-in capital | 153,878 | 153,377 | 150,331 | ||||||||
(Accumulated deficit) Retained earnings | (11,115 | ) | 6,280 | 14,012 | |||||||
Accumulated other comprehensive income | 201 | 214 | 157 | ||||||||
Total stockholders’ equity | 142,994 | 159,901 | 164,530 | ||||||||
Total liabilities and stockholders’ equity | $ | 516,194 | $ | 546,640 | $ | 497,285 |
Thirteen Weeks Ended | |||||||
May 2, 2020 | May 4, 2019 | ||||||
Net sales | $ | 77,289 | $ | 130,303 | |||
Cost of goods sold (includes buying, distribution, and occupancy costs) | 75,695 | 94,619 | |||||
Gross profit | 1,594 | 35,684 | |||||
Selling, general and administrative expenses | 29,995 | 35,538 | |||||
Operating (loss) income | (28,401 | ) | 146 | ||||
Other income, net | 409 | 829 | |||||
(Loss) income before income taxes | (27,992 | ) | 975 | ||||
Income tax (benefit) expense | (10,597 | ) | 298 | ||||
Net (loss) income | $ | (17,395 | ) | $ | 677 | ||
Basic (loss) income per share of Class A and Class B common stock | $ | (0.59 | ) | $ | 0.02 | ||
Diluted (loss) income per share of Class A and Class B common stock | $ | (0.59 | ) | $ | 0.02 | ||
Weighted average basic shares outstanding | 29,677 | 29,469 | |||||
Weighted average diluted shares outstanding | 29,677 | 29,808 |
Thirteen Weeks Ended | |||||||
May 2, 2020 | May 4, 2019 | ||||||
Cash flows from operating activities | |||||||
Net (loss) income | $ | (17,395 | ) | $ | 677 | ||
Adjustments to reconcile net (loss) income to net cash used in operating activities: | |||||||
Depreciation and amortization | 5,024 | 5,209 | |||||
Stock-based compensation expense | 501 | 529 | |||||
Impairment of assets | 333 | — | |||||
Loss on disposal of assets | — | 10 | |||||
Gain on sales and maturities of marketable securities | (330 | ) | (549 | ) | |||
Deferred income taxes | 591 | (130 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Receivables | (5,936 | ) | 246 | ||||
Merchandise inventories | (10,749 | ) | (3,154 | ) | |||
Prepaid expenses and other assets | 2,411 | 479 | |||||
Accounts payable | 4,661 | (895 | ) | ||||
Accrued expenses | (5,284 | ) | (806 | ) | |||
Accrued compensation and benefits | (2,092 | ) | (1,911 | ) | |||
Operating lease liabilities and deferred rent | 9,741 | (715 | ) | ||||
Deferred revenue | (1,042 | ) | (1,268 | ) | |||
Net cash used in operating activities | (19,566 | ) | (2,278 | ) | |||
Cash flows from investing activities | |||||||
Purchases of property and equipment | (3,548 | ) | (3,059 | ) | |||
Purchases of marketable securities | (5,996 | ) | (34,572 | ) | |||
Proceeds from marketable securities | 30,108 | 35,000 | |||||
Net cash provided by (used in) investing activities | 20,564 | (2,631 | ) | ||||
Cash flows from financing activities | |||||||
Line of credit | 23,675 | — | |||||
Dividends paid | (29,677 | ) | (29,453 | ) | |||
Proceeds from exercise of stock options | — | 151 | |||||
Taxes paid in lieu of shares issued for stock-based compensation | — | (85 | ) | ||||
Net cash used in financing activities | (6,002 | ) | (29,387 | ) | |||
Change in cash and cash equivalents | (5,004 | ) | (34,296 | ) | |||
Cash and cash equivalents, beginning of period | 70,137 | 68,160 | |||||
Cash and cash equivalents, end of period | $ | 65,133 | $ | 33,864 |
Stores Open at Beginning of Quarter | Stores Opened During Quarter | Stores Closed During Quarter | Stores Open at End of Quarter | Total Gross Square Footage End of Quarter (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 | ||||
2020 Q1 | 240 | — | 1 | 239 | 1,768 |