Tilly's (TLYS) 12 Mar 202019 Q4 Earnings call transcript

Greetings, and welcome to Tilly's Inc. Fourth Quarter 2019 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

pleasure Tilly's your Inc. my Investor Gar now for Relations is to host introduce Jackson, It Thank you.

begin. may You

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

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

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

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

to Now, I Ed. over will the call turn

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

half store second third negative ultimately in to disappointing fourth XXXX sales weeks of and quarter in during a years. first the our were and we As mid-January comp preannounced our quarter deeper-than-expected three in drop and in over due December, comp resulting traffic fiscal results

with in same shift we other primarily consumer for several past Christmas behavior to since businesses Thanksgiving between this a due have shorter their in period, window drop the believe that and during in connection similar this retailers reported season. slowdowns the was holiday Given

sales we by during offering net since narrowed thus single-digit increased of fiscal due business year which online X.X% XXXX. sales e-comm in fourth far quarter, last E-commerce in the a corrected. to have was has Our which compared decreased percentage the first by been part to product a believe quarter

and By department quarter experienced negative. in We men's from positive top footwear brands. deceleration sales the our and in fourth accessories comp girls boys while women's couple a of third-party a comp

we are and continue by our brands typically forward new that existing Going we brands we in selectively buying adjusting believe deeper do, assortments as in will specific bringing grow. to

these new of for brands assortments into Some forthcoming the introduced been season. be and spring back-to-school have more will our already

XXXX, comping far comping are accessories, and in the while comps are girls, up of total positive, first Thus with men's digits negative. women's quarter single boys in footwear low fiscal

Our new response. and total proprietary our West stores Melrose positive as contemporary a online in of of as to young receive brand XXX continues is well now

reach it of As business and fashion, time. connected women's a age extend reminder, believe are which will with aimed incrementally our brands of West the Melrose we the help at women's over

stores will you selection targeted who collection. for with along to anticipate form of For season. collection certain stores featured brands own visit back-to-school available a you, those be West will in its section the West the of in the Melrose a Melrose of our third-party of see We all

address current time, directly later. XXXX, Smith situation, potential merchandising Merchandising several for bit Chief priorities our business which near-term Officer, effects concerns believe a the has fiscal I over that new notwithstanding we of our of the regarding will improve identified coronavirus terms opportunities In Tricia will

is items our planning adjust styles into drive mentality, critical customer those to our and online specifically assortments believe have down to buys then editing business applying a that With for best to it the and of targeted is our online that are assortment digital-first always sales. one stores. e-comm our Number assortments demographic, the drive we

e-comm We time. over expect price that greater newness more and selling help increase frequently profitability should regular online

a in to two in will denim amount We we is investment additional in focus denim that size customers. increasing meaningful only on available carry, more but year-round more the not a with the carrying believe denim our Number us provide ranges. inventory also presentation much attract

concept for little is Number million annual with $XX With brand. resources marketing very making with two has presentation our meaningful the proprietary and RSQ overall By our scheduled three in believe denim further was June growth this the our brand it direct Irvine to the proprietary end we sales, RSQ in RSQ the focusing creation net ahead. now opportunities of brand of on to number store that fiscal expanding RSQ strongest denim spectrum, at brand. develop XXXX open

marketing in to on we competitors. Number us businesses efforts and girls our which them businesses key girls account footwear nearly in sales fiscal believe for four for boys and apparel combined is XXXX. total significant between $XX versus the further capitalize behind to our differentiators and million boys Without are net

in started of awareness markets. communication our materials marketing this with believe We We kid-specific new of marketing have business. part and it further can better recently creating to greater behind it, grow generate particularly

can early we of just to assortment. expand the effort collection beginning our years. five, The believe beyond business age earlier, women's number the high improved our is expand an school women's of And business Melrose West as the of mentioned with we range

our that have and young both young and customers opportunity can the women past. see in we our in adult clothing, Given, stores believe we carry retain than offer an often shopping we we have young families kids longer to assortments

many quickly are to already back-to-school strategies to the expect Tilly's of Tricia are them for over earnest in underway, has with Although these the time. the begin merchandising In meantime, drive of procured additional about impact brands we the and new excited some season. we prospects several business of very

Turning to estate. real

that's potential opportunities the in to profitable full-wide open near-term opened XX of year very new We fiscal in number believe profitability stores full-sized new full effects that XXXX our situation. in consistent meaningful the coronavirus the of We of store again with their existing portfolio continue that a stores total first during operation. to notwithstanding we accretive have produced future,

We XXXX. in full-size new up to continue stores the stores store opening We XX by XX to fiscal plan full-size additional during our expansion opened XXXX.

the As each if has with been practice, will our retail we only leasing we economics supported they open circumstances decision of appropriate believe the are will environment. by stores reflective involved be in broader individual that

presence we result wanting of believe a store rent one landlord awareness. to as through have this wherein continue do fiscal will decisions store increase, time. prioritize not market confirmed may We and as early February work fiscal there but expanding yet in the a we penetration additional which closed of closures existing are We our lease any nearly way brand in our XXXX greater we can achieve markets we More in at XX. XXXX our at occur

for just certain stores beginning In new all for encouraging programming our need of order of reads significant and customer-facing enhancements investments, deferred March our couple have increases. point-of-sale vendor. in-store of Afterpay results the terms been launched the online -- very at to we pending intend Afterpay within the early months we payment next launch program with We average

that this drive payment to about to opportunities excited alternative through business purchases. the method more are customers on defer allows We current payments

XXXX e-comm compared we generally business there competitors XX% opportunities for total to having continue online higher do. fiscal of that our meaningful sales a of sales certain who believe growth are at penetration finished our also have to just We net penetration much than

our to omnichannel enhance to in our continue improve XXXX capabilities will customer fiscal We convenience.

no In fourth up closing, despite I quarter. fourth of in this than store we contrarian prior comps traffic quarters leading quarter consecutive produced results XX proud am fact our industry worse that miss, during -- to the flat the

are a fiscal result begin we unprecedented the obviously we of an of as coronavirus. XXXX, facing As effects environment

plans third-party gather proprietary closely and We working to information alternative any our impacts. business and to adapt with are very action determine events foreseeable brands monitoring and suppliers

number cases are deliveries production timing changes Currently, and business of coronavirus impacts potential that and predict store what people in the period. the receipts product capabilities, of greater weather We of its have March-through-June potential generally situation new been any as traffic, in severity potential be impacts our we may of cannot on in be behavior, informed the some detail unknowable. on consumer our delayed will market the the of

be may take partners. to extraordinary business ensure and employees we our measures required Further, of to the safety

results operating and coronavirus the at sales materially negatively could the as Our time evolves. impacted situation

provide time. As at a to we unable XXXX fiscal specific result, earnings are guidance for this

execute We situation continue our business monitor this and of the to plans to our to ability. best will continue carefully coronavirus

progress our other concerns that the our shipping business coronavirus we continue remain Despite to as to headwinds sharing forward with increases, our exist you. growth opportunities long-term minimum near-term about look well for confident we and near-term as cost and wage from

Mike performance. of quarter XXXX will fourth fiscal details discuss now operating the our Mike?

were X.X%. our of follows: total performance last million XXXX e-commerce year. versus $X.X fiscal declined compared increase store million quarter fourth to Thanks, $XXX.X by comparable sales X.X% fourth sales fiscal last quarter from operating as Details increased of million X.X% including Ed. net Total $XXX.X or net XXXX's year's of

in the XX.X% last total compared sales, to last year's to XX.X% of declined XX.X% our XX.X% compared Comp total decrease. stores year's year. approximately quarter, X.X% last E-comm of of physical sales X.X% compared X.X%, sales Stores sales our versus to year. net declined net XX.X% sales for E-comm total represented our net increase. represented approximately last net approximately

total XXX stores including XXX RSQ compared shops. total RSQ year, pop-up with quarter to pop-up which one the ended stores four included We shop, last

or profit Product million, points net increased year. sales, million, last $XX.X year to expenses occupancy due sales to buying markdowns. XX.X% distribution declined compared approximately of XX.X% and to net XX of Gross basis or last including compared margins $XX.X was

net approximately to to to a e-comm last improved to and new XX approximately the compared net year. sales. Distribution expenses XX lower basis shipping as opening charges basis XX of due points sales, primarily negative compared primarily costs deleveraged percentage due by year stores points last Occupancy

Also, negotiated certain last and or $XX.X compensation non-recurring approximately XX.X% were e-comm, of Primary and relating million of million XX.X% compared $X.X offset wage approximately bonus million included SG&A payroll from net million partially approximately $X.X $X.X million, sales SG&A or of $XX.X include $X.X increased of $X.X expense. disputes. increased of approximately primarily workers' marketing store year. in vendor to SG&A claim sales, last year's from last reductions million by net reduction growth, to Total variances expenses million, of of resolutions increased minimum count year store expense reserves corporate expenses a to

X.X% growth. net $XX.X net which million, the and increases to $X.X or occupancy of of primarily year, were by noted above, net million, offset $X.X by enough decreased of not to income sales sales million, due SG&A X.X% last or compared Operating sales

of million was pre-tax XXXX relating or $X.X million, year. income options. expense $X.X acceleration million, certain discrete compared to expiration expense to items of of tax income, of tax Fiscal XX.X% and pre-tax the last $X.X includes Income stock tax or XX.X% income approximately

was Net compared income $X.XX diluted year. $X.X million, shares last average quarter Weighted million, diluted the million year. to per $X.X million, $X.XX to diluted were compared $XX.X for share share, $XX.X or last per or

and ended cash to compared no Turning debt balance $XXX.X with and our marketable year. year $XXX.X in We securities the million no and sheet. last million fiscal to debt

As $XX.X paid announced or company share, late a the consecutive authorized shareholders. in dividend dividend was has Board per which a Directors of the special to fourth our on that This was aggregate, January, million February cash the XX. in paid special of year $X

capital were inventory expenditures $XX.X ended XXXX aging X.X% down a We for XXXX. year inventory the slightly square compared Total improved with compared and foot to million fiscal with million, last to for $XX.X fiscal per year. fiscal

to stores e-commerce quarter single-digit low in a a comparable first slightly XXXX. store of e-commerce single sales XX, March percentage comp Through increased basis. digits and total net have Now fiscal the sales percentage including sales high turning up with negative by briefly net on

time. first we plan to our quarter behavior, May given coming capabilities, coronavirus the fiscal production Ed in weeks specific of activity Day. to earnings and on unable following and people, results the timing of the consumer in Memorial XXXX other provide economic We store months As this deliveries, things, noted unpredictability generally our earlier, effects of market the among are traffic, late report at guidance the for

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

you. Thank

Riley. will question question-and-answer from comes the B. We your a proceed now with Our conducting session. [Operator with line question. be of Instructions] Jeff first Sinderen Please Van

Richard for Hello. This Sinderen. Jeff is Magnusen in Van

place timing and you're given of and what you more can And so you manufacturing to in expect might in in QX about experiencing you speak extent chain and for terms inventory expect supply off, far regard? what of China? receipts QX to normalized be the this First what

Yes.

delayed modest And relatively say of So have when receipts our we in remarks, time our as period. being in total a noted the March we percentage June been relatively I prepared of notified correlation this but expecting more XX% that of a than other maybe to sales months, direct that's less result little activity. current those XX% than going month, some in with modest, in in not any through

that are deliveries. We're alternative really deliveries working actions from with to business out timing of We've best that being new XX%, production of as partners delayed. read. whose anywhere we've any And solely and our June teams you information Our the on major timing brand figure gotten themselves. disruptions receiving to the hard we have not very of receipts through only to it's identify China reports the can any expecting gotten report capacity based from been in seems back XX%, XX% specific

but now to as normalcy, at we can. moderating So some some hopefully, point everything will situation can we get can to back informed of doing as we we're stay and sense this for start

Thank you will the and COVID-XX planned to traffic can due then off about you levels what if hard And you. or speak do falls currently promotional to coronavirus?

inventory really -- we doing not will not years, managing to sales. been softness to planning the adjust inventory for we're levels in going on our think we done aggressively have out as to sales We've anything just to be. we're see the we few past fall levels if normally even Well, do what we don't that

expecting promotional a I'm standpoint, anything not from our from standpoint. So, unusual

guidance, you're positive then, thinking Okay. year? question And your it's last what not one flow generating understood is for is, this that providing cash about but

on exactly Well, that things depends out. shake all how

XX, able have be to we comps as the flow cash anywhere should minus are for a positive better than long year. As

XX get in we and where So, worse it minus any at be dropping take us maybe a net-net would for to position would year-over-year. cash

news traffic these got happens. balance help digits, on have that to ride out. of what's sheet us a we've and standpoint within in it some predict then out this be it's a the just looking us for a days, leagues we amount very coming closing, seasons going remarkable sports And even and by healthy seen the last the all company has certainly should pretty what so able so environment just at and even And several off to pause. today are certainty thankfully, at that strong to with to drop weather store storm -- past sheet, So double given markets just us least depending here going hour makes we're and balance shocking about canceling, impossible Disneyland those happen. their But events this from any

much. very you, Thank right. All

Thank you.

Kummetz [Operator question comes proceed line of Please with Research. with next Instructions] Mitch question. Pivotal Our your from the

just or taking Thanks least some it falling in digits off seen talking business Or for about all Mike, in is my markets any in that guess, as follow-up uptick just anything? first, the you're traffic is e-comm double Have store questions. buying dropped interested at digits markets. in is to traffic the you double store I nobody off?

for we slight improvement no seen Ed. We've We've have be that hoping which in seen it consistent. sure, to going a that's our we're won't believe consistent this forward is so -- reason e-comm business

decent. it's So been

brands then, of ones just just pieces. of some fill that maybe you buying couple some in Ed, like thing? a the in are the quarter kind you some then retro from kind sort just bigger to or saw to referencing elaborate the brands. top of that third-party maybe specific of that about their I new you think that? talked run shifting Or of of into this deceleration course? shift And Is part the away working this on deeper a some you quarter, brands about And is maybe you're Can talked whole have trend also those in

mean, we're a I retro it's shift seeing. from away that Yes. not

strong. that always with a in Obey Some brands. new started brand always do, results but off West brought initial of continue that new which accordingly. during of in the have they and brought the the trend brands strong of brands we year to of is been new collection. off, And a Melrose we're have we're most that is the for tailed a back have pleased people that. be we as There's to couple recent as then really new part three and parts last adjusted not us at bringing of couple we And of We tail but brand

of that that. great at you the job not that's when type dealing we're the does as do, always team all brand carry of of a about on thing we that because dependent shift So and trend not any we're many kind as managing one any I'm concerned through something like brands with luckily in and

was on lastly quarter. know the footwear, guess it I negative in I a And comp

I heard of I footwear? comp you're correctly some trend brand QX category. were speak there think was you a the that to sort Can in negative fairly issues allocation you're the to that maybe it quarter. know -- if know in in fourth broader concentrated in I date. some one seeing I

Yes. styles we Well And those. we have inventory had certain just of brand. a get enough of enough certain honestly couldn't in

would quite Our have been results bit better. a

Is like the through quarter. trying Are you far Or... that the in sound -- process correct still to that's doesn't so that? corrected it first of

pretty progress, -- would progress substantial still with I we've a made still work it's in It's it. say but

right. luck. All Thanks guys, Okay. Good

you. All right. Thank

in no I'd back call Mr. the are other like remarks. queue. to Thomas hand to There for questions closing

joining have for good today us you Thank everyone. evening and a

Ladies Thank teleconference. you participation. this and gentlemen, today's does for conclude your

your and wonderful at disconnect a have time may this You lines day.