Tilly's (TLYS) 1 Jun 232024 Q1 Earnings call transcript

Good afternoon, and welcome to the Tilly's First Quarter 2023 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.

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

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

be of as conclusion expectations that today X, Tilly's next section, factors judgment also you forward-looking XX on to only a days. the reflect statements. able this of will the recorded call, Certain differ From should the replay current analysis actual these and from affecting after you may made call reliance based June of call results same place Accordingly, and find shortly XXXX, various during undue not forward-looking will this Tilly's materially business. be for on statements the

thorough which furnished For the regarding the see the well our fiscal SEC quarter of statements, X-K filings Form uncertainties that XXXX is in referenced as risks SEC disclaimer forward-looking any as our associated disclaimer. with included is discussion other first a to release, more the with today please on forward-looking in that statements and earnings

turn our call will include after hour will X I Ed. prepared over call and remarks. be will session Q&A Today's to a limited now the to

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

of of combination weak assortment issues and unseasonable along Our terms certain the sales inflationary net comparable and adult, in family during weather a within were economic estimated young prolonged demographic in our customer We for California quarter March, results environment in believe less and February young first our with than overall. resulting teen, and were quarter negative uncertain outlook ranges. in March. results February an April

product XX% spring/summer negative California, online. sales stores wet with of West, during geographic double-digit weather single-digit in categories comp best and a to other merchandising than considering product the sales winter produced weakest departments in performing results. our all compared comp surprisingly, our the Not was quarter. were performed percentage first more categories our while with Footwear challenged negative particular, the area our in stores last year, both total cold

decreased less the a trend quarter, April XX.X%. April far, the during into has in The thus May in quarter. sales than through second carried Total high decreased total teens by negative XX earlier although our net quarter -- store transactions percentage comparable sales better the

Our than better thus which the have girls spring/summer comped they On girls, during other in second in have led departments footwear product while performed compared last negative. first an positive far by positive women's comp the quarter, did basis, quarter, to year. and categories have overall remain all

inventory We spring/summer merchandise was generally and our quarter feel entering to last about our the year. current aging assortment second good more compared

concern However, demographic young a the negative of and our remain on the other term. customer near factors impacts macroeconomic inflation in

influence on hired news, Chief previously positive having what both Officer, Nordstrom. new as bring been our We're Hudson's who in Bay we at business, her on will In over her Laura to assortment particularly see merchandise apparent our excited and X, Merchandising Janney May our time. joined tremendous positions to becomes senior merchandise experience us

to meaningful us hired just we leaders a how track do with get also at last fresh believe these back We started look President and and time. Planning of over sales on us delivering experience X extensive We Allocation who new growth give Vice week. a business a to help Merchandise new take opportunity

app just several invest continue for May challenges, in our term. Despite features. with long early mobile short-term in relaunched the we our business customer-friendly to We

will quarters. adding next We this of features new continue to couple over the app

completed this in of system facilities labor X future improve management here Irvine. that currently developing efficiencies fiscal better new in management and upgrade to a We We distribution for early in us will across XXXX growth. expect also continue to that inventory it make position be will and progress warehouse our important

X expected during expected quarter to the open terms are X expected the the XXXX to we expect now available open store been new and -- in March estate, have openings this planned are fourth third to for -- us. real originally Three spaces pushed fiscal being to quarter. in of made during opened during XXXX. open store to into X In have to in delays One due late year of stores timing store

XXXX XX% decisions. approximately fiscal existing complete with For stores, lease are we our

the we with expect XXXX, which possible. to lease stores this reasonable we continue closed. store as make costs additional to fiscal We conservatism remain growth much opportunities manage time, close all X sense. of where environment, current already renewals to At during open as economics have Given to approach lease X

I Mike? now to over additional call to turn first Mike details our and quarter on outlook. provide fiscal XXXX performance second quarter our the to introduce operating

afternoon, Thanks, Good Ed. everyone.

net Net sales net X the XX.X%. Our compared last comparable of fiscal from million, represented sales last an follows. were XXX net year, total XX.X% a to decrease represented We of e-commerce. stores stores net by XXXX net total compared increase first sales stores first quarter with physical to year. compared decrease from a quarter decrease XX.X% compared XX.X% e-commerce, first as X.X% total sales decreased XX.X% a quarter last XX.X% e-commerce of XX.X% while and stores, Total results ended of year's net physical sales, last sales including $XXX.X to from year. Total were with to

X points by XX.X% expenses, including last to Buying, and deleveraged sales of was costs XX.X% from basis margin, operating compared inventory higher and utilized manage XXX due buying, distribution primarily sales distribution increased XXX and $X.X occupancy Gross net predominantly level of markdowns additional by costs year. of net occupancy to by points, declined basis result margins to of stores. a Product a million levels. net collectively, occupancy as

were result payroll with to our million XX.X% hiring CMO. SG&A wage last to and compared of a or or store store our X% operating million admirable expenses in hourly $XX.X teams were expenses These payroll reduction as stores resulting sales of net a hours additional of store managing of despite increases year. increase offset partially SG&A benefits XX.X% from absorbing rate wage average $X.X job X attributable last new to and Software-as-a-Service compared Primary by the an of related net by expenses inflation, Total sales in million and increases net year. associated recruiting an were payroll $XX.X corporate

of rates as of year, of breakeven compared X.X% primarily combined last Operating pretax or compared was loss was XX.X loss was XX% of or million income benefit securities income last $X.X diluted loss factors result due last of marketable or or $X.X the per just $X.X higher return a to million tax Weighted our year. million on this last earnings to income $XX.X were million noted. operating tax million to to share pretax XX.X $XX income or of average net to last was compared sales or million Net net per million year. last of net shares $X.X income compared Income year year. to of share $X.XX sales $X.XX Other to million $X.X XX.X% expense of year compared year. XX.X% compared million significantly

per to of the up Turning down marketable total total no expect $XX quarter foot now $XX quarter units with compared Total debt $XXX fiscal first and year. foot, $X.X last million with for debt total million X.X% to We for million square year. outstanding ended new inventories balance our at million year. our expected X.X% and square capital the for per in year first last securities cost We compared but ended and the million. no sheet. first be currently $X.X compared approximately we With XXXX, quarter expenditures expenditures to the openings X capital to to were last store total cash

to total net through compared the XXXX. XXXX for to on May range approximately year. XX fiscal second Total quarter for trends, in of of the sales of net compared the XXXX a we last sales will for decline of to year. current of comparable translating currently XX% million in outlook and $XXX our approximately to last range sales XX.X% to XX% fiscal $XXX be decreased quarter quarter to store second that net Turning the estimate historical Based million comparable the fiscal second by our

shares the XX.X million. We income of $XX XXX loss $XX tax share million. levels, end of total the and the last outstanding to second a per to $X.XX We of expect the be expect sales to report expect XXX we to year's have to XX.X% total range range second quarter would the of in our SG&A of quarter. end of in rate currently stores to at compared at these At estimated $X.XX, million an with

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

[Operator first Capital. Koranda Matt Our question ROTH is from with Instructions]

weather the caused weakness. just have quick one and issues inside general to that? the the quarter Ed, assortment of on may a from some Can you aside just Just mentioned some challenges kind you elaborate macro start. that

see weather. Sure. assortment major category always swim was of would -- and no like or because any issues. categories major most challenge we as -- seasonal shorts not I There's due And performing the some. think nothing no to well as they But normally category major did primarily of

the on how it. you terms assumes just could to high about the quarter. hold guide? revenue second quarter of low kind just can of embedded Maybe steady Okay. the quarter guide, then probably of revenue sort on through think rest just And of Got end on the end like bit low versus high the May the low comp end a looks us. the end, what's the of It in elaborate the for that just sort second of unpack that maybe you end

Matt. Sure,

of the pandemic on average years, So the excluding end, on several low XXXX based the last is really the year.

last QX. QX, slightly Again, is is than period QX in cumulative X of end. last usually average XX%, a of as that X, X to the between QX the X- the speak. low high always the those get history over X looking of sitting range, numbers to around It's you to to average at X-year of high looking that at average get and to QX QX, years years, larger Looking right end May we're a May The of percentage you at percentage we would the end would as as XX%. that of X build,

I how performed across felt So environments has very of our documented like based a the reasonable business was history on range over that years.

you how get end. that's to So either

seeing seeing you're sort of ticket? versus May some would And what that just you you're you in Got the the in then of just the be unpack could trends about you. talk traffic could that terms from maybe if of there, comp latest of kind And helpful.

Sure.

So and was down down were Transactions been an XX.X% Overall, down It's all in it XX% overall they've been was speaks traffic me, QX of transactions, which, in down consistent. in issue. XX% really to has to in May. type QX, XX% traffic environmental May. almost and

there. So consistent

plus been than it It's minus much. that less X%. moved in X%. hasn't And or really up sale was X.X%. it QX, back actually less than down average Our In May, was

the Conversion traffic down down are seem It and transactions of buying terms points. in really people transaction call X.X% amount is the fairly moved It in is just is buying a double-digit a May. movement. So has be that what I'd to average was few consistent Everything value. consistent. percentage QX in are that X% and else

from number Okay. margin, margin, there promotional did product that a the Fair with. step a bit enough. think And about that trends talk how you wanted that we about then environment I we're forward, take given just down. dealing to could just overall see just maybe of the on going should merch

Yes.

risk where what the move over think the a what forward. inventoried keep let ourselves at get we trends need sure sales not and As us to with business we is make as might look too contemplate we healthy headed. in tell inventory position always, we we seasonal We much when

May So and then the struggle and down clearly of obviously with first was March quarter is were consistent XX% was Each April plus. that. XX.X%. during also February February down very a March. And

So an has here negative rate comp. little XX% trend below X-week a have we been that bit

fresh, to to keep to continue, newness that And allow delivered. actions contemplated keep to our have if we inventory that is take need getting for going taking we'll certain

of end start markets season the in starting, know, the you earliest quarter, will July. the as back-to-school to some of we late second get the As mid- towards be

ample we'll think as up come back ramping moving So for for have that cut newness need we to the to to half off room we need year. and allow be not and that, in we about forward the make to newness into of that sure

have we do our do we'll need what that keep and So second the to to we quarter. fresh, thinking into contemplated inventory for

it. Got

the guys just back year, are Okay, kind how more maybe approaching think. quarters? about XX% maybe for me you and just are the any the we I'll mentioned of of the one occupancy But costs for over that the remainder of the from then you rest How have? I in on jump occupancy of thoughts lease sort you pressure like costs thinking You negotiations queue. through, were coming

going Yes, the store up year-over-year because dollars to count up total is year-over-year. are be

So additional stores specific is rent occupancy each perspective, way we The on life are cost absent pure over an lease, had stores X that accounting percent it's the straight dollars. net that lined deals. speaking, treated store some the generally from of

around So the dollars dollars. and And matter of relative then base a occupancy that don't of from that stable then how to stores adding move much year-over-year your comps adds it's are quarter-to-quarter. a relatively performing

up will a to continue dollars bit. the be So little

achieve occupancy We've in been terms of able reasonably been satisfied negotiations. with what to we've

sales a agreement landlord hard able many what need forward. if use to. pretty given on that we to assumptions darn look move years always, we basis we're heard stores if can't, to for to from We take you've our pretty be. us reasonable As we at over and And again expect a we go-forward not if have any with we afraid store. now close we derive this And again where to partners, reach we're

stores pretty think to the direction not of have for add huge been satisfied with we're I new and to doing we've stores, a I renewals pretty said, even our overall, on economics just what we're Mike though But been going good. with new amount think that the

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

horrible Oh, in want on boy, pretty been the I weather here. California. to it's harp

unseasonable a did see you have trend maybe a it's not wondering, where in geographies you [indiscernible]. as or weather other better as chunk was been Just big

were though. California double down areas was the down XX% over worst. California total. All was digits, in

like were digits, areas positive, double not range. and was it's was So a there a was and there down Everything some mix.

down have XX%. might versus ones down best over the XX%, of was only California, XX% Some been which

down. the And decline, that weather getting that from They're thing. broad-based out of of So number coupled slowing me tougher same the things says seeing there. to heard companies with a they're are generally we've kind

we was remarks, performance, prepared the In couple categories were speak than mentioned than worst, gotten the weather our called they're And California more of areas have issues of at the does in negative things categories. than the out. better a but look as So quarter. still spring/summer early when we the winter/fall QX the a May, trend, which in you to little other negative some seasonal that

it's tough. So still

to impact question will touch like her? and actually allocation planning improve wanted think Laura. on seems under just to new I you with terrific you leader if a also on then And from then It hire. we When see your there? could what meaningful maybe a needs And

Yes.

we in can that able she tweak see ways. since -- back-to-school assortment, we'll can think she going -- mean wherever on to she's to affect just speak. real start she's the feel started, working obviously, like some I to be I as any merchandise not she major But or

into bigger a see to start holiday a impact you'll fall that for through sure. as think and I we move

-- on picked calls opportunities position, something in we on we'll as sure. up So future the which share she's for already, -- she's us, for more as share we'll I'm really more

in and is planning brought person for that Merchandise employee we've really to mostly more with There previously experienced, allocation. of improvements really We somebody to the who in for methodologies and past. brought But multiple change had I been some XX doing the in -- what years. in that see are in many the types was we the had just be needs company of positive apparel. solid some companies that And person that some been stuff. the place we've from basically years, position

he major be combination and of a the -- positive will the see think, for I Laura, company. I So

And just you reduce then know Okay. to wanted always guys little a Great. on looking are to I touch bit SG&A. expenses. ways I for

of really sales -- need And wondering what turn be macro? what and think then you're think Just to got thoughts just we you little that Is there about bit. do drivers? we've out we I is you Is situation to mean, kind happen really that? uncovering or any flex for a Or upward? just content obviously, I more, need where maybe a on more a it you patient anything you're tough can you alone sales think not to experiencing. turn more there newness Or know, it to don't what But macro for around? needs at largely you're do where merchandise how it

actually reported seen challenges you've I -- I'm anything Well, I alone. think go. may other overall, than macro think from And -- else. it's I'm not happy think pretty there's results, sure the I as I with assortment, always definitely our more we're but

Yes, on I ship we company. here. every virtually question, a pretty tight Ed this run see in SG&A your and expense

frivolous and impact. don't So we that multimillion-dollar of have the yank business can arbitrarily out not just have programs an you

team hourly increase about in the have and but first wage an last generate we noted having X% X% remarks than dollar year. continues. wage stores. our year-over-year, As result, think higher we average payroll. in did X pressure outstanding impacts wage that job store from The store an hourly quarter rate about When QX, was raw average is our you minimum in inflation savings to and That a additional still phenomenal

our on in to XX% can. We we it our SG&A be doing we any group teams as as And quarter. store given roughly our work possible store ops as can be payroll as tight on everything of closely hours so we're and Store tight management. to with total is very

the a wiggle nugget to There's of the that's So room, lot be honest. other dial. that can not move

of of couple to hundred think it's can So million few realistic. here by thousand out like thousand moved the SG&A of we just here, in snapping there, several yank It's and that just not and our but dollars But realistic fingers. pieces couple just a there. a things hundred bits not quarter, first

in Okay. We'll rest I Fair else if offline. new enough. you just pick I there's ask be anything might the thought would uncovering.

is question Mitch from Kummetz next The Research. with Seaport

the Given you demand about turned or just or too some softness feeling business, the the have? any seasonal turning you you And for inventory the you do the Ed. has difficult? is around mentioned is think are and of opportunity as weather How pent-up swim, shorts that there's macro

I about the feel content itself. good pretty

for the those. that think we've major -- I styles that sold consistently, that there's changes years things no we've to many

some be and categories I promotional will but I expecting maybe be think price swim, shorts it. and for like in competitive, sure. to But we're It demand for expect extremely be there sandals. pent-up it plan certain also that, will we extremely

Okay. you where of kind And double-digit extent are tail to back know through a inventory excess you what kind seen to been that mean year. to know you of last some end And school, to macro stuck lately to you've negative getting your the planning back-to-school adjust I I don't back-to-school end much lapping, in then the start see of. I you've that? too for from how think, don't QX, with given at just I what able the you're plans, up season,

are you that's to you like have the your adjusted been you have business? And kind planning buys? do. what how again, If to So able buys? you of need you I your feel adjust mean

every our We've almost hour adjusted -- we've here. reforecast business

our and to road. are So the buying are happen think down we constantly going accordingly order on from what we plans is adjusting

back-to-school, pretty shape we've been we and in be changed happen that which backpacks adjustments. well is we back-to-school we'll better shoes, adjustment to much going seasonal great for has think And apparel, categories plans. yearly thought for And very pretty shape we're than that. like be drastically made consistently in a -- for in great we the we for what are when us positioned be some inventory-wise. strong to But I going haven't we'll So usually plans, -- was which did

those haven't on We what's of had any numbers right happening to adjust based now.

known opinion, as best collections Tilly's backpack the Yes. I season, absolute as there is my is. known -- having destination And Mitch, the think the own of we one of this is just back-to-school but are backpacks -- about

The period. a grown need the to since think next I need-based last are updating more of There's into go They've probably the as of wardrobe a going much year. for type kids back year's back-to-school they is school. school. some

trend from the season I'm it I try back-to-school the see be continue heading period, predictable hopeful in more challenges certainty. is years optimistic predict the to the that now. we exceptionally potential despite seems means than to for we're I right long these predict we challenges having that might seeing I'm environment, future, foreseeable face of some that But to into soon. season least like see better that what is It X need-based now. with facing to a business could at the however a lasts, we back-to-school better will But maybe cautiously run can't that difficult that but running anything the still is about Nothing the and for hopefully future. coming rate that's how opportunity think a honestly,

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

today. We Thank September. results evening. with joining us you quarter a the early on call forward in all you to good our sharing second look Have for

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

may You disconnect. now