Tilly’s, Inc. (NYSE: TLYS, the “Company”) today announced financial results for the first quarter of fiscal 2020 ended May 2, 2020.
“The first quarter was severely impacted by the COVID-19 pandemic, resulting in the temporary closure of all 239 of our stores halfway through the quarter and the painful decision to furlough 91% of our employee population,” commented Ed Thomas, President and Chief Executive Officer. “So much remains unpredictable at this time, but we are thankful that we have recently been able to bring some of our people back to work with the reopening of 160 of our stores thus far. We remain committed to the health and safety of our employees, customers and communities as we resume operating our stores.”
First Quarter Results Overview
The following comparisons refer to operating results for the first quarter of fiscal 2020 versus the first quarter of fiscal 2019 ended May 4, 2019:
*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.
Fiscal 2020 Second Quarter Store Reopenings and Net Sales Update
During the second quarter of fiscal 2020 ending August 1, 2020, in accordance with the latest guidelines from local, state and federal governments and health organizations, and with new health and safety protocols in place, including significant restrictions on customer traffic, the Company has reopened 160, or 67%, of its total 239 stores as of June 2, 2020.
Since their respective reopening dates and through June 1, 2020, compared to the respective comparable prior year periods, collectively, customer traffic in the reopened stores has decreased by 34% and comparable store net sales in the reopened stores have increased by 1.2%. Individual comparable store net sales results since their respective reopening dates have ranged from a decrease of 91% to an increase of 160%, cumulatively, with 78 stores reporting cumulative comparable store net sales increases and 73 stores reporting cumulative comparable store net sales decreases.
Total comparable store net sales for the second quarter of fiscal 2020 through June 1, 2020, including e-commerce and periods for which physical stores were temporarily closed as a result of the COVID-19 pandemic, were $28.2 million, a decrease of $13.6 million or 32.6%, compared to $41.8 million for the comparable period last year. Comparable store net sales from physical stores were $8.2 million, a decrease of $27.7 million or 77.1% compared to $35.9 million for the comparable period last year. Net sales from e-commerce were $20.0 million, an increase of $14.0 million or 236.8% compared to $5.9 million for the comparable period last year.
more detail at source: https://tillys.gcs-web.com/news-releases/news-release-details/tillys-inc-announces-fiscal-2020-first-quarter-results-provides