On June 6, 2024, Tilly's Inc (TLYS, Financial) released its 8-K filing for the first quarter of fiscal 2024, ending May 4, 2024. The specialty retailer of casual apparel, footwear, and accessories reported a GAAP net loss per share of $(0.65) and a non-GAAP net loss per share of $(0.48), which was in the middle of its outlook range. The company faced significant headwinds from the macro environment, impacting its overall performance.
Company Overview
Tilly's Inc works as a specialty retailer of casual apparel, footwear, and accessories for young men, young women, boys, and girls. It offers an unparalleled selection of relevant brands, styles, colors, sizes, and price points. It delivers branded fashion and core styles for tops, outerwear, bottoms, and dresses. It also provides backpacks, hats, sunglasses, headphones, handbags, watches, and jewelry. It markets its products under the brand names of Vans, RVCA, Adidas, Nike SB, and Hurley among others. It operates its stores in malls, lifestyle centers, power centers, community centers, outlet centers, street-front locations, and also through e-commerce.
Performance and Challenges
Tilly's Inc reported total net sales of $115.9 million for Q1 2024, a decrease of 6.3% compared to $123.6 million in the same period last year. Total comparable net sales, including both physical stores and e-commerce, decreased by 9.4%. Net sales from physical stores were $92.8 million, down 5.1% from $97.8 million last year, with a comparable store net sales decrease of 8.6%. E-commerce net sales were $23.0 million, a decline of 10.8% from $25.8 million last year.
Gross profit was $24.3 million, or 21.0% of net sales, compared to $25.9 million, or 21.0% of net sales, last year. Product margins improved by 130 basis points due to a lower markdown rate and improved initial markups. However, buying, distribution, and occupancy costs deleveraged by 130 basis points collectively, despite being $0.8 million lower than last year, primarily due to carrying these costs against lower net sales.
Financial Achievements
Despite the challenges, Tilly's Inc made progress in improving product margins and driving greater customer engagement through marketing efforts. The company ended the first quarter with 246 total stores compared to 248 total stores at the end of the first quarter last year.
Key Financial Metrics
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Total Net Sales | $115.9 million | $123.6 million |
| Gross Profit | $24.3 million | $25.9 million |
| Operating Loss | $(20.8) million | $(17.3) million |
| Net Loss | $(19.6) million | $(12.0) million |
| Non-GAAP Net Loss | $(14.5) million | $(12.0) million |
Balance Sheet and Liquidity
As of May 4, 2024, Tilly's Inc had $68.0 million in cash, cash equivalents, and marketable securities, with no debt outstanding. This compares to $93.4 million and no debt outstanding as of April 29, 2023. Total inventories increased by 1.8% compared to April 29, 2023. Total year-to-date capital expenditures at the end of the first quarter were $2.1 million, compared to $4.3 million last year.
Commentary
"Our business continues to face many headwinds from the macro environment, but we believe we are making progress on improving our product margins and driving greater customer engagement through our marketing efforts," commented Hezy Shaked, Co-Founder and Interim President and Chief Executive Officer. "While we expect it to remain difficult to improve our sales results in the near term, we believe the efforts we are making now will produce benefits in the future when the current environment improves."
Analysis
Tilly's Inc's performance in Q1 2024 reflects the ongoing challenges in the retail sector, particularly in the face of a challenging macroeconomic environment. The decline in net sales and increased operating loss highlight the difficulties the company is facing. However, the improvement in product margins and the company's efforts to drive customer engagement are positive signs for future performance. The company's strong liquidity position, with significant cash reserves and no debt, provides a solid foundation to navigate these challenges.
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Explore the complete 8-K earnings release (here) from Tilly's Inc for further details.
