"Our first quarter results were better than expected as comparable store sales in March and April improved from February, driven by the depth and relevance of our merchandise offering particularly during the critical spring break and pre-Easter periods. We maintained our pricing integrity during a highly promotional environment and ended the quarter with inventory that was clean, current and well positioned for summer," commented Daniel Griesemer, President and Chief Executive Officer. "These results reflect the strength of our business model and the diligent execution of our team that remains focused on making strategic decisions for the long-term health of our brand."
For the first quarter ended May 4, 2013:
Total net sales were $109.1 million, an increase of 13.0% compared to the first quarter of 2012.
Comparable store sales, which include e-commerce sales, increased 1.1% compared to the first quarter of 2012. E-commerce sales were $12.6 million, an increase of 16% compared to the first quarter of 2012.
Gross profit increased 5.9% to $32.2 million compared to the first quarter of 2012. Gross margin was 29.5%, compared to 31.5% in the first quarter of 2012.
Operating income was $3.9 million compared to $6.0 million in the first quarter of 2012. Operating margin was 3.6%, compared to 6.2% in the first quarter of 2012.
Net income was $2.3 million, or $0.08 per diluted share, based on a weighted average diluted share count of 28.0 million shares. This compares to first quarter 2012 net income of $5.9 million, or $0.29 per diluted share, and first quarter 2012 adjusted net income of $3.2 million, or $0.15 per diluted share, based on 20.5 million weighted average diluted shares. Adjusted net income assumes an expected annual effective tax rate of 40%, and adds back a charge for on-going non-cash compensation expense for stock options similar to the charge in the other three quarters of fiscal year 2012.
At the conclusion of this press release is a reconciliation of non-GAAP results to GAAP results.
Balance Sheet and Liquidity
As of May 4, 2013, the Company had $48.6 million of cash and marketable securities and no borrowings or debt outstanding on its revolving credit facility.
Second Quarter 2013 Outlook
We expect comparable store sales to be flat to a low-single digit increase compared to a 5.1% comparable store sales increase in the second quarter of 2012. Additionally, the 2013 fiscal calendar shift will cause the first peak week of the Company's Back-to-School season to fall in the end of the second quarter this year compared to being the first week of the third quarter last year. As a result, we expect an estimated $8.0 million to $9.0 million in sales will shift into the Company's second quarter from the third quarter, when compared to the 2012 fiscal calendar. Using the anticipated effective tax rate of 40%, net income for the second quarter is expected to be in the range of $3.2 million to $3.8 million, or $0.11 to $0.14 per diluted share, and assumes a weighted average diluted share count of 28.2 million shares, compared to 27.3 million weighted average diluted shares in the second quarter of last year.
Second quarter 2012 adjusted net income was $2.6 million, which excludes a one-time, non-cash compensation charge to SG&A and a one-time net tax provision benefit, and includes a 40% effective tax rate to make that quarter comparable. (See reconciliation of non-GAAP results to GAAP results at the end of this release.)
Fiscal Year 2013 Outlook
The Company continues to expect comparable store sales growth in the low-single digit range for fiscal 2013, on a 52-week vs. 52-week basis. Using an anticipated full year effective tax rate of 40%, net income for fiscal year 2013 is expected to be in the range of $21.5 million to $23.3 million, or $0.76 to $0.82 per diluted share, and assumes a weighted average diluted share count of 28.3 million shares, compared to 26.1 million weighted average diluted shares for the full year 2012.
Full year 2012 adjusted net income was $22.9 million, which includes four quarters of ongoing stock -based compensation expense totaling $2.7 million and a 40% effective tax rate for the entire year, and excludes a one-time charge to recognize life-to-date stock-based compensation that was recorded in the second quarter of 2012 and a one-time tax benefit resulting from the conversion of deferred tax assets to the higher C-corporation value of those assets. (See reconciliation of non-GAAP results to GAAP results at the end of this release.)
Chief Financial Officer Retirement
Tilly's today announced that Bill Langsdorf, the Company's Senior Vice President and Chief Financial Officer, plans to retire later this year. Mr. Langsdorf plans to remain CFO until his successor is in place, and intends to work closely with Tilly's management to ensure a smooth and successful transition of his responsibilities.
"I want to thank Bill for his many important contributions to Tilly's success," said Daniel Griesemer, Tilly's President and Chief Executive Officer. "For more than six years, Bill has been a valuable and dedicated business partner to Tilly's, and was instrumental in preparing Tilly's for its successful initial public offering in 2012. He displays a unique blend of thoughtfulness, strategic thinking and hard work that earns him the respect, admiration and confidence of everyone who has the pleasure of working with him, both inside and outside of the Company. We wish him all the best in his future endeavors."
"I am proud of the Tilly's team and what we have accomplished over the last several years," said Mr. Langsdorf. "The company is well prepared for the future. After having completed our initial public offering last year, this is an opportune time for me to move to the next chapter. I look forward to assisting management as needed during this transition period."
Conference Call Information
A conference call to discuss the financial results is scheduled for today, May 29, 2013, at 4:30 p.m. ET (1:30 p.m. PT). Investors and analysts interested in participating in the call are invited to dial (888) 438-5524 at 4:25 p.m. ET (1:25 p.m. PT). The conference call will also be available to interested parties through a live webcast at www.tillys.com. Please visit the website and select the "Investor Relations" link at least 15 minutes prior to the start of the call to register and download any necessary software.
A telephone replay of the call will be available until June 12, 2013, by dialing (877) 870-5176 (domestic) or (858) 384-5517 (international) and entering the conference identification number: 3921385. Please note participants must enter the conference identification number in order to access the replay.