Tilly's Inc (TLYS, Financial) released its 8-K filing on December 5, 2024, detailing its financial performance for the third quarter of fiscal 2024, which ended on November 2, 2024. The specialty retailer, known for its casual apparel, footwear, and accessories, reported a net loss of $12.9 million, or $0.43 per share, compared to a net loss of $0.8 million, or $0.03 per share, in the same period last year. Despite the widened loss, the company's revenue of $143.4 million surpassed the analyst estimate of $140.88 million.
Company Overview
Tilly's Inc operates as a specialty retailer offering a wide range of casual apparel, footwear, and accessories for young men, women, boys, and girls. The company markets products under well-known brands such as Vans, RVCA, Adidas, Nike SB, and Hurley, and operates through various retail formats including malls, lifestyle centers, and e-commerce.
Performance and Challenges
In the third quarter, Tilly's Inc experienced a 13.8% decline in total net sales compared to the previous year, primarily due to a calendar shift that affected the back-to-school sales period. Despite this, the company achieved its best quarterly comp sales performance since fiscal 2021 and reported positive comp sales in August 2024. However, the company faces challenges in maintaining consistent sales growth and profitability, as highlighted by Hezy Shaked, Co-Founder and Executive Chairman, who noted, "We still have a long way to go to return to generating consistent sales growth and profitability."
Financial Achievements and Industry Context
Despite the challenges, Tilly's Inc reported improved product margins in the early stages of the fourth quarter, which is crucial for the retail industry, especially in a cyclical market. The company's ability to enhance product margins amidst declining sales is a positive indicator of operational efficiency and cost management.
Key Financial Metrics
For the third quarter, Tilly's Inc reported a gross profit of $37.2 million, representing 25.9% of net sales, down from 29.3% in the previous year. The decline in gross profit margin was attributed to deleveraged buying, distribution, and occupancy costs. SG&A expenses were $51.3 million, or 35.7% of net sales, slightly higher than last year's 30.8% of net sales. The operating loss widened to $14.1 million, or 9.8% of net sales, compared to $2.5 million, or 1.5% of net sales, last year.
Balance Sheet and Cash Flow
As of November 2, 2024, Tilly's Inc had $51.7 million in cash, cash equivalents, and marketable securities, with no debt outstanding. The company's total inventories increased by 11.8% compared to the previous year, reflecting strategic inventory management to improve distribution center efficiencies. Year-to-date capital expenditures were $6.7 million, down from $10.5 million last year.
Analysis and Outlook
Tilly's Inc's performance in the third quarter reflects the ongoing challenges in the retail sector, particularly in managing sales amidst calendar shifts and economic pressures. The company's focus on improving product margins and managing costs will be critical in navigating these challenges. Looking ahead, Tilly's Inc anticipates net sales for the fourth quarter to range between $149 million and $156 million, with continued focus on enhancing product margins and managing SG&A expenses.
Our third quarter results included our best quarterly comp sales performance since fiscal 2021, our first month of positive comp sales since February 2022 during fiscal August, and our second consecutive quarter of year-over-year store traffic growth," commented Hezy Shaked, Co-Founder, Executive Chairman, President and Chief Executive Officer.
Explore the complete 8-K earnings release (here) from Tilly's Inc for further details.
