Q3 2025 Tilly's Inc Earnings Call
Speaker Change: may press star then 1 on your touch tone phone. Good day and welcome to the Tilly's Third Quarter 2024 Resort Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Mr. Gord Jackson, the conference specialist. Please go ahead sir.
Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, please press star then 1 when your touchtone is shown. And to withdraw your question, please press star then 2. Please note that this event is being recorded. I would now like to turn the conference over to Mr. Lord Jackson, Investor Relations. Please go ahead, sir.
Speaker Change: Krauske, Director-General of PISA, Wayne Dome Valley. W daily anchor s on weather thanks for tuning in to FIS goes 2021.
Alario, 2021.
Speaker Change: Collaborating with them on community outreach events aimed at mental health awareness and support for young people. Which ties in with our long-standing support of youth marketing efforts via social media and our recently launched mental health campaign.
Speaker Change: are beginning to take root and continue to invest in our business by upgrading the quality of our search engine for our website. We also just launched a new marketing spot, launching our mobile app, which will significantly improve speed. We are also in the process of implementing a new price optimization for young people, which ties in with our long-standing decision until we find an efficient way to get to young people's mental health in early 2025. During the quarter, we continue to invest in our business by upgrading the quality of our search engine for our website.
Speaker Change: and we are making every effort to try to turn things around. We believe we are beginning to make a progress in implementing a new price optimization tool that is intended to help citizens regarding our decision in 2024 to record a property in the future which we currently expect to launch in early 2025.
Speaker Change: Net sales were $133.4 million, where they need a decrease of $13.3 million. We are making an effort to turn our own things around and believe we are making some progress in last year retail calendar-like, which resulted in an $18.4 billion net sales shift out of our third quarter, operating into the second quarter, compared to last year third quarter results.
Speaker Change: Net sales were $143.4 million and represented 77.8% of total net sales primarily due to the period compared to 79.6% last year's retail calendar. Econ net sales decreased by $5.4 million and represented a 22.4% total net sales compared to 20.4% last year.
Speaker Change: Comparable net sales sales from 15 week period increased by 2.2% more, and representing 77.8% compared to the 13 week period of November 4, 2023 last year.
Speaker Change: decreased by 3.4%. E-commerce sales decreased by 5.4% and retail sales increased by 4.9%. Comparable net sales for the 13th and the 3rd quarter with 246 total stores.
Speaker Change: including 249 total store on it compared to the quarter last year. It ended November 4, 2023 last year. Gross margin decreased by 3.8% occupancy expense, with a decrease of 529.3% of net sales last year, and a decline in net sales of 4.9%. Buying distribution and occupancy costs have been leveraged by 320 basis total stores, despite being 0.7.9% below last year in the aggregate quarter last year, due to carrying these costs against a lower level of sales. Gross margin, including buying distribution and occupancy expense, product margins were within 10 baseline points of last year's third quarter, compared to 29.3% on the net in the middle of last year.
Speaker Change: were all minimally offset by accurate initial markups. Leveraged by 320 basis points, total SG&A expenditures were relatively flat at $51.3 million or 35.7% of net sales compared to $51.2 million or 30% margin that were within 10 basis points of last year's third quarter. SG&A de-leveraged a small percentage of net sales due to carrying these expenses that were all minimally offset by accurate initial markups.
Speaker Change: Primary SG&A, total SG&A expenses were relatively flat at $51.3 million, total store payrolls and related events sales at $0.9 million, and lower non-cash store asset impairment charges at $0.6 million.
Speaker Change: Largely, he may be leveraging the percentage of mental illness due to carrying these expenses up to $1.11 billion this year.
Speaker Change: Primary SGA is $12.9 million compared to last year's new quarter. We're attributable to lower full-store pre-tax loss and related benefits of $0.9 million, and lower non-cash-store asset impairment charges. Income tax benefit was $5,000, a near zero tax rate compared to a benefit of $0.3 million, up 1.1 million pre-tax loss last year.
Speaker Change: The lower income tax rate this year is primarily due to the continuing impact of the full non-cash value winning allowance on our deferred tax asset. Net loss was $12.9 million, or 43 cents per share. Income tax revenue this year was $5,000, or $0.80 million dollars, compared to a benefit of $0.3 million, or 28%. Turning to our balance sheet, we ended the third quarter with total cash and market losses. The lower income tax rate this year is primarily due to the continuing impact of the full non-cash value winning allowance on our deferred tax asset.
Speaker Change: Due foremost to our decision to put $9 million in inventory receipts in the latter half of October of last year's net wealth to help smooth out weekly receipt flows to improve operating efficiencies in our storage distribution center.
Speaker Change: Due foremost to our decision to pull over in the fourth quarter of fiscal 2021, we're off to a disheveling start in terms of net sales to include our community-approved product storage and distribution center.
Speaker Change: and help ensure comparable net sales to December 3, 2024. Decreased by 13.3% relative to the quarter's payroll period of $7.75 million. Due in part to the timing shift of Thanksgiving and Black Friday weekends, during the fourth quarter of fiscal 2024.
Speaker Change: We're on a shift at a pointy start in termlining the timing of last year's InfoLeum holiday and our Cyber Monday for this year's.
Speaker Change: Comparable net sales through December 3, 2024 decreased by 15.3% in a parallel period of December 5, 2023, based in part on this timing trend that seems currently black Friday weekend for our fiscal 2024 4th quarter operating results.
Speaker Change: Lining up the timing of last year's earnings in the range of approximately $149 million to a comparable net sales of $3.3 million in 2020, translating to a comparable net sales decline in the relative to 9% period of 5% in November 2028. We currently expect a recurring and historic operating margin of approximately $2.4 million relative to last year's 4.4% operating results.
Speaker Change: SGA to be approximately $52 million before factoring in any potential non-cash, store-at-fellers, impairment charges, which may arise. Translating to a comparable net sale decline in the range of 9% and net loss, SGA to be in the range of approximately $13 million or $29.5 million respectively, with a near-zero effective evasion tax rate due to the last year's report. SGA to be approximately $32 million before factoring in any potential non-cash, store-at-fellers, impairment charges, which may arise. Based on estimated weighted pre-tax years and net loss, SGA to be in the range of approximately $13 million or $29.5 million respectively, and currently with a near-zero effective evasion tax rate due to the continuing impact of the previous year's report. Non-cash, store-at-fellers counts to 239 at the end of the fiscal year.
Speaker Change: Lynch, and I am also speaking strategically about where we need to be over the longer term. We look forward to continuing to share details of our efforts. Operators, we will now go to our Q&A session.
Speaker Change: To ask a question, you may press star, then 1, and your first question will come from Jeff Vance and Darren. If you would like to speak with Riley, please pick up your handset before pressing the keys.
Speaker Change: If at any time your question has been addressed and you would like to explore your question, please press star 1. And at this time, we'll pause during the fairway to assemble or something else. Of course. Of course I am. Of course. Okay. Okay.
Speaker Change: I wasn't sure, I wasn't sure. A couple tough questions that I have, so if you can kind of bear with me for a minute. I think your merch market is much better now than it was 10 minutes or something like that, so I'm pretty much wondering if you had a call last year, and I realize there's moving things in the world where you're getting better, I am new. I wasn't sure, I wasn't sure. A couple tough questions that I have, so if you can kind of bear with me for a minute.
Speaker Change: but we're also looking at costs kind of a slow start here into Q4, Black Friday Weekend not great and it looks like costs are moving sequentially there where you're getting better idea a little bit more around what's happening with merch margins, kind of the puts and takes around IMU versus discounting and then I guess just as you think about this, I realize there's a lot of questions in this but as you think about it, just considering that you are deleveraging, maybe you could just help us understand a little bit more around what's happening with merch margins, the puts and takes around IMU versus discounting.
Speaker Change: and then I guess just as you think about this, I realize there's a lot of questions, but as you think about it, just considering that you are deleveraging.
Speaker Change: Maybe you can give us a sense of how you envision being able to begin to leverage the technology that we have.
Speaker Change: I'll take some of these and then Michael can answer the rest. So, look, we made a major change. We should see results of those changes in the next six months. There was a further period that we realized that we're trying to achieve. A lot of our challenges are in the merchandise.
Speaker Change: people would be the first ones, but at the same time, we should keep the markdowns and we should be subdued.
Speaker Change: and Jeff in the next six months. On the IMU, we have a goal of one year that we're trying to achieve. Overall, we're pretty much close to getting there. I think the Super Bowl will be the first one. But at the same time, we're getting hit with the market, and I think we can do it. It's just a matter of time. Again, those things take a little time. Again, then Jeff, I'll follow on there with a little bit more specifics. Overall, it's a tough thing to do. But I believe we have the roadmap to get there, and I think we can do it.
Speaker Change: It's just a matter of time. Again, those things take a little time.
chose not to compete this weekend.
Speaker Change: Now, what we found is that part of your other question is with comps starting off negative. So, expecting them to be in negative figures for the quarter, our product margins are actually up over 400 basis points so far in the quarter, specifically because of going up against that event that we chose not to repeat this year. Now, to part of your other question, all said and done, with comps starting off negative, expecting them to be in negative figures for the quarter, we have factored in what would be appropriate amounts of markdowns and reserves, and what have you that might be required. We can keep absorbing more and more metal weight increases. We said we'd have approximately two basis points of product margin improvement every single week to be as sharp on.
Speaker Change: We're renegotiating every single contract you can think of, taking every opportunity to reduce operating costs, all manner of expense reductions, but ultimately we've got to have some cooperation from the top line to get to where we need to go, a very active conversation.
Speaker Change: and I are having a lot of time today, and we're renegotiating everything that's underground before we go. We've got a lot of opportunities to talk about the cost of the way that we're doing things. Ultimately, we've got to have some cooperation at the top line to get to where we need to go. We have a lot of temporary labor in our distribution centers, and we would like to never see blue I think you set up 11.8%. If you could just help us understand that. Sure, that was a very conscious decision. We just said, why do that to ourselves just because it's court order? That doesn't make any sense. We need to do the right thing for the business.
Speaker Change: Jackson sense. And also, what is going on with areas but also forms. I think more efforts on members.
Speaker Change: And also with what was going on in that regard, and obviously with the merchandising, we want to make sure we had everything in-house and able to get out there for Black Friday weekend and continue to do what we need to do to keep the matter under control.
Speaker Change: That was the interesting thing I can tell you halfway through, you know, remember after the first little bit of signs alignment where it was changing less than two percent. So that wasn't a very temporary tightening.
Speaker Change: really line them in that regard, obviously if we continue to take it in comp, looking just on the fiscal dates, our comps are more highly negative, as we know, in terms of air control.
Speaker Change: Our store counts have actually turned positive the last few days.
Speaker Change: really mind-numbing at the moment, trying to see what's going on in the business. Kind of interesting, looking just on the fiscal days, our contracts are more highly negative, and that's why our outlook range is in a better position overall, because we're looking at a shifted basis based on the number of days after Thanksgiving.
have actually turned positive in the last few days.
Speaker Change: Jackson. The next question will come from Matt Correnda with Roth Capital. Please go ahead. And it's why our outlook range is in a better position overall than where we are currently. Can you clarify the language in the release around the Thanksgiving holiday that you guys said, the minus 10% figure that you gave? Okay, great. Thanks for taking my question. Just comparing sort of the Black Friday, Cyber Monday period year over year, or is that a time shifted monthly calendar? I guess I wasn't clear on that. The next question will come from Matt Correnda with Roth Capital. Please go ahead. That was a quarter to date. Great.
Speaker Change: Hey guys, thank you. Can you clarify that as the language in the release around the Thanksgiving holiday that you had said, the minus 10% figure that you gave? Is that just comparing sort of the Black Friday, Cyber Monday period year-over-year or is that a time-shifted monthly calendar? I wasn't clear on that. That was a quarter-to-date comparison. So we gave two different numbers.
different maybe maybe the uring the
Speaker Change: in just the last couple of days, but maybe just the cadence during the month and what did you see around kind of the heavier, more typical holiday periods, and in between if you could kind of cover a little bit more about the cadence and how it played out.
Speaker Change: And then last week, from a few others out, we were up almost 13%, so wild swings when you look at, you know, week to weekend because of the timing shift to Thanksgiving, where last year's both versions of a fiscal comp as well as a shifted comp relative to Thanksgiving, we kind of understand, you know, what's really happening because there's such wild shifts, and when we get to this year's Black Friday, we were up almost 30%. So, again, looking at that shifted basis week to week, and because of the timing shift of Thanksgiving, that's why we were starting to see a little bit better visions of a fiscal comp as well as a shifted comp relative to Thanksgiving, and we kind of understand, you know, what's really happening because there's such wild shifts from week to week.
Speaker Change: like maybe just refresh us on the comparisons that we're up against from December and January of last year. If I recall correctly, it was relatively negative and maybe deteriorated in the fourth quarter of last year. Are there easier comparisons as we get into December, January? It was actually fairly consistent from last month. And can you remind us, like maybe just refresh us on the comparisons that we're up against from December and January of last year. If I recall correctly, it was relatively negative and maybe deteriorated in the fourth quarter of last year. Are there easier comparisons as we get into December, January? And then maybe just on the... I wanted to clarify the product margin improvement that we're counting on, the 200 basis points that we're guiding to for the fourth quarter, it sounded like you said, I thought I caught you saying 400 bps.
from the Center for Consumer Policy Research.
Speaker Change: It sounded like you said, I thought I caught you saying 400 bips of improvement in December just given the, you know, the lack of store-wide promotion that we saw this year. Is that right? And then maybe just, does that assume then that we see some additional erosion for the rest of the quarter in the gross margin and the product margins, I think?
Speaker Change: So we did not repeat that this year, and that definitely had a little over 400 basis points of not doing that even across the entire store through Blackboard Marketing.
Speaker Change: And then maybe if you could talk about promotional strategies that we should be looking for, it looks like we're kind of back to the typical Bogo stuff that you could do, but maybe just...
Speaker Change: What do you have at your disposal? What tools are in the toolkit? Especially if inventory remains a little bit elevated like what we've been looking for on the promotional front.
Speaker Change: Okay, and then maybe if we can talk about promotional strategies that we should be looking for, like, we're kind of back to the typical BOGO stuff that you guys do, but maybe just, what do you have at your disposal? What tools are at the toolkit? Especially if inventory remains a little bit elevated, like, which we would be looking for on the promotional front. We have specific plans in place. You'll see the typical kind of behavior from our promotions in place. We have targeted, planned promotions through the season, but with the overarching goal of, you know, we need to be more profitable and more productive. We're not going to give away those things in any specific detail in this forum. Especially given that, unfortunately, we're last year. You know, remember, last year's quarter was the lowest product margins we've ever seen. So we have to fund the promotions in place.
We should be able to show some improvement this year.
Speaker Change: Is there anything else moving that line or surprising you at the upside on the SG&A front, and then what levers do we have at our disposal to sort of improve the labor cost efficiency at the distribution center?
Speaker Change: Nothing surprising, just as with store payroll that I mentioned earlier, our teams work very closely together to
Speaker Change: This concludes our question and answer session. I would like to send the conference back over to management for any closing remarks. Please go ahead. Thank you all for joining us. We'll look forward to sharing our fourth quarter results with you in mid-March. Have a good meeting. Good evening.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks. Please go ahead.