Tillys (TLYS) is a leading specialty retailer of casual apparel, footwear and accessories for young men, young women, boys and girls with an extensive assortment of iconic global, emerging, and proprietary brands rooted in an active and social lifestyle.

We have seen a lot of volatility on this name is recent weeksk. Currently it has slowed its growth, and now operates 220 total stores, including one RSQ pop-up store, across 32 states. There is room for more growth, but the company has done a strong job at managing the retail storm that has ensued in recent years. In this column, we discuss the most recent quarter and our outlook for the stock.

Sales review

Total net sales were $164.3 million, an increase of 2.6% from $160.2 million last year, despite ending the quarter with four fewer stores than a year ago (219 total stores vs. 223 last year).

Comparable store sales, which includes e-commerce sales, were flat. Comparable store sales increased 0.1% in the fourth quarter last year.

Profit margin and expense items

Gross profit was $51.4 million, an increase of 4.8% from $49.1 million last year. Gross margin, or gross profit as a percentage of net sales, increased to 31.3% from 30.6% last year. This 70 basis point increase in gross margin was attributable to a 90 basis point reduction in occupancy costs, partially offset by a 20 basis point decrease in product margins.

Selling, general and administrative expenses were $40.0 million, or 24.3% of net sales, compared to $38.7 million, or 24.1% of net sales, last year. This 20 basis point increase was primarily attributable to increased store payroll as a result of minimum wage increases.

Operating income

Operating income was $11.4 million, or 7.0% of net sales, an increase of 10.0% from $10.4 million, or 6.5% of net sales, last year. This 50 basis point increase in our operating margin was attributable to improved occupancy costs, as explained above.

Income tax expense was $5.2 million, or 43.5% of pre-tax income, compared to $4.2 million, or 40.2% of pre-tax income, last year. This year’s income tax expense includes a net charge of $0.2 million due to the impact of the Tax Cuts and Jobs Act signed into law during December 2017.

Net income was $6.7 million, or $0.23 per diluted share, compared to $6.3 million, or $0.22 per diluted share, last year.


As of February 3, 2018, Tilly’s had $136.0 million of cash and marketable securities and no debt outstanding under its revolving credit facility. This compares to $133.9 million of cash and marketable securities and no debt outstanding under its revolving credit facility as of January 28, 2017. In February 2018, Tilly’ paid a special cash dividend to its stockholders of approximately $29.1 million in the aggregate. Tilly’s also paid a special cash dividend to its stockholders of approximately $20.1 million in the aggregate during February 2017.

Looking ahead


Overall, with TLYS stock, we have a cream-of-the-crop retailer, in a rebounding retail group, that will likely continue to be strong. This quarter was a bit disappointing with sales and revenues just missing expectations, but we think the selloff will be an opportunity to get long again.

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