NYSE:TLYS Tilly's Q3 2024 Earnings Report $1.61 -0.09 (-5.29%) Closing price 03:59 PM EasternExtended Trading$1.58 -0.03 (-1.55%) As of 04:05 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Tilly's EPS ResultsActual EPS-$0.03Consensus EPS -$0.07Beat/MissBeat by +$0.04One Year Ago EPSN/ATilly's Revenue ResultsActual Revenue$166.48 millionExpected Revenue$168.19 millionBeat/MissMissed by -$1.71 millionYoY Revenue GrowthN/ATilly's Announcement DetailsQuarterQ3 2024Date11/30/2023TimeN/AConference Call DateThursday, November 30, 2023Conference Call Time4:30PM ETUpcoming EarningsTilly's' Q1 2026 earnings is scheduled for Thursday, June 5, 2025, with a conference call scheduled at 4:30 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Tilly's Q3 2024 Earnings Call TranscriptProvided by QuartrNovember 30, 2023 ShareLink copied to clipboard.There are 8 speakers on the call. Operator00:00:00Good day, and welcome to Tilly's Third Quarter 2023 Results Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please also note this event is being recorded. And I'd now like to turn the conference over to Gar Jackson, Investor Relations. Operator00:00:30Please go ahead. Speaker 100:00:33Good afternoon, and welcome to the Tilly's fiscal 2023 3rd quarter earnings call. Ed Thomas, President and CEO And Michael Henry, EVP and CFO will discuss the company's results and then host a Q and A session. For a copy of Tilly's earnings press release, please visit the Investor Relations section of the company's website at tillys.com. From the same section, shortly after the conclusion of the call, you will November 30, 2023, and actual results may differ materially from current expectations based on various factors affecting Tilly's business. Accordingly, you should not place undue reliance on these forward looking statements. Speaker 100:01:17For a more thorough discussion of the risks and uncertainties associated with any forward looking Statements please see the disclaimer regarding forward looking statements that is included in our fiscal 2023 Q3 earnings release, Which is furnished to the SEC today on Form 8 ks as well as our other filings with the SEC referenced in that disclaimer. Today's call will be limited to 1 hour And we'll include a Q and A session after our prepared remarks. I now turn the call over to Ed. Speaker 200:01:44Thanks, Gar. Good afternoon, everyone, and thank you for joining us today. We continue to believe that inflation remains a significant headwind on discretionary spending for our young family, young adult, teen and pre teen demographic. Despite what remains a challenging sales environment for us, I am proud of our team's efforts towards Protecting product margins, managing inventory and controlling expenses. Our 3rd quarter results represent a Sequential improvement from our first and second quarter earnings results and exceeded our expectations primarily due To achieving stronger product margins and lower operating lowering operating expenses more than we anticipated. Speaker 200:02:38After starting the quarter with a negative 3.7 percent comp store sales decline in August amid the peak Of the need driven back to school period, our comp sales decelerated sequentially in the post back to school period to negative double digits in each of September October. For the quarter, All geographic markets comp negative within a 5 point range with reduced customer traffic across all store formats compared to last year. Total transaction volume was down high single digits, while the average transaction value was slightly higher than in last year's Q3. From a merchandising perspective, girls apparel and footwear comp positive, while all other departments comp negative during the 3rd quarter. While acknowledging that the environment remains challenging for our customer demographic, We believe that we had some product content issues on our part that we are working to fix as quickly as we can. Speaker 200:03:52Graphic keys has been an area of weakness for us within both men's and women's apparel, and we have been lacking sufficient fashion newness in women's overall. Within accessories, a strong backpack business wasn't enough To overcome declines in other areas, we believe we have identified certain opportunities to improve our performance across departments as we finish fiscal 2023 and look into 2024. In terms of store real estate, we opened 3 new stores during the Q3 And an additional 3 stores just ahead of Thanksgiving. We currently expect to close 4 Stores near the end of the fiscal year upon natural lease expiration. For fiscal 2024, we We anticipate opening 4 new stores and have only one known store closure at this time. Speaker 200:04:58We have nearly 100 lease actions to consider for fiscal 20 Almost 40% of our store portfolio. Given where our current operating margins are, We plan to be aggressive in exiting stores that are not acceptably productive under current conditions and lease terms. Our preliminary expectation for total fiscal 2024 capital expenditures is approximately $15,000,000 inclusive of new stores and ongoing distribution and technology enhancements. Turning to the Q4 for fiscal 2023, total comparables net sales, including both physical stores and e decreased by 6.5% through November 28, 2023, With store comps down 13.6 percent, while ecom was up 11% relative to last year's comparable period. The double digit negative comps we saw in the post back to school period over the final 7 weeks of the Q3 continued into the 1st 2 weeks of the Q4. Speaker 200:06:18However, The trend of our business began to improve during the final 2 weeks of fiscal November, including 2.6% comp sales growth for Black Friday weekend, the 5 day period from Thanksgiving Day Through Cyber Monday, we believe this recent positive turn in our business was driven in part by a more aggressive promotional stance than we have historically taken to this period. Based on recent holiday seasons, we expect But our comp sales may slow down again in the early part of December before improving trend wise in the final days leading into Christmas. We are encouraged By the overall sequential improvement in our business trends over the last two quarters and are working diligently to attempt to accelerate that improvement going forward. I now turn the call over to Mike to Speaker 300:07:30Thanks, Ed. Our 3rd quarter operating results compared to last year were as follows. Net sales were $166,500,000 a decrease of Net sales from physical stores decreased by 6.4% and represented 79.6% of total net sales Matching last year, while e commerce net sales decreased by 6.2% and represented 20.4% of total net sales. Comparable net sales including both physical stores and e commerce decreased by 9%. We ended the Q3 with 2 49 total stores, a net increase of 2 stores since the end of last year's Q3. Speaker 300:08:11Gross margin, including buying, distribution and occupancy expenses was 29.3% of net sales compared to 30.7 percent of net sales last year. Buying, distribution and occupancy costs deleveraged by 90 basis points On lower net sales despite decreasing by $1,000,000 collectively. Reduced freight costs within distribution were partially offset by higher occupancy costs As a result of 2 net additional stores compared to last year and increased common area maintenance expenses overall. Product margins were just 50 basis points below last year and improved sequentially this year by 80 basis points compared to the 2nd quarter and by 170 basis points compared to the Q1. Total SG and A expenses were $51,200,000 or 30.8 percent of net sales compared to $48,300,000 or 27.1 percent of net sales last year. Speaker 300:09:04Primary increases in SG and A were attributable to non cash Store asset impairment charges of $1,700,000 marketing expenses of $700,000 and combined store and corporate payroll and related benefits expenses of $700,000 Operating loss was $2,500,000 or 1.5 percent of net sales compared to operating income of $6,300,000 or 3.6 percent of net sales last year. Other income was $1,300,000 compared to $700,000 last year, primarily Speaker 100:09:36as a result Speaker 300:09:37of earning higher rates of return on our marketable securities this year. Income tax benefit was $300,000 28.0 percent of pre tax loss compared to income tax expense of $1,800,000 or 26.3 percent of pre tax income last year. Net loss was $800,000 or $0.03 per share compared to net income of $5,100,000 or $0.17 per diluted share last year. Weighted average shares were 29,900,000 this year compared to 30,000,000 last year. Turning to our balance sheet, we ended the 3rd quarter with total cash and marketable securities $94,000,000 and no debt outstanding. Speaker 300:10:15This compared to $106,000,000 in no debt outstanding last year. We We ended the Q3 with inventories at cost up 0.8 percent per square foot and unit inventories down 3.2% per square foot compared to last year. Total year to date capital expenditures were $10,500,000 this year compared to $11,900,000 last year. Turning to our outlook for the Q4 of fiscal 2023, please note that this year's Q4 includes an extra week, making it a 14 week quarter compared to 13 weeks last year. Based on our quarter to date comparable net sales results and current and historical trends, we currently anticipate our total net sales for the Q4 of fiscal 2023 to be in the range of approximately $172,000,000 to $178,000,000 translating to an estimated comparable net sales decrease in the range of Approximately 6% to 9%. Speaker 300:11:08We expect our SG and A to be approximately $55,000,000 to $56,000,000 Pretax loss to be in the range of approximately $5,000,000 to $8,000,000 our estimated income tax rate to be approximately 26% and loss per share to be in the range of $0.12 to $0.20 based on estimated weighted average diluted shares of approximately 29,900,000. We currently expect to end fiscal 2023 with 248 total stores, a net decrease of 1 store from the end of fiscal 2022. Operator, we'll now go to our Q and A session. Operator00:11:45Thank you. We'll now begin the question and answer session. And our first question comes from Jeff Van Sinderen With B. Riley, please go ahead. Speaker 400:12:12Hi, everyone. And I know you mentioned some things that you're working on in terms of merchandise Content and I guess I'm wondering now that your new CMO has been there for a little bit, maybe you can just speak more About the opportunities that you're seeing to improve merchandise content, I know you mentioned graphic tees, but maybe there's other areas where you feel like You've got more opportunity, maybe concentration in various categories. Just any other color you can add there. Speaker 200:12:42Hi, Jeff. I would say the single biggest category where we have opportunity Is on women's fashion tops. That was the content actually we have is good. We just didn't have enough. So I think one of the things that Lara has been working on is doing a better job of timing of the seasonality of certain goods, But also shifting from categories that are underperforming like graphic tees, which has been a very strong category for a long Time into more fashion tops. Speaker 200:13:18I wouldn't say there would be any drastic changes to any particular categories at all. Speaker 400:13:27Okay, good. And then I know you mentioned a little bit higher promotional activity this year Around the Black Friday weekend and you were positive comps. So maybe you can just talk about a couple of things around inventory, how you're positioned in inventory in the areas that are selling well. In other words, do you have enough of the stuff that's moving well or moved well in Black Friday weekend? And Maybe just touch on the planned promotional cadence this year versus last year for the remainder of Q4. Speaker 200:14:02I would say the single biggest change we made from what we've done historically is we simplified their promotions into percent off As opposed to a lot of BOGOs, we simplified that and that drove business across pretty much across Positive business across all categories for a couple of days, for sure. And we weren't As aggressive as one of a lot of our peers were in terms of what that percent off was, but it was different approach for us. And it definitely simplified the buying process with our customers. Inventory is in pretty good shape, Jeff. Yes. Speaker 200:14:47Overall, Speaker 300:14:48our inventory age is better than it was at this time a year ago. So feel good about level of inventory and content of that inventory as we sit here right now. And then you also asked about Q4 promo cadence and so we have various planned promotions on the biggest days of the season coming up and the Big weekend days that are in between here and Christmas that would be fairly consistent with what we've done traditionally. Speaker 400:15:17Okay. Are you shifting those to doing more of the percentage off versus the BOGOs since those worked on Black Friday weekend? Speaker 200:15:26It's mixed, Jeff. Speaker 400:15:28It's mixed. Okay. Okay, fair enough. I'll let someone else jump in. I'll take the rest offline. Speaker 400:15:32Thank you. Speaker 200:15:33Okay. Thank you. Operator00:15:40The next question comes from Matt Koranda with Roth MKM. Please go ahead. Speaker 500:15:48Hey, guys. It's Mike Zabran on for Matt. Could you just talk a little bit more about the divergence Between quarter to date store comps versus the e commerce comp, I assume more promotions through the websites translating to Better performance relative to stores, but just any other dynamics to call out here? Speaker 300:16:11Nothing specific to point to. It's been kind of surprising to us quite honestly To see that kind of divergence between stores and e comm, we normally don't see that wide of a gap. So honestly, I'm not sure if it's just customer convenience at this early stage of the holiday season of people deciding to shop online as opposed to physically going to stores. It's been a surprising divergence. There is a little higher level of promotions online than in stores, because we do tend to clear a lot of our kind of end of life red tagged goods online. Speaker 300:16:51So There is pretty consistently a higher level of promos online than in stores generally, but that's the case all year long usually. Speaker 200:16:59Yes, that's pretty typical. And There's clearly been a challenging physical store traffic out there. And part of it, I think, has been more Convenience orientated than not and we offer our full assortment in every store in online. So The choices were very similar. I think it was probably customer choice of what channel they want to shop in. Speaker 500:17:34Got it. It makes sense. I guess on health of inventory, any guideposts or just What are we looking to see to get inventory growth back in line with comps? Speaker 300:17:49Yes, it's not too far off now. I mean, we ended the quarter on a unit basis down 3% and change versus the minus 6% comp. So It's not too far apart as we speak. And as I mentioned earlier to Jeff's question, the inventory is more current right now than it was at this time last year. We always endeavor to get inventory comp as close to sales comp as we can. Speaker 300:18:12And if we're going to have a negative comp 4th As indicated by our outlook, we'd expect to end the year with inventories down. Speaker 500:18:22Got it. Makes sense. Last one for me. For fiscal 2024, can you just help us understand a little bit more what's behind the lower Store outlook for 4 stores just seems a little bit behind normal cadence. Does that represent a more cautious view you might have on the consumer? Speaker 500:18:40Is it more macro or is it more so around the 100 or so lease actions that you referenced earlier in the call? Speaker 200:18:50It's totally driven by what we we're being cautious because of the uncertainty of what the consumer environment is being Gonna be we have several stores in the pipeline that are targeted for expansion for us that are being negotiated. And when we decide that there's more consistency in the environment out there, We'll be in a good position to accelerate that growth when that time comes. Speaker 500:19:27Makes sense. That's all for me guys. Thanks. Speaker 200:19:30Thank you. Operator00:19:34The next question comes from Marni Shapiro with The Retail Tracker. Please go ahead. Speaker 600:19:40Hey, everybody. I had a couple of questions. I did want to follow-up on the conversation you were just having. First, On the promotions over the holiday season, you moved to more percent off. I thought it was, by the way, really effective in the stores. Speaker 600:19:57It Caught my eye and I wrote about it and had pictures about it. I'm curious if you saw a difference. Do people buy fewer units or were they the same number of units go out the door just made Speaker 300:20:10It was lower units and the average transaction value ended up lower. So We did get feedback from our store teams and district managers that it was well received by customers generally because it is So much easier to think about and manage than BOGOs throughout the assortment. So it seemed to get a good response In terms of how the customers viewed it, but it did end up eroding our transaction value in units per transaction. Speaker 600:20:39That makes sense. But I always think that shoppers don't like to do math when they're in the store. So if you can make it a little bit easier It always helps. And then I'm just curious because I too was looking at the numbers between online and in I'm curious if you guys have is there a difference in what they're buying? Because I find when I'm on your site, it's Your fashion content on the women's side, even in women's tops as which you had referenced, is really kind of good. Speaker 600:21:10And then you have things like the crop puffer vests and things like that, which online is all this stuff is really easy to get to and find and I find in your stores And probably alluding to some of the issues going on in the stores, it's not always so easy to find those items and she has to do a little bit To find them, so I'm curious if you're seeing more fashion go out the door online than in stores or if that might be driving more of What's going on online versus in stores? Speaker 200:21:37No, actually, it's been the store in the women's side, the Stores have been consistently better than online for us, but it's improved because we've made some Very targeted changes to improving how we merchandise online. They're not done yet, but certainly we've made and we've seen Positive results as a result of that. But I really think it was just a matter of where the customer chose to shop As opposed to the particular visual merchandising or the assortment. Speaker 300:22:15It's just been in the month of November that we've seen this When you look back at the Q3, stores and e comm comps were within 1% of each other. So we have very consistent Performance between Storz and econ throughout the Q3 and then suddenly we get to November and this divergence emerged and it was a little surprising to us honestly. Speaker 600:22:36That's definitely a little strange. And then I'm just also curious, some of the pressure that you've seen, Especially on the junior side, but even just overall, because the junior side has had some good sell throughs. Are you seeing better sales coming out of your own brand Versus other brands because you're especially on the junior side, I think your fashion on your own brands has Been pretty good, like really good. And so I'm just curious if you're able are there kind of gaps in the market with branded goods that you're able to make up with your own brand? And Is that outpacing what your what the market goods are doing? Speaker 200:23:18Well, our best brand continues to be Rescue, our own brand. Speaker 600:23:22Right. Speaker 200:23:23And it crosses over in multiple categories. It's good. And it's intentionally Have offered us what we're able to secure from outside brands. So it's always a balancing act. And there's never Any one point in time where it stays the same forever, it just doesn't and it changes. Speaker 200:23:53And I think We have a pretty experienced team in the women's side that they've been around for A while and they know the market well and they adjust accordingly. Speaker 600:24:08All right. Thank you so much. Best of luck for holiday then. Speaker 200:24:11Thank you. Thank you. Operator00:24:16The next question comes from Mick Kumetz with Seaport Research. Please go ahead. Speaker 700:24:22Yes. Thanks for taking my questions. Hey, Ed, on the assortment, you mentioned women's fashion tops doing well, but you don't have enough, graphic tees being weak. Like how quickly can you adjust? And if so, like is that potentially benefit to comp once you get that sorted out? Speaker 200:24:44We can adjust pretty quickly in almost every category. I mean bottoms and shoes, Lead times are a lot longer than apparel. And so but where we saw the opportunity was really again in tops, Well, we did adjust on the fly and we think that we think we've made a lot of Changes that will positively impact the business in the categories where we felt we were maybe underrepresented. Speaker 700:25:18Any concerns on graphic keys in terms of that inventory, if it's been weak that that might require some more markdowns or Any issues there? Speaker 200:25:29Not really. I mean, I think that we shifted our focus in some of the types of licenses that we went after. We were in all these categories like music and sports. Speaker 100:25:41And Speaker 200:25:44We just we didn't probably didn't move quick enough to get into some of these fresh categories because the graphics business has been So positive for us for so long. We were somewhat surprised at some of the changes, But we can adjust and we will adjust and I don't there's no real markdown liability there. Speaker 700:26:08Okay. And then on footwear, positive comp in the quarter, What's driving that? Is there just better trend in footwear now? Or is it more about product availability? I know that some of the vendors there Add issues, supply chain issues, I know this has been kind of cleared up. Speaker 700:26:27So it's just that you have better inventory or are you seeing better trend there as well? Speaker 200:26:33I think it's more availability of certain brands like Nike. Our Converse and Reebok. Yes. We've seen New Balance. We've We brought in a couple of new brands, which is not a major part of the assortment, but certainly new to us, Recently new to us. Speaker 200:26:57And then brands that we've carried for a long time like Nike, we saw improvement in the inventory Availability. Speaker 700:27:07And then lastly, Mike, just on the product margin, I think you said it was down 50 bps in the quarter. How are you thinking about that for Q4? Speaker 300:27:19We'll if we're at The better end of our outlook, we would actually expect our product margins to be slightly up. If we're at the bottom end of our range, we might be slightly down, Not much different than what we just saw in the Q3 at this time based on what we currently know. Speaker 700:27:36All right. Thanks, guys. Good luck. Speaker 200:27:38Thank you. Operator00:27:44This will conclude our question and answer session. I'll turn the conference back over to I'd like Thomas for any closing remarks. Speaker 200:27:52Thank you all for joining us on the call today. We look forward to sharing our 4th quarter Results with you in mid March 2024. Have a good evening everyone. Operator00:28:08The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallTilly's Q3 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Tilly's Earnings HeadlinesHydro Flask limited-edition water bottles are on sale for 50% off at TillysApril 18, 2025 | nj.comTilly's (NYSE:TLYS) shareholders have endured a 78% loss from investing in the stock three years agoApril 14, 2025 | finance.yahoo.comTrump Orders 'National Digital Asset Stockpile'‘Digital Asset Reserve’ for THIS Coin??? Get all the details before this story gains even more tractionApril 25, 2025 | Crypto 101 Media (Ad)Tilly’s price target lowered to $2.50 from $5 at Roth MKMMarch 14, 2025 | markets.businessinsider.comTilly’s (TLYS) Receives a Hold from Roth MKMMarch 14, 2025 | markets.businessinsider.comTilly’s, Inc. (NYSE:TLYS) Q4 2024 Earnings Call TranscriptMarch 13, 2025 | msn.comSee More Tilly's Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Tilly's? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Tilly's and other key companies, straight to your email. Email Address About Tilly'sTilly's (NYSE:TLYS) engages in the retail of casual apparel, footwear, and accessories. Its stores are located in retail centers, including malls, lifestyle centers, power centers, community centers, outlet centers, and street-front locations. 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There are 8 speakers on the call. Operator00:00:00Good day, and welcome to Tilly's Third Quarter 2023 Results Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please also note this event is being recorded. And I'd now like to turn the conference over to Gar Jackson, Investor Relations. Operator00:00:30Please go ahead. Speaker 100:00:33Good afternoon, and welcome to the Tilly's fiscal 2023 3rd quarter earnings call. Ed Thomas, President and CEO And Michael Henry, EVP and CFO will discuss the company's results and then host a Q and A session. For a copy of Tilly's earnings press release, please visit the Investor Relations section of the company's website at tillys.com. From the same section, shortly after the conclusion of the call, you will November 30, 2023, and actual results may differ materially from current expectations based on various factors affecting Tilly's business. Accordingly, you should not place undue reliance on these forward looking statements. Speaker 100:01:17For a more thorough discussion of the risks and uncertainties associated with any forward looking Statements please see the disclaimer regarding forward looking statements that is included in our fiscal 2023 Q3 earnings release, Which is furnished to the SEC today on Form 8 ks as well as our other filings with the SEC referenced in that disclaimer. Today's call will be limited to 1 hour And we'll include a Q and A session after our prepared remarks. I now turn the call over to Ed. Speaker 200:01:44Thanks, Gar. Good afternoon, everyone, and thank you for joining us today. We continue to believe that inflation remains a significant headwind on discretionary spending for our young family, young adult, teen and pre teen demographic. Despite what remains a challenging sales environment for us, I am proud of our team's efforts towards Protecting product margins, managing inventory and controlling expenses. Our 3rd quarter results represent a Sequential improvement from our first and second quarter earnings results and exceeded our expectations primarily due To achieving stronger product margins and lower operating lowering operating expenses more than we anticipated. Speaker 200:02:38After starting the quarter with a negative 3.7 percent comp store sales decline in August amid the peak Of the need driven back to school period, our comp sales decelerated sequentially in the post back to school period to negative double digits in each of September October. For the quarter, All geographic markets comp negative within a 5 point range with reduced customer traffic across all store formats compared to last year. Total transaction volume was down high single digits, while the average transaction value was slightly higher than in last year's Q3. From a merchandising perspective, girls apparel and footwear comp positive, while all other departments comp negative during the 3rd quarter. While acknowledging that the environment remains challenging for our customer demographic, We believe that we had some product content issues on our part that we are working to fix as quickly as we can. Speaker 200:03:52Graphic keys has been an area of weakness for us within both men's and women's apparel, and we have been lacking sufficient fashion newness in women's overall. Within accessories, a strong backpack business wasn't enough To overcome declines in other areas, we believe we have identified certain opportunities to improve our performance across departments as we finish fiscal 2023 and look into 2024. In terms of store real estate, we opened 3 new stores during the Q3 And an additional 3 stores just ahead of Thanksgiving. We currently expect to close 4 Stores near the end of the fiscal year upon natural lease expiration. For fiscal 2024, we We anticipate opening 4 new stores and have only one known store closure at this time. Speaker 200:04:58We have nearly 100 lease actions to consider for fiscal 20 Almost 40% of our store portfolio. Given where our current operating margins are, We plan to be aggressive in exiting stores that are not acceptably productive under current conditions and lease terms. Our preliminary expectation for total fiscal 2024 capital expenditures is approximately $15,000,000 inclusive of new stores and ongoing distribution and technology enhancements. Turning to the Q4 for fiscal 2023, total comparables net sales, including both physical stores and e decreased by 6.5% through November 28, 2023, With store comps down 13.6 percent, while ecom was up 11% relative to last year's comparable period. The double digit negative comps we saw in the post back to school period over the final 7 weeks of the Q3 continued into the 1st 2 weeks of the Q4. Speaker 200:06:18However, The trend of our business began to improve during the final 2 weeks of fiscal November, including 2.6% comp sales growth for Black Friday weekend, the 5 day period from Thanksgiving Day Through Cyber Monday, we believe this recent positive turn in our business was driven in part by a more aggressive promotional stance than we have historically taken to this period. Based on recent holiday seasons, we expect But our comp sales may slow down again in the early part of December before improving trend wise in the final days leading into Christmas. We are encouraged By the overall sequential improvement in our business trends over the last two quarters and are working diligently to attempt to accelerate that improvement going forward. I now turn the call over to Mike to Speaker 300:07:30Thanks, Ed. Our 3rd quarter operating results compared to last year were as follows. Net sales were $166,500,000 a decrease of Net sales from physical stores decreased by 6.4% and represented 79.6% of total net sales Matching last year, while e commerce net sales decreased by 6.2% and represented 20.4% of total net sales. Comparable net sales including both physical stores and e commerce decreased by 9%. We ended the Q3 with 2 49 total stores, a net increase of 2 stores since the end of last year's Q3. Speaker 300:08:11Gross margin, including buying, distribution and occupancy expenses was 29.3% of net sales compared to 30.7 percent of net sales last year. Buying, distribution and occupancy costs deleveraged by 90 basis points On lower net sales despite decreasing by $1,000,000 collectively. Reduced freight costs within distribution were partially offset by higher occupancy costs As a result of 2 net additional stores compared to last year and increased common area maintenance expenses overall. Product margins were just 50 basis points below last year and improved sequentially this year by 80 basis points compared to the 2nd quarter and by 170 basis points compared to the Q1. Total SG and A expenses were $51,200,000 or 30.8 percent of net sales compared to $48,300,000 or 27.1 percent of net sales last year. Speaker 300:09:04Primary increases in SG and A were attributable to non cash Store asset impairment charges of $1,700,000 marketing expenses of $700,000 and combined store and corporate payroll and related benefits expenses of $700,000 Operating loss was $2,500,000 or 1.5 percent of net sales compared to operating income of $6,300,000 or 3.6 percent of net sales last year. Other income was $1,300,000 compared to $700,000 last year, primarily Speaker 100:09:36as a result Speaker 300:09:37of earning higher rates of return on our marketable securities this year. Income tax benefit was $300,000 28.0 percent of pre tax loss compared to income tax expense of $1,800,000 or 26.3 percent of pre tax income last year. Net loss was $800,000 or $0.03 per share compared to net income of $5,100,000 or $0.17 per diluted share last year. Weighted average shares were 29,900,000 this year compared to 30,000,000 last year. Turning to our balance sheet, we ended the 3rd quarter with total cash and marketable securities $94,000,000 and no debt outstanding. Speaker 300:10:15This compared to $106,000,000 in no debt outstanding last year. We We ended the Q3 with inventories at cost up 0.8 percent per square foot and unit inventories down 3.2% per square foot compared to last year. Total year to date capital expenditures were $10,500,000 this year compared to $11,900,000 last year. Turning to our outlook for the Q4 of fiscal 2023, please note that this year's Q4 includes an extra week, making it a 14 week quarter compared to 13 weeks last year. Based on our quarter to date comparable net sales results and current and historical trends, we currently anticipate our total net sales for the Q4 of fiscal 2023 to be in the range of approximately $172,000,000 to $178,000,000 translating to an estimated comparable net sales decrease in the range of Approximately 6% to 9%. Speaker 300:11:08We expect our SG and A to be approximately $55,000,000 to $56,000,000 Pretax loss to be in the range of approximately $5,000,000 to $8,000,000 our estimated income tax rate to be approximately 26% and loss per share to be in the range of $0.12 to $0.20 based on estimated weighted average diluted shares of approximately 29,900,000. We currently expect to end fiscal 2023 with 248 total stores, a net decrease of 1 store from the end of fiscal 2022. Operator, we'll now go to our Q and A session. Operator00:11:45Thank you. We'll now begin the question and answer session. And our first question comes from Jeff Van Sinderen With B. Riley, please go ahead. Speaker 400:12:12Hi, everyone. And I know you mentioned some things that you're working on in terms of merchandise Content and I guess I'm wondering now that your new CMO has been there for a little bit, maybe you can just speak more About the opportunities that you're seeing to improve merchandise content, I know you mentioned graphic tees, but maybe there's other areas where you feel like You've got more opportunity, maybe concentration in various categories. Just any other color you can add there. Speaker 200:12:42Hi, Jeff. I would say the single biggest category where we have opportunity Is on women's fashion tops. That was the content actually we have is good. We just didn't have enough. So I think one of the things that Lara has been working on is doing a better job of timing of the seasonality of certain goods, But also shifting from categories that are underperforming like graphic tees, which has been a very strong category for a long Time into more fashion tops. Speaker 200:13:18I wouldn't say there would be any drastic changes to any particular categories at all. Speaker 400:13:27Okay, good. And then I know you mentioned a little bit higher promotional activity this year Around the Black Friday weekend and you were positive comps. So maybe you can just talk about a couple of things around inventory, how you're positioned in inventory in the areas that are selling well. In other words, do you have enough of the stuff that's moving well or moved well in Black Friday weekend? And Maybe just touch on the planned promotional cadence this year versus last year for the remainder of Q4. Speaker 200:14:02I would say the single biggest change we made from what we've done historically is we simplified their promotions into percent off As opposed to a lot of BOGOs, we simplified that and that drove business across pretty much across Positive business across all categories for a couple of days, for sure. And we weren't As aggressive as one of a lot of our peers were in terms of what that percent off was, but it was different approach for us. And it definitely simplified the buying process with our customers. Inventory is in pretty good shape, Jeff. Yes. Speaker 200:14:47Overall, Speaker 300:14:48our inventory age is better than it was at this time a year ago. So feel good about level of inventory and content of that inventory as we sit here right now. And then you also asked about Q4 promo cadence and so we have various planned promotions on the biggest days of the season coming up and the Big weekend days that are in between here and Christmas that would be fairly consistent with what we've done traditionally. Speaker 400:15:17Okay. Are you shifting those to doing more of the percentage off versus the BOGOs since those worked on Black Friday weekend? Speaker 200:15:26It's mixed, Jeff. Speaker 400:15:28It's mixed. Okay. Okay, fair enough. I'll let someone else jump in. I'll take the rest offline. Speaker 400:15:32Thank you. Speaker 200:15:33Okay. Thank you. Operator00:15:40The next question comes from Matt Koranda with Roth MKM. Please go ahead. Speaker 500:15:48Hey, guys. It's Mike Zabran on for Matt. Could you just talk a little bit more about the divergence Between quarter to date store comps versus the e commerce comp, I assume more promotions through the websites translating to Better performance relative to stores, but just any other dynamics to call out here? Speaker 300:16:11Nothing specific to point to. It's been kind of surprising to us quite honestly To see that kind of divergence between stores and e comm, we normally don't see that wide of a gap. So honestly, I'm not sure if it's just customer convenience at this early stage of the holiday season of people deciding to shop online as opposed to physically going to stores. It's been a surprising divergence. There is a little higher level of promotions online than in stores, because we do tend to clear a lot of our kind of end of life red tagged goods online. Speaker 300:16:51So There is pretty consistently a higher level of promos online than in stores generally, but that's the case all year long usually. Speaker 200:16:59Yes, that's pretty typical. And There's clearly been a challenging physical store traffic out there. And part of it, I think, has been more Convenience orientated than not and we offer our full assortment in every store in online. So The choices were very similar. I think it was probably customer choice of what channel they want to shop in. Speaker 500:17:34Got it. It makes sense. I guess on health of inventory, any guideposts or just What are we looking to see to get inventory growth back in line with comps? Speaker 300:17:49Yes, it's not too far off now. I mean, we ended the quarter on a unit basis down 3% and change versus the minus 6% comp. So It's not too far apart as we speak. And as I mentioned earlier to Jeff's question, the inventory is more current right now than it was at this time last year. We always endeavor to get inventory comp as close to sales comp as we can. Speaker 300:18:12And if we're going to have a negative comp 4th As indicated by our outlook, we'd expect to end the year with inventories down. Speaker 500:18:22Got it. Makes sense. Last one for me. For fiscal 2024, can you just help us understand a little bit more what's behind the lower Store outlook for 4 stores just seems a little bit behind normal cadence. Does that represent a more cautious view you might have on the consumer? Speaker 500:18:40Is it more macro or is it more so around the 100 or so lease actions that you referenced earlier in the call? Speaker 200:18:50It's totally driven by what we we're being cautious because of the uncertainty of what the consumer environment is being Gonna be we have several stores in the pipeline that are targeted for expansion for us that are being negotiated. And when we decide that there's more consistency in the environment out there, We'll be in a good position to accelerate that growth when that time comes. Speaker 500:19:27Makes sense. That's all for me guys. Thanks. Speaker 200:19:30Thank you. Operator00:19:34The next question comes from Marni Shapiro with The Retail Tracker. Please go ahead. Speaker 600:19:40Hey, everybody. I had a couple of questions. I did want to follow-up on the conversation you were just having. First, On the promotions over the holiday season, you moved to more percent off. I thought it was, by the way, really effective in the stores. Speaker 600:19:57It Caught my eye and I wrote about it and had pictures about it. I'm curious if you saw a difference. Do people buy fewer units or were they the same number of units go out the door just made Speaker 300:20:10It was lower units and the average transaction value ended up lower. So We did get feedback from our store teams and district managers that it was well received by customers generally because it is So much easier to think about and manage than BOGOs throughout the assortment. So it seemed to get a good response In terms of how the customers viewed it, but it did end up eroding our transaction value in units per transaction. Speaker 600:20:39That makes sense. But I always think that shoppers don't like to do math when they're in the store. So if you can make it a little bit easier It always helps. And then I'm just curious because I too was looking at the numbers between online and in I'm curious if you guys have is there a difference in what they're buying? Because I find when I'm on your site, it's Your fashion content on the women's side, even in women's tops as which you had referenced, is really kind of good. Speaker 600:21:10And then you have things like the crop puffer vests and things like that, which online is all this stuff is really easy to get to and find and I find in your stores And probably alluding to some of the issues going on in the stores, it's not always so easy to find those items and she has to do a little bit To find them, so I'm curious if you're seeing more fashion go out the door online than in stores or if that might be driving more of What's going on online versus in stores? Speaker 200:21:37No, actually, it's been the store in the women's side, the Stores have been consistently better than online for us, but it's improved because we've made some Very targeted changes to improving how we merchandise online. They're not done yet, but certainly we've made and we've seen Positive results as a result of that. But I really think it was just a matter of where the customer chose to shop As opposed to the particular visual merchandising or the assortment. Speaker 300:22:15It's just been in the month of November that we've seen this When you look back at the Q3, stores and e comm comps were within 1% of each other. So we have very consistent Performance between Storz and econ throughout the Q3 and then suddenly we get to November and this divergence emerged and it was a little surprising to us honestly. Speaker 600:22:36That's definitely a little strange. And then I'm just also curious, some of the pressure that you've seen, Especially on the junior side, but even just overall, because the junior side has had some good sell throughs. Are you seeing better sales coming out of your own brand Versus other brands because you're especially on the junior side, I think your fashion on your own brands has Been pretty good, like really good. And so I'm just curious if you're able are there kind of gaps in the market with branded goods that you're able to make up with your own brand? And Is that outpacing what your what the market goods are doing? Speaker 200:23:18Well, our best brand continues to be Rescue, our own brand. Speaker 600:23:22Right. Speaker 200:23:23And it crosses over in multiple categories. It's good. And it's intentionally Have offered us what we're able to secure from outside brands. So it's always a balancing act. And there's never Any one point in time where it stays the same forever, it just doesn't and it changes. Speaker 200:23:53And I think We have a pretty experienced team in the women's side that they've been around for A while and they know the market well and they adjust accordingly. Speaker 600:24:08All right. Thank you so much. Best of luck for holiday then. Speaker 200:24:11Thank you. Thank you. Operator00:24:16The next question comes from Mick Kumetz with Seaport Research. Please go ahead. Speaker 700:24:22Yes. Thanks for taking my questions. Hey, Ed, on the assortment, you mentioned women's fashion tops doing well, but you don't have enough, graphic tees being weak. Like how quickly can you adjust? And if so, like is that potentially benefit to comp once you get that sorted out? Speaker 200:24:44We can adjust pretty quickly in almost every category. I mean bottoms and shoes, Lead times are a lot longer than apparel. And so but where we saw the opportunity was really again in tops, Well, we did adjust on the fly and we think that we think we've made a lot of Changes that will positively impact the business in the categories where we felt we were maybe underrepresented. Speaker 700:25:18Any concerns on graphic keys in terms of that inventory, if it's been weak that that might require some more markdowns or Any issues there? Speaker 200:25:29Not really. I mean, I think that we shifted our focus in some of the types of licenses that we went after. We were in all these categories like music and sports. Speaker 100:25:41And Speaker 200:25:44We just we didn't probably didn't move quick enough to get into some of these fresh categories because the graphics business has been So positive for us for so long. We were somewhat surprised at some of the changes, But we can adjust and we will adjust and I don't there's no real markdown liability there. Speaker 700:26:08Okay. And then on footwear, positive comp in the quarter, What's driving that? Is there just better trend in footwear now? Or is it more about product availability? I know that some of the vendors there Add issues, supply chain issues, I know this has been kind of cleared up. Speaker 700:26:27So it's just that you have better inventory or are you seeing better trend there as well? Speaker 200:26:33I think it's more availability of certain brands like Nike. Our Converse and Reebok. Yes. We've seen New Balance. We've We brought in a couple of new brands, which is not a major part of the assortment, but certainly new to us, Recently new to us. Speaker 200:26:57And then brands that we've carried for a long time like Nike, we saw improvement in the inventory Availability. Speaker 700:27:07And then lastly, Mike, just on the product margin, I think you said it was down 50 bps in the quarter. How are you thinking about that for Q4? Speaker 300:27:19We'll if we're at The better end of our outlook, we would actually expect our product margins to be slightly up. If we're at the bottom end of our range, we might be slightly down, Not much different than what we just saw in the Q3 at this time based on what we currently know. Speaker 700:27:36All right. Thanks, guys. Good luck. Speaker 200:27:38Thank you. Operator00:27:44This will conclude our question and answer session. I'll turn the conference back over to I'd like Thomas for any closing remarks. Speaker 200:27:52Thank you all for joining us on the call today. We look forward to sharing our 4th quarter Results with you in mid March 2024. Have a good evening everyone. Operator00:28:08The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.Read morePowered by