NYSE:TLYS Tilly's Q1 2024 Earnings Report $1.61 -0.09 (-5.29%) Closing price 04/25/2025 03:59 PM EasternExtended Trading$1.58 -0.03 (-1.55%) As of 04/25/2025 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-$0.40Consensus EPS -$0.34Beat/MissMissed by -$0.06One Year Ago EPS$0.03Tilly's Revenue ResultsActual Revenue$123.64 millionExpected Revenue$124.99 millionBeat/MissMissed by -$1.35 millionYoY Revenue GrowthN/ATilly's Announcement DetailsQuarterQ1 2024Date6/1/2023TimeAfter Market ClosesConference Call DateThursday, June 1, 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 Q1 2024 Earnings Call TranscriptProvided by QuartrJune 1, 2023 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00Afternoon, and welcome to the Tilly's First Quarter 2023 Results Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Gar Jackson, Investor Relations. Operator00:00:35Please go ahead. Speaker 100:00:38Good afternoon, and welcome to the Tilly's fiscal 2023 1st quarter earnings Ed Thomas, President and CEO and Michael Enri, 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 tilly's.com. From the same section, shortly after the conclusion of the call, you will also be able to find a recorded replay of this call for the next 30 days. Certain forward looking statements will be made during this call that reflect Tilly's judgment and analysis only as of today, June 1, 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 100:01:23For a more thorough discussion of the risks and uncertainties associated with any forward looking statements, please see the disclaimer regarding forward looking statements is included in our fiscal 2023 Q1 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 will include a Q and A session after our prepared remarks. I will now turn the call over to Ed. Speaker 200:01:51Thanks, Gar. Good afternoon, everyone, and thank you for joining us today. Our first quarter results were within our estimated outlook ranges. April results were less negative in terms of comparable net sales than in February March. We believe the combination of an uncertain and inflationary economic environment for our teen, young adult, Young Family customer demographic and prolonged unseasonable weather in California. Speaker 200:02:25During February March, along with certain assortment issues resulted in a weak quarter overall. Not surprisingly, considering the cold wet weather in the West in particular, our springsummer product categories were more challenged In our winter product categories during the Q1, footwear performed best with a single digit Negative sales comp percentage compared to last year, while all other merchandising departments produced double digit negative Sales comp results. California with 40% of our total stores was our weakest performing Geographic area in both stores and online. Total store transactions decreased by a high Teens percentage during the quarter, although better in April than earlier in the quarter. The less negative April trend has carried into the Q2 thus far. Speaker 200:03:27Our total comparable sales net sales Through May 30, decreased 11.5%. Our springsummer product categories have performed better than they did During the Q1, led by women's and girls, which have comped positive compared to last year. On an overall basis, footwear and girls have comp positive thus far in the second quarter, while all other departments remain negative. We generally feel good about our Spring summer merchandise assortment and our inventory aging was more current entering the Q2 compared to last year. Remaining concern in the near term. Speaker 200:04:18In positive news, we hired our new Chief Merchandising Officer, Laura Janney, who joined us on May 8, having previously been in senior merchandise positions At both Hudson's Bay and Nordstrom, we're excited to see what her tremendous experience will bring to our business, particularly as her influence on our merchandise assortment becomes apparent over time. We also just hired a new Vice President of Merchandise Planning and Allocation with extensive experience who started last week. We believe these 2 new leaders give us a meaningful opportunity to take a fresh look at how we do business and help us get back on track to delivering sales growth over time. Despite short term We continue to invest in our business for the long term. We just relaunched our mobile app in early May with several customer friendly features. Speaker 200:05:20We will continue adding features to this new app over the next couple of quarters. We also continue to make progress in developing a new warehouse management system to improve efficiencies of labor and inventory management across Our 2 distribution facilities here in Irvine. We currently expect that this important upgrade will be completed in early fiscal 2024 and that it will better position us for future growth. In terms of store real estate, we now expect to have 7 new store openings during fiscal 2023. 1 store opened in late March Are expected to open during the 4 are expected to open during the Q3 and 2 are expected to open in the 4th quarter. Speaker 200:06:09Three stores originally planned for this year have been pushed into 2024 due to delays and timing of spaces being made available to us. For existing stores, we are approximately 60% complete with our fiscal 2023 lease decisions. Given the current environment, we continue to approach all lease renewals with reasonable At this time, we expect to close 3 stores during fiscal 2023, 2 of which have already closed. We remain open to additional store growth opportunities where economics make sense. I now turn the call over to Mike To provide additional details on our fiscal 2023 Q1 operating performance and to introduce our 2nd quarter outlook. Speaker 300:07:09Mike? Thanks, Ed. Good afternoon, everyone. Our fiscal 2023 Q1 results compared to last year's Q1 were as follows. Total net sales were $123,600,000 a decrease of 15.2%. Speaker 300:07:23Net sales from physical stores represented 79.1 percent of total net sales compared to 80.6% last year, while e commerce net sales represented 20.9% of total net sales compared to 19.4% last year. Total comparable net sales including e commerce decreased by 17.5% With a 19.7% decrease from physical stores and an 8.3% decrease from e commerce, we ended the Q1 with 248 total stores, a net increase of 7 stores compared to last year. Gross margin, including buying, distribution and occupancy expenses was 21.0 percent of net sales compared to 30.1% of net sales last year. Buying, distribution and occupancy costs deleveraged by 6 20 basis points and increased by $2,400,000 collectively, Predominantly from occupancy costs as a result of operating 7 net additional stores. Product margins declined by 290 basis points, primarily due to a higher level of markdowns utilized to manage inventory levels. Speaker 300:08:30Total SG and A expenses were $43,200,000 or 34.9 percent of net sales compared to $42,700,000 or 29.3 percent of net sales last year. Primary increases in SG and A were attributable to corporate payroll as a result of wage inflation, software as a service expenses and recruiting expenses associated with the hiring of our new CMO. These increases were partially offset by a $900,000 reduction in store payroll and related benefits, resulting from an admirable job by Store teams are managing store payroll hours despite operating 7 net additional stores and absorbing an average 8% hourly wage rate increase compared to last year. Operating loss was $17,300,000 or 14 percent of net sales compared to operating income of $1,100,000 or 0.8 percent of net sales last As a result of the combined factors just noted, other income was $1,100,000 compared to breakeven last year, Primarily due to earnings significantly higher rates of return on our marketable securities compared to last year. Income tax benefit was $4,200,000 or 26.1 percent of pre tax loss compared to income tax expense of 300,000 dollars or 26.9 percent of pre tax income last year. Speaker 300:09:49Net loss was $12,000,000 or 0 point 4 zero dollars per share compared to net income of 800,000 or $0.03 per diluted share last year. Weighted average shares were 29,800,000 this year compared to 31,000,000 last year. Turning to our balance sheet, we ended the Q1 with total cash and marketable securities of $93,000,000 and no debt outstanding compared to $111,000,000 in no debt last year. We ended the 1st quarter with total inventories at cost up 1.6% per square foot, but down 5.8% in total units per square foot compared to last year. Total capital expenditures for the Q1 were $4,300,000 compared $2,600,000 last year. Speaker 300:10:33With 7 new store openings currently expected for fiscal 2023, we now expect our total capital expenditures for the year to be approximately $15,000,000 Turning to our outlook for the Q2 of fiscal 2023, total comparable net sales For the Q2 of fiscal 2023 will be in the range of approximately $148,000,000 to $158,000,000 Translating to a comparable store net sales decline in the range of approximately 10% to 15% for the Q2 of fiscal 2023 Compared to last year, we expect our SG and A to be in the range of $49,000,000 to $50,000,000 At these sales levels, we would expect to report a loss per share in the range of $0.13 to $0.27 with an estimated income tax rate of 26.1 percent Total shares outstanding of 29,900,000. We currently expect to have 248 total stores at the end of the second quarter compared to 242 at the end of last year's Q2. Operator, we'll now go to our Q and A session. Operator00:11:41We will now begin the question and answer session. Our first question is from Matt Koranda with ROTH Capital. Please go ahead. Speaker 400:12:14Hey guys, good afternoon. Just Quick one to start. As you mentioned, some assortment issues that may have caused some challenges Inside the quarter aside from just the weather and kind of the general macro weakness. Can you just elaborate on that? Speaker 200:12:30Sure. Nothing no major category or No major category did we see any major assortment issues. There's always some. But I think most of the challenge was due to seasonal categories not performing as well as they normally would, Like shorts and swim primarily because of weather. Speaker 400:12:59Okay. Got it. And then just on the Q2 revenue guide, maybe you can just unpack that a bit in terms of the low end, high end For us, it looks like the low end probably assumes that sort of the May comp just kind of hold steady through the rest of the quarter. Maybe you could just elaborate on sort of how to think about what's embedded on the low end versus the high end of the second quarter revenue guide? Speaker 300:13:23Sure, Matt. So on the low end, really is based on the average of the last Several years excluding the 2020 pandemic year, looking at the last 5 to 6 years average history of Q1 to Q2 build, Q2 is always larger than Q1. That average of that 5 to 6 year period would get you to the low end. The High end is looking at May as a percentage of Q2. It's usually right around 25%, slightly over 25%. Speaker 300:13:54Again, looking at the last 5, 6 years, Cumulative average of May as a percentage of Q2 that would get you to the high end of the range and we're sitting in between those two numbers as we speak. So Felt like that was very reasonable range based on documented history of how our business has performed Across environments over the years. So that's how you get to either end. Speaker 400:14:19Got you. And then Maybe you could talk about the sort of what you're seeing in the latest comp from May just in terms of traffic versus ticket and If you could just kind of unpack some of the trends that you're seeing there, that'd be helpful. Speaker 300:14:33Sure. So traffic has been consistent. Overall, traffic was down 12% in Q1 and it was down 12 It's really all transactions, which to me speaks to an overall environmental Type of issue, transactions were down 17.5% in Q1 and they've been down almost 15% in May. So consistent there, our average sale really hasn't moved that much. It's been plus or minus less than 3%. Speaker 300:15:06In Q1, it was down less than 3% and in May, it was actually back up 2.5%. So The people that are buying seem to be buying a consistent amount in terms of average transaction value. Conversion has moved just a few percentage points, It was down 6% in Q1 and is down 2.7% in May. It really is traffic and transactions that are the double digit movement. Everything else is what I'd call fairly consistent. Speaker 400:15:39Okay, fair enough. And then just maybe on the product margin, product or merch margin, could you just talk about Speaker 300:16:00Yes, as always, when we look at what the sales trends tell us Where the business is headed, we contemplate what we think we might need to make sure we keep inventory in a healthy position and not let ourselves get Over inventoried with too much seasonal risk as we move forward. So, the Q1 was obviously a struggle Very clearly during February March, each of February March were down 20% plus. And then April was down 11.4 May is also consistent with that. So we have an 8 week trend rate here that It has been a little bit below 11% negative comp. And if that is going to continue, we have contemplated Taking certain actions that we'll need to take to keep our inventory fresh, allow for newness to keep getting delivered. Speaker 300:16:54As you know, as we get towards the end of the second quarter, the back to School season will be starting. Some of the earliest markets start in mid to late July, so we'll need to be ramping up for that And we need to make sure that we have ample room to allow for that newness to come in and not cut off newness as we think about moving forward into the back half of the year. So we'll do what we need to do to keep inventory fresh and we have that contemplated into our thinking for the Q2. Speaker 400:17:23Got it. Okay. Maybe just one more for me and then I'll jump back in queue. But occupancy costs for the rest of the year, maybe just any thoughts on how you guys are Kind of approaching the remainder of the lease negotiations that you have. You mentioned you were like 60% through, I think. Speaker 400:17:43How are we thinking about sort of pressure from occupancy costs over the coming quarters? Speaker 300:17:49Yes, the dollars are going to be up year over year because total store count is up year over year. So we had 7 net additional stores that each store Costs some dollars. The way occupancy is treated from an accounting perspective, it's straight lined over the life of the lease, generally speaking, Absent specific stores that are on pure percent rent deals. So the dollars don't move around that much And then it's a matter of how are your comps performing relative to a relatively stable base of occupancy and then year over year adding stores that adds dollars. So the dollars will continue to be up a little bit. Speaker 300:18:26We've been reasonably satisfied with what we've been able to achieve in terms of Occupancy negotiations, as always, you've heard this from us again and again over many years now that We take a pretty darn hard look at what we expect on a go forward basis for any given store. We use pretty reasonable sales assumptions To derive where we need to be and if we're able to reach agreement with our landlord partners, we move forward and if we can't, we're not afraid to close stores if we have to. Speaker 200:18:55But overall, I think just to add on to what Mike said, I think we're pretty satisfied with the direction that We've been going with our renewals and for new stores even though we're not doing a huge amount of new stores, the economics have been pretty good. Speaker 400:19:17Okay, great. I'll jump in queue guys. Thanks. Speaker 200:19:19Thank you. Operator00:19:21The next question is from Jeff Van Sinderen with B. Riley. Please go ahead. Speaker 500:19:27Hi, everyone. I don't want to harp on the weather here, but boy, it's been pretty horrible in California. I'm just wondering, did you see a better trend in other Geographies or maybe weather was not as unseasonable as it's been where you have a big chunk of your stores. Speaker 300:19:46California was the worst. California was down over 20% in total. All areas were down double digits though. So it's not like Some areas were positive and there was a mix. Everything was down double digits and there was a range. Speaker 300:20:03Some of the 1s might have been down only 13%, 14% versus California, which was down over 20%. So that broad based decline, coupled with the weather Timmy says things are generally slowing down. They're getting tougher out there and we've heard from a number of companies that they're seeing the same kind of thing. So California was the worst, which does speak to some of the weather issues early in the quarter. And when you look at seasonal performance, As we mentioned in our prepared remarks, the springsummer categories were more negative than the winterfall categories. Speaker 300:20:40In May, things have gotten a little better than the Q1 trend, but they're still negative other than a couple of areas that we called out. So it's still tough. Yes. Speaker 500:20:54And then I just wanted to touch on Laura. It seems like a terrific hire. When will we actually see a meaningful impact from her? And then maybe also if you could touch on what you think needs to improve with planning and allocation under your new leader there? Speaker 200:21:09Yes, I think, we'll start to see some real I mean, obviously, since she just started, she's not going to be able to affect back to school in any major ways, but wherever she can or feels like she can tweak the merchandise assortment, she's working on that as we speak. I think that you'll start to see a bigger impact as we move into fall And through Holiday for sure. So I'm really excited already she has picked up on something opportunities for us, which We'll share more as we as she is in the position, we'll share more on future calls for sure. Merchandise Planning and Allocation, we just basically brought in somebody that the person that was in that position Previously, I've been with the company for 20 years, really solid employee and stuff. But the person that we brought in is more experienced, Multiple types of companies, mostly apparel. Speaker 200:22:14And I see some Really positive improvements from some of the methodologies we've had in place for many years. There needs to be some change to it, what we've been doing in the past. So I see The combination of he and Laura, I think will be a major positive for the company. Speaker 500:22:43Okay, great. And then, just wanted to touch a little bit on SG and A. I know you guys are always looking for ways to reduce expenses. Just wondering anything there maybe that you're uncovering where you can flex a little bit? Or is it just really a situation where we need to Kind of be patient for sales to turn upward. Speaker 200:23:04And then just Speaker 500:23:04any thoughts on what you think? I mean, obviously, we've got a really tough macro out there and you're not alone in what you're But what do you think needs to happen for sales to turn around? Is it largely macro? Is it we need more, I don't know more newness or more merchandise content drivers or how do you think about that? Speaker 200:23:27Well, I think there's always I think it's more macro than anything else. I actually are overall, I'm pretty Happy with our assortment, but I think the challenges definitely Mako. And As I'm sure you've seen from other reported results, we're not alone. Speaker 600:23:50Right. Speaker 300:23:51Yes. And then on your SG and A question, We run a pretty tight ship here. Ed and I see virtually every expense in this company. So we don't have frivolous multimillion dollar programs that you can just arbitrarily yank out of the business and not have an impact. As we noted in our remarks about Q1, our store teams did a phenomenal job in the Q1 to Generate raw dollar savings in store payroll, when you think about year over year, we have an 8% average hourly wage increase For minimum wage impacts and wage inflation and having 7 additional stores, that was an outstanding result, but that Pressure continues. Speaker 300:24:35The average hourly rate is still 8% higher than last year. And We're doing everything we can to be as tight as possible on hours management. We work very closely with our store ops group and our store teams to Be as tight on it as we can. Store payroll is roughly 40% of our total SG and A in any given quarter. So that's the nugget that can move the dial. Speaker 300:25:01There's not a lot of other wiggle room, to be honest. So, bits and pieces here and there, but just like in the Q1, Few things moved a couple of 100,000 here, a couple of 100,000 there, but it's not realistic to think that we can just yank several $1,000,000 out of SG and A snapping our fingers, it's just not realistic. Speaker 500:25:21Okay, fair enough. Just thought I would ask if there's anything else new you might be uncovering. I appreciate Operator00:25:33The next question is from Mitch Kummetz with Seaport Research. Please go ahead. Speaker 600:25:38Yes. Thanks for taking my questions. Given some of the softness around the seasonal business, you mentioned shorts and swim, Ed. How are you feeling about the inventory that you have? And do you think there's any opportunity for Heads up demand as the weather is turning or has turned or is the macro just too difficult? Speaker 200:26:03I feel pretty good about the content itself. I think that the things that we've Styles that we've sold for many years consistently, there's no major changes to those. I think There will be some pent up demand for sure, but I also expect it to be extremely promotional In certain categories like shorts and swim and maybe sandals, it will be extremely Price competitive, but we're expecting that we planned for it. Speaker 100:26:36Okay. Speaker 600:26:36And then, back to School, you start to see some back to school at the tail end of Q2. How are you planning for that? I mean, I know that You're lapping, I think, a double digit negative from last year. And I don't know, to what extent you've kind of been able to adjust Your plans just given what you've seen in the macro lately to where you don't end up getting stuck with too much excess Inventory through the back to school season kind of so how are you planning the business? And have you adjusted your buys? Speaker 600:27:11You been able to adjust your buys, if again, that's kind of what you feel like you need to do? Speaker 200:27:20We've adjusted we've reforecast our business almost every hour here. So we constantly are adjusting Our buying plans and are on order accordingly from what we think is going to happen down the road. So We've pretty much back to school plans. We haven't drastically changed what we thought was going to happen when we did the yearly plans. But we've made some adjustments and I think we'll be well positioned in categories that are Very strong for us like backpacks, for which is usually a seasonal adjustment We're going to be in great shape inventory wise and shoes which has been Pretty consistently better than the apparel. Speaker 200:28:16We'll be in great shape for that. We haven't had adjusted any of those numbers Based on what's happening right now. Speaker 300:28:23Yes. And Mitch, this is just my own opinion. But as I think about the back to school season, we are known Tilly's is known As the backpack destination, having one of the absolute best collections of backpacks there is, I think a back to school is much more of a need based type of period. The kids are going back to school. They've probably grown since last year. Speaker 300:28:45There's a need for some wardrobe updating as they go into the next year of school, I'm hopeful that despite the challenges that we might continue to face from the environment, it seems like We will be facing these challenges for the foreseeable future, however long that lasts, but the back to school season is more of a need based period that I'm at least cautiously optimistic that maybe that means we could see a better trend than what we're seeing right now. But I honestly, I can't predict the future. Nothing is predictable still for 3 years running now. It is exceptionally difficult to try to predict anything with certainty. But that's how I think about Heading into the back to school season and having some potential opportunity to see a better run rate in the business hopefully coming soon. Speaker 200:29:33Okay. All right. Speaker 600:29:34Thanks and good luck. Speaker 200:29:36Thank you. Operator00:29:37This concludes our question and answer session. I would like to turn the conference back over to Ed Thomas for any closing Speaker 200:29:45Thank you all for joining us on the call today. We look forward to sharing our Q2 results with you in early September. Have a good evening. Operator00:29:55The conference is now concluded. Thank you for attending today's presentation. You may nowRead morePowered by Conference Call Audio Live Call not available Earnings Conference CallTilly's Q1 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.comSilicon Valley Gold RushA new technology has sparked a modern-day gold rush in Silicon Valley. OpenAI’s Sam Altman invested $375M. Bill Gates has backed four companies in this space. The World Economic Forum calls it “the most exciting human discovery since fire.” Whitney Tilson believes this trend could mint a new class of wealthy investors—and he’s sharing one stock to watch now, for free.April 26, 2025 | Stansberry Research (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 7 speakers on the call. Operator00:00:00Afternoon, and welcome to the Tilly's First Quarter 2023 Results Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Gar Jackson, Investor Relations. Operator00:00:35Please go ahead. Speaker 100:00:38Good afternoon, and welcome to the Tilly's fiscal 2023 1st quarter earnings Ed Thomas, President and CEO and Michael Enri, 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 tilly's.com. From the same section, shortly after the conclusion of the call, you will also be able to find a recorded replay of this call for the next 30 days. Certain forward looking statements will be made during this call that reflect Tilly's judgment and analysis only as of today, June 1, 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 100:01:23For a more thorough discussion of the risks and uncertainties associated with any forward looking statements, please see the disclaimer regarding forward looking statements is included in our fiscal 2023 Q1 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 will include a Q and A session after our prepared remarks. I will now turn the call over to Ed. Speaker 200:01:51Thanks, Gar. Good afternoon, everyone, and thank you for joining us today. Our first quarter results were within our estimated outlook ranges. April results were less negative in terms of comparable net sales than in February March. We believe the combination of an uncertain and inflationary economic environment for our teen, young adult, Young Family customer demographic and prolonged unseasonable weather in California. Speaker 200:02:25During February March, along with certain assortment issues resulted in a weak quarter overall. Not surprisingly, considering the cold wet weather in the West in particular, our springsummer product categories were more challenged In our winter product categories during the Q1, footwear performed best with a single digit Negative sales comp percentage compared to last year, while all other merchandising departments produced double digit negative Sales comp results. California with 40% of our total stores was our weakest performing Geographic area in both stores and online. Total store transactions decreased by a high Teens percentage during the quarter, although better in April than earlier in the quarter. The less negative April trend has carried into the Q2 thus far. Speaker 200:03:27Our total comparable sales net sales Through May 30, decreased 11.5%. Our springsummer product categories have performed better than they did During the Q1, led by women's and girls, which have comped positive compared to last year. On an overall basis, footwear and girls have comp positive thus far in the second quarter, while all other departments remain negative. We generally feel good about our Spring summer merchandise assortment and our inventory aging was more current entering the Q2 compared to last year. Remaining concern in the near term. Speaker 200:04:18In positive news, we hired our new Chief Merchandising Officer, Laura Janney, who joined us on May 8, having previously been in senior merchandise positions At both Hudson's Bay and Nordstrom, we're excited to see what her tremendous experience will bring to our business, particularly as her influence on our merchandise assortment becomes apparent over time. We also just hired a new Vice President of Merchandise Planning and Allocation with extensive experience who started last week. We believe these 2 new leaders give us a meaningful opportunity to take a fresh look at how we do business and help us get back on track to delivering sales growth over time. Despite short term We continue to invest in our business for the long term. We just relaunched our mobile app in early May with several customer friendly features. Speaker 200:05:20We will continue adding features to this new app over the next couple of quarters. We also continue to make progress in developing a new warehouse management system to improve efficiencies of labor and inventory management across Our 2 distribution facilities here in Irvine. We currently expect that this important upgrade will be completed in early fiscal 2024 and that it will better position us for future growth. In terms of store real estate, we now expect to have 7 new store openings during fiscal 2023. 1 store opened in late March Are expected to open during the 4 are expected to open during the Q3 and 2 are expected to open in the 4th quarter. Speaker 200:06:09Three stores originally planned for this year have been pushed into 2024 due to delays and timing of spaces being made available to us. For existing stores, we are approximately 60% complete with our fiscal 2023 lease decisions. Given the current environment, we continue to approach all lease renewals with reasonable At this time, we expect to close 3 stores during fiscal 2023, 2 of which have already closed. We remain open to additional store growth opportunities where economics make sense. I now turn the call over to Mike To provide additional details on our fiscal 2023 Q1 operating performance and to introduce our 2nd quarter outlook. Speaker 300:07:09Mike? Thanks, Ed. Good afternoon, everyone. Our fiscal 2023 Q1 results compared to last year's Q1 were as follows. Total net sales were $123,600,000 a decrease of 15.2%. Speaker 300:07:23Net sales from physical stores represented 79.1 percent of total net sales compared to 80.6% last year, while e commerce net sales represented 20.9% of total net sales compared to 19.4% last year. Total comparable net sales including e commerce decreased by 17.5% With a 19.7% decrease from physical stores and an 8.3% decrease from e commerce, we ended the Q1 with 248 total stores, a net increase of 7 stores compared to last year. Gross margin, including buying, distribution and occupancy expenses was 21.0 percent of net sales compared to 30.1% of net sales last year. Buying, distribution and occupancy costs deleveraged by 6 20 basis points and increased by $2,400,000 collectively, Predominantly from occupancy costs as a result of operating 7 net additional stores. Product margins declined by 290 basis points, primarily due to a higher level of markdowns utilized to manage inventory levels. Speaker 300:08:30Total SG and A expenses were $43,200,000 or 34.9 percent of net sales compared to $42,700,000 or 29.3 percent of net sales last year. Primary increases in SG and A were attributable to corporate payroll as a result of wage inflation, software as a service expenses and recruiting expenses associated with the hiring of our new CMO. These increases were partially offset by a $900,000 reduction in store payroll and related benefits, resulting from an admirable job by Store teams are managing store payroll hours despite operating 7 net additional stores and absorbing an average 8% hourly wage rate increase compared to last year. Operating loss was $17,300,000 or 14 percent of net sales compared to operating income of $1,100,000 or 0.8 percent of net sales last As a result of the combined factors just noted, other income was $1,100,000 compared to breakeven last year, Primarily due to earnings significantly higher rates of return on our marketable securities compared to last year. Income tax benefit was $4,200,000 or 26.1 percent of pre tax loss compared to income tax expense of 300,000 dollars or 26.9 percent of pre tax income last year. Speaker 300:09:49Net loss was $12,000,000 or 0 point 4 zero dollars per share compared to net income of 800,000 or $0.03 per diluted share last year. Weighted average shares were 29,800,000 this year compared to 31,000,000 last year. Turning to our balance sheet, we ended the Q1 with total cash and marketable securities of $93,000,000 and no debt outstanding compared to $111,000,000 in no debt last year. We ended the 1st quarter with total inventories at cost up 1.6% per square foot, but down 5.8% in total units per square foot compared to last year. Total capital expenditures for the Q1 were $4,300,000 compared $2,600,000 last year. Speaker 300:10:33With 7 new store openings currently expected for fiscal 2023, we now expect our total capital expenditures for the year to be approximately $15,000,000 Turning to our outlook for the Q2 of fiscal 2023, total comparable net sales For the Q2 of fiscal 2023 will be in the range of approximately $148,000,000 to $158,000,000 Translating to a comparable store net sales decline in the range of approximately 10% to 15% for the Q2 of fiscal 2023 Compared to last year, we expect our SG and A to be in the range of $49,000,000 to $50,000,000 At these sales levels, we would expect to report a loss per share in the range of $0.13 to $0.27 with an estimated income tax rate of 26.1 percent Total shares outstanding of 29,900,000. We currently expect to have 248 total stores at the end of the second quarter compared to 242 at the end of last year's Q2. Operator, we'll now go to our Q and A session. Operator00:11:41We will now begin the question and answer session. Our first question is from Matt Koranda with ROTH Capital. Please go ahead. Speaker 400:12:14Hey guys, good afternoon. Just Quick one to start. As you mentioned, some assortment issues that may have caused some challenges Inside the quarter aside from just the weather and kind of the general macro weakness. Can you just elaborate on that? Speaker 200:12:30Sure. Nothing no major category or No major category did we see any major assortment issues. There's always some. But I think most of the challenge was due to seasonal categories not performing as well as they normally would, Like shorts and swim primarily because of weather. Speaker 400:12:59Okay. Got it. And then just on the Q2 revenue guide, maybe you can just unpack that a bit in terms of the low end, high end For us, it looks like the low end probably assumes that sort of the May comp just kind of hold steady through the rest of the quarter. Maybe you could just elaborate on sort of how to think about what's embedded on the low end versus the high end of the second quarter revenue guide? Speaker 300:13:23Sure, Matt. So on the low end, really is based on the average of the last Several years excluding the 2020 pandemic year, looking at the last 5 to 6 years average history of Q1 to Q2 build, Q2 is always larger than Q1. That average of that 5 to 6 year period would get you to the low end. The High end is looking at May as a percentage of Q2. It's usually right around 25%, slightly over 25%. Speaker 300:13:54Again, looking at the last 5, 6 years, Cumulative average of May as a percentage of Q2 that would get you to the high end of the range and we're sitting in between those two numbers as we speak. So Felt like that was very reasonable range based on documented history of how our business has performed Across environments over the years. So that's how you get to either end. Speaker 400:14:19Got you. And then Maybe you could talk about the sort of what you're seeing in the latest comp from May just in terms of traffic versus ticket and If you could just kind of unpack some of the trends that you're seeing there, that'd be helpful. Speaker 300:14:33Sure. So traffic has been consistent. Overall, traffic was down 12% in Q1 and it was down 12 It's really all transactions, which to me speaks to an overall environmental Type of issue, transactions were down 17.5% in Q1 and they've been down almost 15% in May. So consistent there, our average sale really hasn't moved that much. It's been plus or minus less than 3%. Speaker 300:15:06In Q1, it was down less than 3% and in May, it was actually back up 2.5%. So The people that are buying seem to be buying a consistent amount in terms of average transaction value. Conversion has moved just a few percentage points, It was down 6% in Q1 and is down 2.7% in May. It really is traffic and transactions that are the double digit movement. Everything else is what I'd call fairly consistent. Speaker 400:15:39Okay, fair enough. And then just maybe on the product margin, product or merch margin, could you just talk about Speaker 300:16:00Yes, as always, when we look at what the sales trends tell us Where the business is headed, we contemplate what we think we might need to make sure we keep inventory in a healthy position and not let ourselves get Over inventoried with too much seasonal risk as we move forward. So, the Q1 was obviously a struggle Very clearly during February March, each of February March were down 20% plus. And then April was down 11.4 May is also consistent with that. So we have an 8 week trend rate here that It has been a little bit below 11% negative comp. And if that is going to continue, we have contemplated Taking certain actions that we'll need to take to keep our inventory fresh, allow for newness to keep getting delivered. Speaker 300:16:54As you know, as we get towards the end of the second quarter, the back to School season will be starting. Some of the earliest markets start in mid to late July, so we'll need to be ramping up for that And we need to make sure that we have ample room to allow for that newness to come in and not cut off newness as we think about moving forward into the back half of the year. So we'll do what we need to do to keep inventory fresh and we have that contemplated into our thinking for the Q2. Speaker 400:17:23Got it. Okay. Maybe just one more for me and then I'll jump back in queue. But occupancy costs for the rest of the year, maybe just any thoughts on how you guys are Kind of approaching the remainder of the lease negotiations that you have. You mentioned you were like 60% through, I think. Speaker 400:17:43How are we thinking about sort of pressure from occupancy costs over the coming quarters? Speaker 300:17:49Yes, the dollars are going to be up year over year because total store count is up year over year. So we had 7 net additional stores that each store Costs some dollars. The way occupancy is treated from an accounting perspective, it's straight lined over the life of the lease, generally speaking, Absent specific stores that are on pure percent rent deals. So the dollars don't move around that much And then it's a matter of how are your comps performing relative to a relatively stable base of occupancy and then year over year adding stores that adds dollars. So the dollars will continue to be up a little bit. Speaker 300:18:26We've been reasonably satisfied with what we've been able to achieve in terms of Occupancy negotiations, as always, you've heard this from us again and again over many years now that We take a pretty darn hard look at what we expect on a go forward basis for any given store. We use pretty reasonable sales assumptions To derive where we need to be and if we're able to reach agreement with our landlord partners, we move forward and if we can't, we're not afraid to close stores if we have to. Speaker 200:18:55But overall, I think just to add on to what Mike said, I think we're pretty satisfied with the direction that We've been going with our renewals and for new stores even though we're not doing a huge amount of new stores, the economics have been pretty good. Speaker 400:19:17Okay, great. I'll jump in queue guys. Thanks. Speaker 200:19:19Thank you. Operator00:19:21The next question is from Jeff Van Sinderen with B. Riley. Please go ahead. Speaker 500:19:27Hi, everyone. I don't want to harp on the weather here, but boy, it's been pretty horrible in California. I'm just wondering, did you see a better trend in other Geographies or maybe weather was not as unseasonable as it's been where you have a big chunk of your stores. Speaker 300:19:46California was the worst. California was down over 20% in total. All areas were down double digits though. So it's not like Some areas were positive and there was a mix. Everything was down double digits and there was a range. Speaker 300:20:03Some of the 1s might have been down only 13%, 14% versus California, which was down over 20%. So that broad based decline, coupled with the weather Timmy says things are generally slowing down. They're getting tougher out there and we've heard from a number of companies that they're seeing the same kind of thing. So California was the worst, which does speak to some of the weather issues early in the quarter. And when you look at seasonal performance, As we mentioned in our prepared remarks, the springsummer categories were more negative than the winterfall categories. Speaker 300:20:40In May, things have gotten a little better than the Q1 trend, but they're still negative other than a couple of areas that we called out. So it's still tough. Yes. Speaker 500:20:54And then I just wanted to touch on Laura. It seems like a terrific hire. When will we actually see a meaningful impact from her? And then maybe also if you could touch on what you think needs to improve with planning and allocation under your new leader there? Speaker 200:21:09Yes, I think, we'll start to see some real I mean, obviously, since she just started, she's not going to be able to affect back to school in any major ways, but wherever she can or feels like she can tweak the merchandise assortment, she's working on that as we speak. I think that you'll start to see a bigger impact as we move into fall And through Holiday for sure. So I'm really excited already she has picked up on something opportunities for us, which We'll share more as we as she is in the position, we'll share more on future calls for sure. Merchandise Planning and Allocation, we just basically brought in somebody that the person that was in that position Previously, I've been with the company for 20 years, really solid employee and stuff. But the person that we brought in is more experienced, Multiple types of companies, mostly apparel. Speaker 200:22:14And I see some Really positive improvements from some of the methodologies we've had in place for many years. There needs to be some change to it, what we've been doing in the past. So I see The combination of he and Laura, I think will be a major positive for the company. Speaker 500:22:43Okay, great. And then, just wanted to touch a little bit on SG and A. I know you guys are always looking for ways to reduce expenses. Just wondering anything there maybe that you're uncovering where you can flex a little bit? Or is it just really a situation where we need to Kind of be patient for sales to turn upward. Speaker 200:23:04And then just Speaker 500:23:04any thoughts on what you think? I mean, obviously, we've got a really tough macro out there and you're not alone in what you're But what do you think needs to happen for sales to turn around? Is it largely macro? Is it we need more, I don't know more newness or more merchandise content drivers or how do you think about that? Speaker 200:23:27Well, I think there's always I think it's more macro than anything else. I actually are overall, I'm pretty Happy with our assortment, but I think the challenges definitely Mako. And As I'm sure you've seen from other reported results, we're not alone. Speaker 600:23:50Right. Speaker 300:23:51Yes. And then on your SG and A question, We run a pretty tight ship here. Ed and I see virtually every expense in this company. So we don't have frivolous multimillion dollar programs that you can just arbitrarily yank out of the business and not have an impact. As we noted in our remarks about Q1, our store teams did a phenomenal job in the Q1 to Generate raw dollar savings in store payroll, when you think about year over year, we have an 8% average hourly wage increase For minimum wage impacts and wage inflation and having 7 additional stores, that was an outstanding result, but that Pressure continues. Speaker 300:24:35The average hourly rate is still 8% higher than last year. And We're doing everything we can to be as tight as possible on hours management. We work very closely with our store ops group and our store teams to Be as tight on it as we can. Store payroll is roughly 40% of our total SG and A in any given quarter. So that's the nugget that can move the dial. Speaker 300:25:01There's not a lot of other wiggle room, to be honest. So, bits and pieces here and there, but just like in the Q1, Few things moved a couple of 100,000 here, a couple of 100,000 there, but it's not realistic to think that we can just yank several $1,000,000 out of SG and A snapping our fingers, it's just not realistic. Speaker 500:25:21Okay, fair enough. Just thought I would ask if there's anything else new you might be uncovering. I appreciate Operator00:25:33The next question is from Mitch Kummetz with Seaport Research. Please go ahead. Speaker 600:25:38Yes. Thanks for taking my questions. Given some of the softness around the seasonal business, you mentioned shorts and swim, Ed. How are you feeling about the inventory that you have? And do you think there's any opportunity for Heads up demand as the weather is turning or has turned or is the macro just too difficult? Speaker 200:26:03I feel pretty good about the content itself. I think that the things that we've Styles that we've sold for many years consistently, there's no major changes to those. I think There will be some pent up demand for sure, but I also expect it to be extremely promotional In certain categories like shorts and swim and maybe sandals, it will be extremely Price competitive, but we're expecting that we planned for it. Speaker 100:26:36Okay. Speaker 600:26:36And then, back to School, you start to see some back to school at the tail end of Q2. How are you planning for that? I mean, I know that You're lapping, I think, a double digit negative from last year. And I don't know, to what extent you've kind of been able to adjust Your plans just given what you've seen in the macro lately to where you don't end up getting stuck with too much excess Inventory through the back to school season kind of so how are you planning the business? And have you adjusted your buys? Speaker 600:27:11You been able to adjust your buys, if again, that's kind of what you feel like you need to do? Speaker 200:27:20We've adjusted we've reforecast our business almost every hour here. So we constantly are adjusting Our buying plans and are on order accordingly from what we think is going to happen down the road. So We've pretty much back to school plans. We haven't drastically changed what we thought was going to happen when we did the yearly plans. But we've made some adjustments and I think we'll be well positioned in categories that are Very strong for us like backpacks, for which is usually a seasonal adjustment We're going to be in great shape inventory wise and shoes which has been Pretty consistently better than the apparel. Speaker 200:28:16We'll be in great shape for that. We haven't had adjusted any of those numbers Based on what's happening right now. Speaker 300:28:23Yes. And Mitch, this is just my own opinion. But as I think about the back to school season, we are known Tilly's is known As the backpack destination, having one of the absolute best collections of backpacks there is, I think a back to school is much more of a need based type of period. The kids are going back to school. They've probably grown since last year. Speaker 300:28:45There's a need for some wardrobe updating as they go into the next year of school, I'm hopeful that despite the challenges that we might continue to face from the environment, it seems like We will be facing these challenges for the foreseeable future, however long that lasts, but the back to school season is more of a need based period that I'm at least cautiously optimistic that maybe that means we could see a better trend than what we're seeing right now. But I honestly, I can't predict the future. Nothing is predictable still for 3 years running now. It is exceptionally difficult to try to predict anything with certainty. But that's how I think about Heading into the back to school season and having some potential opportunity to see a better run rate in the business hopefully coming soon. Speaker 200:29:33Okay. All right. Speaker 600:29:34Thanks and good luck. Speaker 200:29:36Thank you. Operator00:29:37This concludes our question and answer session. I would like to turn the conference back over to Ed Thomas for any closing Speaker 200:29:45Thank you all for joining us on the call today. We look forward to sharing our Q2 results with you in early September. Have a good evening. Operator00:29:55The conference is now concluded. Thank you for attending today's presentation. You may nowRead morePowered by