NYSE:TLYS Tilly's Q2 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-$0.04Consensus EPS -$0.21Beat/MissBeat by +$0.17One Year Ago EPS$0.13Tilly's Revenue ResultsActual Revenue$159.95 millionExpected Revenue$150.91 millionBeat/MissBeat by +$9.04 millionYoY Revenue GrowthN/ATilly's Announcement DetailsQuarterQ2 2024Date8/31/2023TimeAfter Market ClosesConference Call DateThursday, August 31, 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 Q2 2024 Earnings Call TranscriptProvided by QuartrAugust 31, 2023 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00Hello, and welcome to Tilly's Second Quarter 2023 Earnings 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. Operator00:00:37Please go ahead. Speaker 100:00:40Good afternoon, and welcome to the Tilly's fiscal 2023 2nd quarter earnings call. Ed Thomas, President and CEO and Michael Hendry, Executive Vice President Certain forward looking statements will be made during this call that reflect Tilly's judgment and analysis only as of today, August 31, 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. For a more thorough discussion of the risks and uncertainties associated with any forward looking Please see the disclaimer regarding forward looking statements that is included in our fiscal 2023 Q2 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 I will include a Q and A session after our prepared remarks. Speaker 100:01:52I now turn the call over to Ed. Speaker 200:01:54Thanks, Gar. Good afternoon, everyone, and thank you for joining us today. Our second quarter results exceeded our previously announced Estimated outlook ranges for both net sales and earnings per share. The trend of our comp Sales results improved to negative high single digits for each of June July following a negative 11.3% start in fiscal May. This improved sequential comp Sales performance coupled with diligent expense management produced better bottom line results than we anticipated for the quarter. Speaker 200:02:38Our springsummer product categories performed better during the Q2 than in the Q1 of this fiscal year, Resulting in improved relative performance across all geographic markets with the most significant improvement Coming from our home state of California, where 40% of our stores reside. For the quarter, on a percentage basis, Comps were positive in the Northwest, single digit negative in 8 of our geographic markets, including Both Southern and Northern California and double digit negative in the remaining 5 markets. In terms of store transaction metrics, On a percentage basis, total transactions were down low double digits, while the average transaction value increased by Low single digits compared to last year. From a merchandising perspective, for the Q2, girls and footwear comped positive. Women's and boys were single digit negative, while men's and accessories were each double digit negative on a percentage basis. Speaker 200:03:51All departments improved sequentially from their Q1 performance and most have then improved Further from the Q2 performance during August, we are optimistic that our new Chief Merchandising Officer and new Vice President of Merchandise Planning, both of who joined us in May, will help us continue to improve our performance going forward. In terms of store real estate, we expect to open 3 new stores in each of the 3rd and 4th quarters, Bringing our total new store count to 7 for the year. We closed 2 stores during the 2nd quarter. We continue to believe that we have ample opportunities to grow our total store count over the next several years. However, As we said in the past, we will be very selective in our approach to new store openings and will only open new stores that reflect what we believe to be appropriate lease economics to drive acceptable profitability relative to the sales environment we expect. Speaker 200:05:00Turning to the Q3 of fiscal 2023, which includes the peak of the back to school season, Total comparable net sales through August 29, including both physical stores and ecom decreased by 3.9 percent versus the comparable period of last year, continuing the sequential improvement in our comp sales trends in recent months. We have seen back to school shopping patterns this year that seem to indicate that our customers Have been shopping later than in prior years, even seeing stronger results following what we anticipated to be The peak back to school shopping weeks for certain stores before then seeing Results start to soften in the post back to school period. Given this backdrop amid the broader economic environment, We are anticipating that our comp sales results may likely revert to pre back to school levels Following what was a need based purchasing period during August, Overall, we feel good about our back to school and holiday merchandise assortments. And despite ongoing macroeconomic challenges, We are cautiously optimistic that we can produce a better comp store sales trend over the back half of the year and what we produced in the first half. We will continue to manage our business diligently relative to the environment with the goal of improving performance over time. Speaker 200:06:45I will now turn the call over to Mike to discuss our 2nd quarter operating results in more detail and to introduce our 3rd quarter outlook. Mike? Speaker 300:06:57Thanks, Ed. Our Q2 operating results compared to last year were as follows. Net sales were $160,000,000 a decrease of 5%. Net sales from physical stores decreased by 5.3% and represented 81.1% of total Net sales compared to 81.5% last year, while e commerce net sales decreased by 3.4% and represented 18.9% of total net sales compared to 18.5% last year. Comparable net sales including both physical stores and e Commerce decreased by 8.5%. Speaker 300:07:33We ended the 2nd quarter with 2 46 total stores compared to 2 42 total stores last year. Gross margin, including buying, distribution and occupancy expenses, was 27.7 percent of net sales compared to 30.9% of net sales last year. Buying, distribution and occupancy costs deleveraged by 170 basis points and increased by $900,000 collectively, predominantly from occupancy costs as a result of operating additional stores and carrying these costs against a lower level of net sales this year. Product margins declined by 150 basis points compared to last year's Q2, primarily as a result of higher markdowns and estimated inventory valuation reserves, but improved by 90 basis points sequentially from this year's Q1. Total SG and A expenses were $47,000,000 or 29.4 percent of net sales compared to $46,800,000 or 27.8 percent of net sales last year. Speaker 300:08:32SG and A deleveraged as a percentage of net sales due to carrying these costs against lower total net sales. The largest SG and A increases were from non cash store impairment charges of $800,000 and increased corporate payroll and benefits of $400,000 primarily due to the impact of wage increases for employee retention. Partially offsetting these increases were a variety of smaller savings across several expense line items. Operating loss was 2 point Other income was $1,200,000 compared to $200,000 last year, primarily due to earning higher rates of return on our marketable securities this year. Income tax benefit was $300,000 or 23.2 percent of pre tax loss compared to income tax expense of 1 4 percent of pre tax income last year. Speaker 300:09:32The decrease in income tax rate was primarily attributable to the low level of pre tax loss and certain discrete tax impacts compared to net income of $3,800,000 or $0.13 per diluted share last year and an improvement of $0.36 per share sequentially from our Q1 results. Weighted average shares were 29,800,000 this year compared to 30,200,000 diluted shares last year. Turning to our balance sheet. We ended the 2nd quarter with total cash and marketable securities of $104,000,000 and no debt outstanding compared to $116,000,000 And no debt at the end of the Q2 last year. We ended the 2nd quarter with inventories at cost up less than 1% per square foot and down 3% per square foot in units. Speaker 300:10:25Total capital expenditures for the first half were $6,300,000 compared to $6,900,000 We currently expect our total capital expenditures for fiscal 2023 to be in the range of approximately $15,000,000 to $17,000,000 primarily for new store construction and information technology and distribution systems enhancements. Turning to the Q3 of fiscal 2023. Based on our quarter to date net sales results and current and historical trends, including August typically representing just over half of third quarter net sales volume, We currently expect our total net sales for the Q3 of fiscal 2023 to be in the range of approximately $166,000,000 to $171,000,000 SG and A to be approximately $50,000,000 pre tax loss to be in the range of Approximately $1,800,000 to $4,300,000 our estimated income tax rate to be approximately 26% and loss per share to be in the range of $0.05 to $0.11 based on estimated weighted average shares of approximately 29,800,000. We expect to have 249 total stores open at the end of the 3rd quarter, a net increase of 2 from 2 47 total stores at the end of last year's Q3. Operator, we'll now go to our Q and A session. Operator00:11:43Thank you very much. We will now begin the question and answer session. Today's first question comes from Matt Koranda with ROTH MKM. Please go ahead. Speaker 400:12:14Hey, guys. Good afternoon. Thanks for the questions. Just wanted to see if I could get a bit more color on why the expected drop off And comps for the rest of the quarter, it just looks like I know you said maybe we're expecting When need based buying goes away that we expect a bit of a drop off, but correct me if I'm wrong, I think comps got a bit easier last year, when we think about September, October. Could you maybe just speak to the dynamic there? Speaker 300:12:43Sure, Matt. We're already seeing it. So we've Been tracking performance before, during and after the back to school peaks depending on when various schools went back. And we've seen a consistent pattern that as soon as the peak of the back to school period is over, we are seeing the business slow down. You are right. Speaker 300:13:05The compares are easier in the final 2 months of the quarter, But we're still seeing that same deterioration regardless of the fact that we're going up against easier compares. August was actually the toughest compare And we had our best month. So it's kind of counterintuitive from a purely comparable basis standpoint, but that is the pattern that we're seeing. So We were barely negative in the 2nd week of August after having a minus 10% in the 1st week of August. Then we were plus 3 in the 3rd week of August and then minus 5 in the final week of August and we're down high single digits this week. Speaker 300:13:41So we're seeing it In the performance of the stores, and as we've heard other companies mention as well, it does appear to us that The back to school shopping patterns were much closer into need, kind of a tighter peak. And then once that need period has concluded and at this stage over 90% of back to school is done. There's less than 20 stores that are currently in peak. The rest have already Completed their key back to school peak period. So that's just the dynamic that we're seeing in the results and we're contemplating that in our outlook. Speaker 400:14:18Okay, fair enough. And then maybe just could you talk about the what's contemplated in the ticket versus Transaction within the comp outlook. I mean, any changes there, maybe just less benefit from ticket On a year over year basis or anything to call out on that front relative to kind of what you experienced in 2Q? Speaker 300:14:40Our comp dynamics have been pretty consistent most of the year. It's been a decline in traffic and a decline in transactions, period. The average transaction value has actually been slightly up interestingly. So there's just fewer transactions occurring, But they are occurring at a similar or even slightly higher rate. Speaker 400:15:01Got it. And that's coming from AUR or is that coming from Bigger Basket? Speaker 300:15:08It's a low single digit change. So there's nothing dramatic to call out on either item. Speaker 400:15:15Okay, got it. And then just one other one for me on the gross margins. I know you don't explicitly put out a gross margin outlook, but you can back into on an applied basis. And it just seems to look relatively flat in the Q3 versus the second. And I just noted that despite kind of the uptick in revenue. Speaker 400:15:34So just wondered if you could maybe speak to the dynamics on B and A and O cost, maybe Mike or just more pressure on merch margin. What's the dynamic there? Speaker 300:15:43Sure. So it's as it has been in recent quarters, it continues to be occupancy is the major part of the leverage within the non product Cost of goods sold, we're starting the quarter with 4 more stores than last year's Q3. So dollars are added. We're going to end the Q3 with 2 more stores than last year and carrying those costs against what we're expecting to be a negative comp for the quarter. So it's going to So it's occupancy that causes most of it. Speaker 300:16:12We are anticipating product margins to be Somewhat lower than last year's Q3, but again sequentially improved in Q3 versus Q2 and Q2 was improved So on the worse end of our outlook, it might be 100 basis points of product margin decline. It will be less than 100 basis points on the better end. Speaker 400:16:40Okay. Got you. I'll leave it there. Thanks. Operator00:16:45The next question comes from Mitch Kummet with Seaport. Please go ahead. Speaker 500:16:51Yes. Thanks for taking my questions. Can you just talk a little bit about what was working for back to school for you guys? Speaker 200:17:01Sure. There was no single brand category that was Dominant, for sure. We saw improvement from Q1 to Q2 Pretty much across all categories being apparel, footwear, accessories, we saw improvement there. I would say the improvement continued into August into in the boys and girls category. But I can't call out anything, any single category or brand that drove it. Speaker 200:17:37It was across the board. Speaker 500:17:39And then did I hear you correctly, did you say that girls and footwear were positive comp in the quarter? Speaker 300:17:47For the Q2, yes, girls and footwear. Speaker 200:17:50Yes. That's correct. Speaker 500:17:51Can you just elaborate on that? I mean that's Pretty good strength compared to the rest of the business. What are you seeing within those segments? Speaker 200:18:04The girls' assortment was definitely improved over last year. So that drove That part of the business. Footwear has been pretty decent for us all year and it's multiple brands So driving that, some Nike, some Converse, that's driving that business. Speaker 500:18:28Okay. And when you think about like the product pipeline going into holiday, how are you feeling about that? Speaker 200:18:38I feel really good about it. I mean, obviously, with the new merchandising leadership Coming in just a short while ago, they're making whatever changes they have been able to make. And I think, they've done a really good job of editing the go forward assortment, based on what they feel is the right Trends, but also opportunities that they've identified in looking at our business. So I think we're going to be in really We'll have a really good assortment for holidays for sure. Speaker 500:19:15Okay. And then lastly, I know that on the last earnings call, You were anticipating some pretty heavy promotional activity in kind of seasonal categories, short swim sandals. I'm wondering how that played out, how much of a drag that was on the product margin and how are you situated with your seasonal inventory coming out of the quarter? Speaker 300:19:41I don't think it had a dramatic impact one way or the other. The seasonal categories improved their performance in the second quarter Sequentially from Q1 and continued to be better in August, generally speaking than they were in the second quarter. You'll remember how just terrible the start to the Q1 was, especially here in California with all of the just a torrential rain that we had repetitively through February March. So We did have a really slow start to the spring season and we do have a little bit more springsummer merchandise right now than we did a year ago. But again, we're expecting Q3 product margins to be sequentially improved versus Q2 and for the decline versus last year to narrow in the Q3 than what it was in the Q2 and what it was in the Q1. Speaker 300:20:29So we've contemplated everything that we think we need to contemplate To deal with anything that we need to deal with as we close out the springsummer season and get deeper into fall as the Q3 moves on. Speaker 200:20:42Yes. We'll be just to add to that, we'll be in pretty good shape in terms of the quantity of inventory that we have in shorts and swim and So on and so forth, because it helps that most of the country has been 100 degrees the last 2 weeks. But those Negative trends in the seasonal categories really continued into August, which we anticipated Early on, we made adjustments to inventory flow wherever we could. Speaker 500:21:13Okay, great. Thanks guys. Speaker 200:21:15Thank you. Operator00:21:18The next question comes from Jeff Van Sinderen with B. Riley. Please go ahead. Speaker 600:21:25Hi, everyone. And let me say congratulations on the improving trend. Maybe you can circle back to the CMO situation. Just wondering how much of the holiday assortment is actually going to be owned, So to speak, by the new CMO. Speaker 200:21:45I don't know how to put a percentage to it, Jeff, but honestly, There's a lot of things that she felt good about that was on order that we've already taken action on. And making adjustments really, I would say diving in deeper into some of the brands that are stronger for us And what we had on order, that would be one area that I would say we think it's going to be There are some trends that we were on, but again adjusting the forecast going forward to maybe doing heavier receipts In areas where we think are going to be where she thinks that we're going to be stronger. Speaker 600:22:30Okay, fair enough. And then just wanted to circle back to inventory for a second. If we assume kind of the midpoint of your Q3 guidance, Where do you think that we would see inventory per foot be roughly at the end of Q3? Speaker 300:22:49I think per foot, it will be down to some extent. As always, we We do everything we can to try to manage inventory as tightly to the sales trends as possible. Q2 sales were down 5. Our unit inventory per square foot was down 3. So Close there and we're going to aim to keep that relationship as tight as we can. Speaker 600:23:12Okay, good. And then just as far as the lease decisions, how far are we through those decisions for this year? And then I guess what are you seeing on renewals? Speaker 200:23:27We're done for this year pretty much unless we see something unusual that's opportunistic. We We have a pretty significant pipeline that we've been working on and when we decide to accelerate The number of stores as part of our expansion, we're going to be in really good shape to be able to turn that flip that switch pretty quickly. As far as renewals go, we're so far, so good. The economics have been We're happy with the economics we're seeing on renewals. And we'll continue to really Scrutinize every lease renewal to make sure that the economics are what we think is going to happen in the future. Speaker 600:24:17Okay, makes sense. Thanks very much. I'll take the rest offline. Speaker 200:24:21All right. Thanks, Jeff. Operator00:24:25This concludes the question and answer session. I would like to turn the conference back over to Ed Thomas for any closing remarks. Speaker 200:24:34Thank you all for joining us on the call today. We look forward to sharing our 3rd quarter results with you at the end of November. Have a great evening. Operator00:24:46The conference has now concluded. Thank you for attending today's presentation. You may now disconnect yourRead morePowered by Conference Call Audio Live Call not available Earnings Conference CallTilly's Q2 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’s betrayal exposed Trump’s Final Reset Inside the shocking plot to re-engineer America’s financial system…and why you need to move your money now.April 26, 2025 | Porter & Company (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. Operator00:00:00Hello, and welcome to Tilly's Second Quarter 2023 Earnings 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. Operator00:00:37Please go ahead. Speaker 100:00:40Good afternoon, and welcome to the Tilly's fiscal 2023 2nd quarter earnings call. Ed Thomas, President and CEO and Michael Hendry, Executive Vice President Certain forward looking statements will be made during this call that reflect Tilly's judgment and analysis only as of today, August 31, 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. For a more thorough discussion of the risks and uncertainties associated with any forward looking Please see the disclaimer regarding forward looking statements that is included in our fiscal 2023 Q2 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 I will include a Q and A session after our prepared remarks. Speaker 100:01:52I now turn the call over to Ed. Speaker 200:01:54Thanks, Gar. Good afternoon, everyone, and thank you for joining us today. Our second quarter results exceeded our previously announced Estimated outlook ranges for both net sales and earnings per share. The trend of our comp Sales results improved to negative high single digits for each of June July following a negative 11.3% start in fiscal May. This improved sequential comp Sales performance coupled with diligent expense management produced better bottom line results than we anticipated for the quarter. Speaker 200:02:38Our springsummer product categories performed better during the Q2 than in the Q1 of this fiscal year, Resulting in improved relative performance across all geographic markets with the most significant improvement Coming from our home state of California, where 40% of our stores reside. For the quarter, on a percentage basis, Comps were positive in the Northwest, single digit negative in 8 of our geographic markets, including Both Southern and Northern California and double digit negative in the remaining 5 markets. In terms of store transaction metrics, On a percentage basis, total transactions were down low double digits, while the average transaction value increased by Low single digits compared to last year. From a merchandising perspective, for the Q2, girls and footwear comped positive. Women's and boys were single digit negative, while men's and accessories were each double digit negative on a percentage basis. Speaker 200:03:51All departments improved sequentially from their Q1 performance and most have then improved Further from the Q2 performance during August, we are optimistic that our new Chief Merchandising Officer and new Vice President of Merchandise Planning, both of who joined us in May, will help us continue to improve our performance going forward. In terms of store real estate, we expect to open 3 new stores in each of the 3rd and 4th quarters, Bringing our total new store count to 7 for the year. We closed 2 stores during the 2nd quarter. We continue to believe that we have ample opportunities to grow our total store count over the next several years. However, As we said in the past, we will be very selective in our approach to new store openings and will only open new stores that reflect what we believe to be appropriate lease economics to drive acceptable profitability relative to the sales environment we expect. Speaker 200:05:00Turning to the Q3 of fiscal 2023, which includes the peak of the back to school season, Total comparable net sales through August 29, including both physical stores and ecom decreased by 3.9 percent versus the comparable period of last year, continuing the sequential improvement in our comp sales trends in recent months. We have seen back to school shopping patterns this year that seem to indicate that our customers Have been shopping later than in prior years, even seeing stronger results following what we anticipated to be The peak back to school shopping weeks for certain stores before then seeing Results start to soften in the post back to school period. Given this backdrop amid the broader economic environment, We are anticipating that our comp sales results may likely revert to pre back to school levels Following what was a need based purchasing period during August, Overall, we feel good about our back to school and holiday merchandise assortments. And despite ongoing macroeconomic challenges, We are cautiously optimistic that we can produce a better comp store sales trend over the back half of the year and what we produced in the first half. We will continue to manage our business diligently relative to the environment with the goal of improving performance over time. Speaker 200:06:45I will now turn the call over to Mike to discuss our 2nd quarter operating results in more detail and to introduce our 3rd quarter outlook. Mike? Speaker 300:06:57Thanks, Ed. Our Q2 operating results compared to last year were as follows. Net sales were $160,000,000 a decrease of 5%. Net sales from physical stores decreased by 5.3% and represented 81.1% of total Net sales compared to 81.5% last year, while e commerce net sales decreased by 3.4% and represented 18.9% of total net sales compared to 18.5% last year. Comparable net sales including both physical stores and e Commerce decreased by 8.5%. Speaker 300:07:33We ended the 2nd quarter with 2 46 total stores compared to 2 42 total stores last year. Gross margin, including buying, distribution and occupancy expenses, was 27.7 percent of net sales compared to 30.9% of net sales last year. Buying, distribution and occupancy costs deleveraged by 170 basis points and increased by $900,000 collectively, predominantly from occupancy costs as a result of operating additional stores and carrying these costs against a lower level of net sales this year. Product margins declined by 150 basis points compared to last year's Q2, primarily as a result of higher markdowns and estimated inventory valuation reserves, but improved by 90 basis points sequentially from this year's Q1. Total SG and A expenses were $47,000,000 or 29.4 percent of net sales compared to $46,800,000 or 27.8 percent of net sales last year. Speaker 300:08:32SG and A deleveraged as a percentage of net sales due to carrying these costs against lower total net sales. The largest SG and A increases were from non cash store impairment charges of $800,000 and increased corporate payroll and benefits of $400,000 primarily due to the impact of wage increases for employee retention. Partially offsetting these increases were a variety of smaller savings across several expense line items. Operating loss was 2 point Other income was $1,200,000 compared to $200,000 last year, primarily due to earning higher rates of return on our marketable securities this year. Income tax benefit was $300,000 or 23.2 percent of pre tax loss compared to income tax expense of 1 4 percent of pre tax income last year. Speaker 300:09:32The decrease in income tax rate was primarily attributable to the low level of pre tax loss and certain discrete tax impacts compared to net income of $3,800,000 or $0.13 per diluted share last year and an improvement of $0.36 per share sequentially from our Q1 results. Weighted average shares were 29,800,000 this year compared to 30,200,000 diluted shares last year. Turning to our balance sheet. We ended the 2nd quarter with total cash and marketable securities of $104,000,000 and no debt outstanding compared to $116,000,000 And no debt at the end of the Q2 last year. We ended the 2nd quarter with inventories at cost up less than 1% per square foot and down 3% per square foot in units. Speaker 300:10:25Total capital expenditures for the first half were $6,300,000 compared to $6,900,000 We currently expect our total capital expenditures for fiscal 2023 to be in the range of approximately $15,000,000 to $17,000,000 primarily for new store construction and information technology and distribution systems enhancements. Turning to the Q3 of fiscal 2023. Based on our quarter to date net sales results and current and historical trends, including August typically representing just over half of third quarter net sales volume, We currently expect our total net sales for the Q3 of fiscal 2023 to be in the range of approximately $166,000,000 to $171,000,000 SG and A to be approximately $50,000,000 pre tax loss to be in the range of Approximately $1,800,000 to $4,300,000 our estimated income tax rate to be approximately 26% and loss per share to be in the range of $0.05 to $0.11 based on estimated weighted average shares of approximately 29,800,000. We expect to have 249 total stores open at the end of the 3rd quarter, a net increase of 2 from 2 47 total stores at the end of last year's Q3. Operator, we'll now go to our Q and A session. Operator00:11:43Thank you very much. We will now begin the question and answer session. Today's first question comes from Matt Koranda with ROTH MKM. Please go ahead. Speaker 400:12:14Hey, guys. Good afternoon. Thanks for the questions. Just wanted to see if I could get a bit more color on why the expected drop off And comps for the rest of the quarter, it just looks like I know you said maybe we're expecting When need based buying goes away that we expect a bit of a drop off, but correct me if I'm wrong, I think comps got a bit easier last year, when we think about September, October. Could you maybe just speak to the dynamic there? Speaker 300:12:43Sure, Matt. We're already seeing it. So we've Been tracking performance before, during and after the back to school peaks depending on when various schools went back. And we've seen a consistent pattern that as soon as the peak of the back to school period is over, we are seeing the business slow down. You are right. Speaker 300:13:05The compares are easier in the final 2 months of the quarter, But we're still seeing that same deterioration regardless of the fact that we're going up against easier compares. August was actually the toughest compare And we had our best month. So it's kind of counterintuitive from a purely comparable basis standpoint, but that is the pattern that we're seeing. So We were barely negative in the 2nd week of August after having a minus 10% in the 1st week of August. Then we were plus 3 in the 3rd week of August and then minus 5 in the final week of August and we're down high single digits this week. Speaker 300:13:41So we're seeing it In the performance of the stores, and as we've heard other companies mention as well, it does appear to us that The back to school shopping patterns were much closer into need, kind of a tighter peak. And then once that need period has concluded and at this stage over 90% of back to school is done. There's less than 20 stores that are currently in peak. The rest have already Completed their key back to school peak period. So that's just the dynamic that we're seeing in the results and we're contemplating that in our outlook. Speaker 400:14:18Okay, fair enough. And then maybe just could you talk about the what's contemplated in the ticket versus Transaction within the comp outlook. I mean, any changes there, maybe just less benefit from ticket On a year over year basis or anything to call out on that front relative to kind of what you experienced in 2Q? Speaker 300:14:40Our comp dynamics have been pretty consistent most of the year. It's been a decline in traffic and a decline in transactions, period. The average transaction value has actually been slightly up interestingly. So there's just fewer transactions occurring, But they are occurring at a similar or even slightly higher rate. Speaker 400:15:01Got it. And that's coming from AUR or is that coming from Bigger Basket? Speaker 300:15:08It's a low single digit change. So there's nothing dramatic to call out on either item. Speaker 400:15:15Okay, got it. And then just one other one for me on the gross margins. I know you don't explicitly put out a gross margin outlook, but you can back into on an applied basis. And it just seems to look relatively flat in the Q3 versus the second. And I just noted that despite kind of the uptick in revenue. Speaker 400:15:34So just wondered if you could maybe speak to the dynamics on B and A and O cost, maybe Mike or just more pressure on merch margin. What's the dynamic there? Speaker 300:15:43Sure. So it's as it has been in recent quarters, it continues to be occupancy is the major part of the leverage within the non product Cost of goods sold, we're starting the quarter with 4 more stores than last year's Q3. So dollars are added. We're going to end the Q3 with 2 more stores than last year and carrying those costs against what we're expecting to be a negative comp for the quarter. So it's going to So it's occupancy that causes most of it. Speaker 300:16:12We are anticipating product margins to be Somewhat lower than last year's Q3, but again sequentially improved in Q3 versus Q2 and Q2 was improved So on the worse end of our outlook, it might be 100 basis points of product margin decline. It will be less than 100 basis points on the better end. Speaker 400:16:40Okay. Got you. I'll leave it there. Thanks. Operator00:16:45The next question comes from Mitch Kummet with Seaport. Please go ahead. Speaker 500:16:51Yes. Thanks for taking my questions. Can you just talk a little bit about what was working for back to school for you guys? Speaker 200:17:01Sure. There was no single brand category that was Dominant, for sure. We saw improvement from Q1 to Q2 Pretty much across all categories being apparel, footwear, accessories, we saw improvement there. I would say the improvement continued into August into in the boys and girls category. But I can't call out anything, any single category or brand that drove it. Speaker 200:17:37It was across the board. Speaker 500:17:39And then did I hear you correctly, did you say that girls and footwear were positive comp in the quarter? Speaker 300:17:47For the Q2, yes, girls and footwear. Speaker 200:17:50Yes. That's correct. Speaker 500:17:51Can you just elaborate on that? I mean that's Pretty good strength compared to the rest of the business. What are you seeing within those segments? Speaker 200:18:04The girls' assortment was definitely improved over last year. So that drove That part of the business. Footwear has been pretty decent for us all year and it's multiple brands So driving that, some Nike, some Converse, that's driving that business. Speaker 500:18:28Okay. And when you think about like the product pipeline going into holiday, how are you feeling about that? Speaker 200:18:38I feel really good about it. I mean, obviously, with the new merchandising leadership Coming in just a short while ago, they're making whatever changes they have been able to make. And I think, they've done a really good job of editing the go forward assortment, based on what they feel is the right Trends, but also opportunities that they've identified in looking at our business. So I think we're going to be in really We'll have a really good assortment for holidays for sure. Speaker 500:19:15Okay. And then lastly, I know that on the last earnings call, You were anticipating some pretty heavy promotional activity in kind of seasonal categories, short swim sandals. I'm wondering how that played out, how much of a drag that was on the product margin and how are you situated with your seasonal inventory coming out of the quarter? Speaker 300:19:41I don't think it had a dramatic impact one way or the other. The seasonal categories improved their performance in the second quarter Sequentially from Q1 and continued to be better in August, generally speaking than they were in the second quarter. You'll remember how just terrible the start to the Q1 was, especially here in California with all of the just a torrential rain that we had repetitively through February March. So We did have a really slow start to the spring season and we do have a little bit more springsummer merchandise right now than we did a year ago. But again, we're expecting Q3 product margins to be sequentially improved versus Q2 and for the decline versus last year to narrow in the Q3 than what it was in the Q2 and what it was in the Q1. Speaker 300:20:29So we've contemplated everything that we think we need to contemplate To deal with anything that we need to deal with as we close out the springsummer season and get deeper into fall as the Q3 moves on. Speaker 200:20:42Yes. We'll be just to add to that, we'll be in pretty good shape in terms of the quantity of inventory that we have in shorts and swim and So on and so forth, because it helps that most of the country has been 100 degrees the last 2 weeks. But those Negative trends in the seasonal categories really continued into August, which we anticipated Early on, we made adjustments to inventory flow wherever we could. Speaker 500:21:13Okay, great. Thanks guys. Speaker 200:21:15Thank you. Operator00:21:18The next question comes from Jeff Van Sinderen with B. Riley. Please go ahead. Speaker 600:21:25Hi, everyone. And let me say congratulations on the improving trend. Maybe you can circle back to the CMO situation. Just wondering how much of the holiday assortment is actually going to be owned, So to speak, by the new CMO. Speaker 200:21:45I don't know how to put a percentage to it, Jeff, but honestly, There's a lot of things that she felt good about that was on order that we've already taken action on. And making adjustments really, I would say diving in deeper into some of the brands that are stronger for us And what we had on order, that would be one area that I would say we think it's going to be There are some trends that we were on, but again adjusting the forecast going forward to maybe doing heavier receipts In areas where we think are going to be where she thinks that we're going to be stronger. Speaker 600:22:30Okay, fair enough. And then just wanted to circle back to inventory for a second. If we assume kind of the midpoint of your Q3 guidance, Where do you think that we would see inventory per foot be roughly at the end of Q3? Speaker 300:22:49I think per foot, it will be down to some extent. As always, we We do everything we can to try to manage inventory as tightly to the sales trends as possible. Q2 sales were down 5. Our unit inventory per square foot was down 3. So Close there and we're going to aim to keep that relationship as tight as we can. Speaker 600:23:12Okay, good. And then just as far as the lease decisions, how far are we through those decisions for this year? And then I guess what are you seeing on renewals? Speaker 200:23:27We're done for this year pretty much unless we see something unusual that's opportunistic. We We have a pretty significant pipeline that we've been working on and when we decide to accelerate The number of stores as part of our expansion, we're going to be in really good shape to be able to turn that flip that switch pretty quickly. As far as renewals go, we're so far, so good. The economics have been We're happy with the economics we're seeing on renewals. And we'll continue to really Scrutinize every lease renewal to make sure that the economics are what we think is going to happen in the future. Speaker 600:24:17Okay, makes sense. Thanks very much. I'll take the rest offline. Speaker 200:24:21All right. Thanks, Jeff. Operator00:24:25This concludes the question and answer session. I would like to turn the conference back over to Ed Thomas for any closing remarks. Speaker 200:24:34Thank you all for joining us on the call today. We look forward to sharing our 3rd quarter results with you at the end of November. Have a great evening. Operator00:24:46The conference has now concluded. Thank you for attending today's presentation. You may now disconnect yourRead morePowered by