tlys-20220430

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

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FORM 10-Q

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☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-35535

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TILLY’S, INC.

(Exact name of Registrant as specified in its charter)

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Delaware						45-2164791
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

10 Whatney

Irvine, CA 92618

(Address of principal executive offices)

(949) 609-5599

(Registrant’s telephone number, including area code)

__________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.001 par value per share	TLYS	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated Filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2) Yes ☐ No ☒

As of June 3, 2022, the registrant had the following shares of common stock outstanding:


Class A common stock $0.001 par value			22,736,122
Class B common stock $0.001 par value			7,306,108

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TILLY’S, INC.

FORM 10-Q

For the Quarterly Period Ended April 30, 2022

Index


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	6
	Consolidated Balance Sheets as of April 30, 202 2 , January 2 9 , 202 2 and May 1, 2021	6
	Consolidated Statements of Operations for the Thirteen Weeks Ended April 30, 202 2 and May 1, 202 1	7
	Consolidated Statements of Comprehensive Income for the Thirteen Weeks Ended April 30, 202 2 and May 1, 202 1	8
	Consolidated Statement of Stockholders’ Equity as of April 30, 202 2 and May 1, 202 1	9
	Consolidated Statements of Cash Flows for the Thirt een Weeks Ended April 30, 202 2 and May 1, 202 1	10
	Notes to the Consolidated Financial Statements	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30

Item 4.	Controls and Procedures	30

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 6.	Exhibits	31

	Signatures	32

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Forward-Looking Statements

This Report contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical or current fact included in this Report are forward-looking statements. Forward-looking statements refer to our current expectations and projections relating to our financial condition, results of operations, plans, objectives, strategies, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate”, “estimate”, “expect”, “project”, “plan”, “intend”, “believe”, “may”, “might”, “will”, “should”, “can have”, “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected earnings, revenues, comparable store sales, operating income, earnings per share, costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations, growth or initiatives, strategies or the expected outcome or impact of pending or threatened litigation are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:

•the impacts of the COVID-19 pandemic generally and on our operations, future financial or operational results, including with respect to our ability to keep stores open and e-commerce operational, cash and liquidity management, expense management, our ability to reduce costs, and our ability to procure sufficient quantities of inventory in line with our sales plans, or to effectively manage inventory levels on an ongoing basis relative to net sales performance and changing market conditions, particularly in light of ongoing supply chain disruptions that have significantly altered historical product flows both in terms of timing and amount of inventory available;

•the impacts of inflation on consumer spending generally and on our operating results and financial condition;

•our ability to adapt to downward trends in traffic for our stores and changes in our customers' purchasing patterns;

•our ability to successfully open new stores and profitably operate our existing stores;

•our ability to attract customers to our e-commerce website and generate acceptable levels of return from our digital marketing efforts and other e-commerce growth initiatives;

•our ability to efficiently utilize our e-commerce fulfillment center;

•effectively adapting to new challenges associated with our expansion into new geographic markets;

•our ability to establish, maintain and enhance a strong brand image;

•generating adequate cash from our existing stores and e-commerce to support our growth;

•identifying and responding to new and changing customer fashion preferences and fashion-related trends;

•competing effectively in an environment of intense competition both in stores and online;

•adjusting to increasing costs of mailing catalogs, paper and printing;

•the success of the malls, power centers, neighborhood and lifestyle centers, outlet centers and street-front locations in which our stores are located;

•our ability to attract customers in the various retail venues and geographies in which our stores are located;

•adapting to declines in consumer confidence and decreases in consumer spending;

•our ability to adapt to significant changes in sales due to the seasonality of our business;

•our ability to compete in social media marketing platforms;

•natural disasters, unusually adverse weather conditions, port delays, boycotts, epidemics, pandemics, acts of war, terrorism, civil unrest, and other unanticipated events;

•our dependence on third-party vendors to provide us with sufficient quantities of merchandise at acceptable prices;

•increases in costs of energy, transportation or utility costs and in the costs of labor and employment;

•our ability to balance proprietary branded merchandise with the third-party branded merchandise we sell;

•most of our merchandise is made in foreign countries, making price and availability of our merchandise susceptible to international trade conditions;

•failure of our vendors and their manufacturing sources to use acceptable labor or other practices;

•our dependence upon key executive management or our inability to hire or retain the talent required for our business;

•our ability to effectively adapt to our planned expansion;

•failure of our information technology systems to support our current and growing business, before and after our planned upgrades;

•disruptions in our supply chain and distribution center;

•our indebtedness and lease obligations, including restrictions on our operations contained therein;

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•our reliance upon independent third-party transportation providers for certain of our product shipments;

•our ability to increase comparable store sales or sales per square foot, which may cause our operations and stock price to be volatile;

•disruptions to our information systems in the ordinary course of business or as a result of systems upgrades;

•our inability to protect our trademarks or other intellectual property rights;

•the impact of governmental laws and regulations and the outcomes of legal proceedings;

•our ability to secure our data and comply with the security standards for the credit card industry;

•our failure to maintain adequate internal controls over our financial and management systems; and

•continuing costs incurred as a result of being a public company.

We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results.

See “Risk Factors” within our most recent Annual Report on Form 10-K for a more complete discussion of the risks and uncertainties mentioned above and for discussion of other risks and uncertainties. All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements as well as others made in this Report and hereafter in our other SEC filings and public communications. You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties.

We caution you that the risks and uncertainties identified by us may not be all of the factors that are important to you. Furthermore, the disclosures and forward-looking statements included in this Report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

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Part I. Financial Information

Item 1. Financial Statements (Unaudited)

TILLY’S, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(Unaudited)


	April 30, 2022		January 29, 2022		May 1, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	59,954	$	42,201	$	81,015
Marketable securities	50,997		97,027		76,633
Receivables	8,209		6,705		9,701
Merchandise inventories	74,112		65,645		65,341
Prepaid expenses and other current assets	14,769		16,400		4,591
Total current assets	208,041		227,978		237,281
Operating lease assets	218,163		216,508		222,209
Property and equipment, net	46,606		47,530		54,139
Deferred tax assets	11,594		11,446		11,664
Other assets	1,253		1,361		1,231
TOTAL ASSETS	$	485,657	$	504,823	$	526,524

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	27,193	$	28,144	$	35,860
Accrued expenses	16,741		19,073		29,110

Deferred revenue	15,150		17,096		12,913
Accrued compensation and benefits	8,707		17,056		14,489

Current portion of operating lease liabilities	51,237		51,504		51,231
Current portion of operating lease liabilities, related party	2,483		2,533		2,402
Other liabilities	674		761		763
Total current liabilities	122,185		136,167		146,768
Noncurrent portion of operating lease liabilities	174,301		171,965		192,345
Noncurrent portion of operating lease liabilities, related party	20,364		21,000		11,282
Other liabilities	872		978		1,528
Total long-term liabilities	195,537		193,943		205,155
Total liabilities	317,722		330,110		351,923
Commitments and contingencies (Notes 2 and 5)
Stockholders’ equity:
Common stock (Class A), $0.001 par value; 100,000 shares authorized; 22,832, 23,719 and 22,837 shares issued and outstanding, respectively	23		24		23
Common stock (Class B), $0.001 par value; 35,000 shares authorized; 7,306, 7,306 and 7,306 shares issued and outstanding, respectively	7		7		7
Preferred stock, $0.001 par value; 10,000 shares authorized; no shares issued or outstanding	—		—		—
Additional paid-in capital	167,512		166,929		158,454
Retained earnings	391		7,754		16,094
Accumulated other comprehensive income (loss)	2		(1)		23
Total stockholders’ equity	167,935		174,713		174,601
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	485,657	$	504,823	$	526,524

The accompanying notes are an integral part of these consolidated financial statements.

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TILLY’S, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


	Thirteen Weeks Ended
	April 30, 2022		May 1, 2021
Net sales	$	145,775	$	163,157

Cost of goods sold (includes buying, distribution, and occupancy costs)	101,100		107,616
Rent expense, related party	860		702
Total cost of goods sold (includes buying, distribution, and occupancy costs)	101,960		108,318
Gross profit	43,815		54,839

Selling, general and administrative expenses	42,574		39,832
Rent expense, related party	133		133
Total selling, general, and administrative expenses	42,707		39,965

Operating income	1,108		14,874
Other income (expense), net	4		(115)
Income before income taxes	1,112		14,759
Income tax expense	299		3,800
Net income	$	813	$	10,959
Basic earnings per share of Class A and Class B common stock	$	0.03	$	0.37
Diluted earnings per share of Class A and Class B common stock	$	0.03	$	0.36
Weighted average basic shares outstanding	30,762		29,878
Weighted average diluted shares outstanding	31,046		30,529

The accompanying notes are an integral part of these consolidated financial statements.

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TILLY’S, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Thirteen Weeks Ended
	April 30, 2022		May 1, 2021
Net income	$	813	$	10,959
Other comprehensive income, net of tax:
Net change in unrealized gain on available-for-sale securities, net of tax	3		3
Other comprehensive income, net of tax	3		3
Comprehensive income	$	816	$	10,962

The accompanying notes are an integral part of these consolidated financial statements.

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TILLY’S, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Number of Shares
	Common Stock (Class A)	Common Stock (Class B)	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss)/Income		Total Stockholders’ Equity
Balance at January 29, 2022	23,719	7,306	$	31	$	166,929	$	7,754	$	(1)	$	174,713
Net income	—	—	—		—		813		—		813




Share-based compensation expense	—	—	—		563		—		—		563
Employee stock option exercises	5	—	—		20		—		—		20
Repurchase of common stock	(

SEC Form 10-Q filed by Tilly's Inc.