Tilly’s(US:TLYS)2022-12-07 20:50Store Operations and Expansion - As of October 29, 2022, Tilly's operated 247 stores across 33 states, an increase from 243 stores the previous year[105] - The company expects to open up to 15 new stores in fiscal 2023, primarily in California, Texas, and the Northeast, with total capital expenditures not exceeding $25 million[110] Financial Performance - Total net sales for the thirteen weeks ended October 29, 2022, were $177.8 million, a decrease of $28.2 million or 13.7% compared to $206.1 million last year[123] - Gross profit was $54.6 million, or 30.7% of net sales, down from $76.7 million, or 37.2% of net sales last year, primarily due to increased markdown rates[124] - Selling, general and administrative (SG&A) expenses were $48.3 million, or 27.1% of net sales, compared to $47.7 million, or 23.2% of net sales last year[125] - Operating income decreased to $6.3 million, or 3.6% of net sales, from $29.0 million, or 14.1% of net sales last year[126] - Net income was $5.1 million, or $0.17 per diluted share, compared to $20.8 million, or $0.66 per diluted share last year[128] - Comparable store net sales change was (14.9)% for the thirteen weeks ended October 29, 2022, compared to a 31.3% increase last year[123] - For the thirty-nine weeks ended October 29, 2022, total net sales were $491.9 million, a decrease of $79.3 million or 13.9% compared to $571.2 million last year[129] - SG&A expenses for the thirty-nine weeks were $137.8 million, or 28.0% of net sales, compared to $136.0 million, or 23.8% of net sales last year[131] - Operating income for the thirty-nine weeks was $12.6 million, or 2.6% of net sales, down from $70.3 million, or 12.3% of net sales last year[132] Economic and Market Conditions - Fiscal 2022 fourth quarter operating results are anticipated to remain below fiscal 2021 levels due to ongoing economic impacts from the COVID-19 pandemic[106] - Inflationary cost pressures have resulted in significant price increases for merchandise, negatively impacting consumer behavior and financial results during fiscal 2022[107] - Supply chain disruptions have led to shipping delays and increased costs, affecting the ability to meet customer expectations and overall operational results[108] - Labor challenges and wage inflation have increased competition for labor, driving up wages beyond government-mandated increases[109] - The company experienced a decline in net sales due to the winding down of pandemic restrictions and inflationary pressures in fiscal 2022[140] Cash Flow and Financing - Working capital decreased to $90.0 million as of October 29, 2022, from $91.8 million at January 29, 2022, a decline of $1.8 million[137] - Net cash used in operating activities was $11.1 million for the thirty-nine weeks ended October 29, 2022, compared to net cash provided of $46.9 million in the same period last year, a decrease of $57.9 million[140] - Net cash provided by investing activities was $55.5 million this year, compared to net cash used of $42.1 million last year, reflecting a significant turnaround[142] - Net cash used in financing activities was $10.8 million this year, an improvement from $21.6 million used last year[144] - The company entered into a new senior secured credit agreement with a revolving credit facility of up to $25.0 million, maturing on January 20, 2024[146] - As of October 29, 2022, the company was in compliance with all covenants under the new credit agreement and had no outstanding borrowings[152] - Cash flow from investing activities included maturities of marketable securities totaling $117.2 million, partially offset by purchases of $49.8 million[142] Shareholder Actions - The company repurchased shares totaling $10.9 million during the first three quarters of fiscal 2022[145] Financial Covenants - The company’s financial covenants require a total funded debt to EBITDA ratio no greater than 4.00 to 1.00 and a fixed charge coverage ratio of not less than 1.25 to 1.00[149]