Tilly’s(US:TLYS)2023-06-02 00:46Financial Data and Key Metrics Changes - Total net sales for Q1 2023 were $123.6 million, a decrease of 15.2% compared to the previous year [18] - Gross margin decreased to 21.0% of net sales from 30.1% last year, with buying, distribution, and occupancy costs increasing by 620 basis points [19] - Operating loss was $17.3 million or 14% of net sales, compared to operating income of $1.1 million or 0.8% of net sales last year [22] - Net loss was $12 million or $0.40 per share, compared to net income of $0.8 million or $0.03 per diluted share last year [28] Business Line Data and Key Metrics Changes - Footwear had a single-digit negative sales comp percentage, while all other merchandising departments experienced double-digit negative sales comp results [9] - 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 [19] - Spring/summer product categories performed better in Q2 compared to Q1, led by women's and girls' categories, which had positive comps [11] Market Data and Key Metrics Changes - California, which accounts for 40% of total stores, was the weakest performing geographic area, with total sales down over 20% [9][48] - Total store transactions decreased by a high teens percentage during the quarter, although there was an improvement in April [10] Company Strategy and Development Direction - The company plans to open seven new stores during fiscal 2023, with three stores pushed to 2024 due to delays [16] - A new Chief Merchandising Officer and Vice President of Merchandise Planning and Allocation have been hired to improve business operations and sales growth [13][14] - The company is investing in a new warehouse management system to enhance labor and inventory management efficiency [15] Management's Comments on Operating Environment and Future Outlook - Management noted that the economic environment remains uncertain and inflationary, impacting the young customer demographic [8] - The company expects total net sales for Q2 2023 to be in the range of approximately $148 million to $158 million, translating to a comparable store net sales decline of approximately 10% to 15% [24] - Management expressed cautious optimism for the back-to-school season, which is typically need-based, potentially leading to better sales trends [68] Other Important Information - Total capital expenditures for Q1 were $4.3 million, with expectations of approximately $15 million for the year [29] - The company ended Q1 with total cash and marketable securities of $93 million and no debt outstanding [23] Q&A Session Summary Question: Can you elaborate on the assortment issues mentioned? - Management indicated that most challenges were due to seasonal categories not performing well, particularly shorts and swim, primarily because of weather [26] Question: How is the second quarter revenue guide structured? - The low end of the guide is based on historical averages, while the high end considers May's performance as a percentage of Q2 [32][33] Question: What trends are being observed in traffic versus ticket? - Traffic was down 12% in Q1 and May, while average sale values remained relatively stable [35] Question: What are the expectations for product margins going forward? - Management is considering actions to keep inventory fresh and avoid overstocking as they approach the back-to-school season [40] Question: How are occupancy costs being managed? - Occupancy costs are expected to rise year-over-year due to an increase in store count, but management is satisfied with lease negotiations [42][45] Question: How is inventory being managed in light of seasonal softness? - Management feels confident about inventory content but expects a highly promotional environment for certain categories [59]