US retailer Tilly's Q2 FY23 results beat expectations

Tilly’s total net sales in the second quarter (Q2) of fiscal 2023 (FY23) were $160.0 million, a decrease of $8.4 million or 5.0 per cent, compared to $168.3 million last year. Total comparable net sales, including both physical stores and e-commerce, decreased by 8.5 per cent.

Net sales from physical stores were $129.8 million, a decrease of $7.3 million or 5.3 per cent in the second quarter, compared to $137.1 million last year, with a comparable store net sales decrease of 9.3 per cent. Net sales from physical stores represented 81.1 per cent of total net sales compared to 81.5 per cent of total net sales last year. The company ended the second quarter with 246 total stores compared to 242 total stores at the end of the second quarter last year, the company said in a press release.

In the second quarter, gross profit, including buying, distribution, and occupancy costs, was $44.3 million, or 27.7 per cent of net sales, compared to $52.0 million, or 30.9 per cent of net sales, last year. Buying, distribution, and occupancy costs deleveraged by 170 basis points and increased by $0.9 million collectively, predominantly due to occupancy costs, as a result of operating 4 net additional stores and carrying these costs against a lower level of net sales this year. Product margins declined by 150 basis points primarily due to increased markdowns and estimated inventory valuation reserves.

"After a slow start to the second quarter in May, the trend of our comp sales improved for the remainder of the quarter and our prudent expense management drove better than expected results for the second quarter," said Ed Thomas, president and chief executive officer. "We remain cautiously optimistic about the trend of our business considering the sequential improvement in our comp sales trend during fiscal August amid the peak of the back-to-school season to start the third quarter."

Total comparable net sales through August 29, 2023, including both physical stores and e-commerce, decreased by 3.9 per cent relative to the comparable period of last year. Based on current and historical trends, including fiscal August historically representing just over 50 per cent of total third quarter net sales volume, the company currently estimates that its fiscal 2023 third quarter net sales will be in the range of approximately $166 million and $171 million, translating to an estimated comparable net sales decrease in the range of approximately 5 per cent to 8 per cent for the third quarter of fiscal 2023 compared to last year.

The company anticipates that its comparable net sales results may decelerate following the need-based purchasing period during the month of August amid the peak of the back-to-school season.