Tilly’s Inc. (NYSE: TLYS) Executive Vice President and CFO Michael Henry grew up in Lompoc, surrounded by farms and ranches. Behind his parents’ home is nothing but land. It’s a far cry from the sandy beaches and skate parks central to the brands he’s built his career around for nearly three decades now.
His start in the world of finance was happenstance. Henry was a natural math whiz. He spent his winter break in eighth grade studying so he could move up to the algebra class (and aced his first test with a 95% when school resumed). When he saw the numbers and columns comprising the assignments of his best friend his junior year of high school, he was intrigued and joined the same computer accounting class where his teacher, the late Dean Anderson, put forth the idea Henry could one day be a business leader.
Henry began participating in accounting competitions. First the Southern California regionals, then state and then the nationals his senior year where he made it all the way to Cincinnati, placing fifth in the nation.
“I’m a nerd,” the CFO said of himself and his natural understanding of accounting and analysis.
He’s since worked at some of the biggest names in the action sports space, helping guide companies through tough rounds of layoffs and bankruptcy discussions to COVID, and currently sits high at an Irvine-based retailer that continues to best itself quarter after quarter coming out of the pandemic.
That work helped earn Henry the CFO Lifetime Achievement award during the Business Journal’s annual CFO of the Year Awards Sept. 28 at the Irvine Marriott.
Concept to Reality
The award is symbolic of a career that fulfills what Anderson predicted of Henry’s potential and his ability to adapt to all situations, continuing to learn so that his 16-year-old self, who decided in high school he wanted to be a CFO of a public company, could make good on that goal.
“At the time [being CFO of a public company] was a concept. I had no idea what that meant and what it took,” he said.
“I didn’t know anybody who was a CFO certainly of a public company, so I didn’t know what I was getting into. As you get into college and you start meeting people from the audit firms, you realize, man, there’s a lot of smart people in this profession and their business knowledge is really sharp. It’s just constant learning. You’re never done learning. Even today, I learn from examples and the comments of our board members who are more experienced than myself, or our CEO [Ed Thomas] and other colleagues within Tilly’s or former places I’ve been. You never stop learning. You never stop growing.”
Henry, the first in his family to graduate from college, attended California Polytechnic State University in San Luis Obispo where he received a bachelor’s degree in business administration. He moved to Orange County in 1994 to take a job with Deloitte & Touche LLP working mostly with semiconductor and personal computer companies.
When his colleague David Unter, the former CFO at local companies such as Costa Mesa-based Volcom Inc. and 5.11 Tactical of Irvine, stopped in Henry’s office to talk about an offer he received to be controller at Anaheim retailer Pacific Sunwear of California LLC, Henry half joked he’d be out of there if he had a client offer him a position in-house.
He had a recent 110-hour week at the firm still fresh in his mind when he said that. Unter wanted to stay longer at Deloitte and passed Henry’s name on to PacSun, where he was offered a job and stayed for 10 years.
He was hooked on what he called the “vibrant, youthful environment” and that’s what’s kept him in the action sports space.
In 2012, he joined Huntington Beach-based Quiksilver Inc., which was renamed Boardriders Inc. following its 2016 emergence from bankruptcy.
“Quiksilver was in a downward trend and we knew there was going to be some bankruptcy decisions in the not-too-distant future and I just thought it’d be so much better to be back at a company that had opportunistic decisions to make and growth decisions to make,” he said of the decision to join Tilly’s.
“The last seven years of my combined time at PacSun and Quiksilver was all about downtrending, negative kinds of decisions. That wears on you after a while.”
Tilly’s “was an opportunity to come back and get back on the good side of the ledger. Now, no way in the world could I have anticipated what would come into being in the last 18 months, but those experiences just really helped me help the rest of the team to stay calm.”
Last year proved to be an exercise in the culmination of a number of lessons learned over Henry’s nearly 30-year career helping shuttle apparel companies through a rugged retail landscape and everchanging consumer tastes in fashion.
“It was the most challenging period of time I’ve ever experienced by far,” Henry said of 2020.
“I remember we announced earnings on March 12 last year and six days later all of our stores were closed. We had no idea it was going to get that bad that fast, so it was really adapting on the fly. At the time, we had no idea how long our stores would stay closed, and so I just immediately started planning for worst case scenarios. We were working 15-, 16-hour days seven days a week just trying to model out and make a bunch of assumptions.”
The models were around inventory management and how sustainable paying rent on some 240 stores in Tilly’s fleet with no revenue coming in could be.
The company decided it could not continue paying rent on all of its stores, had to furlough nearly all employees and canceled tens of millions of dollars in inventory commitments. The senior management that was left took 50% pay cuts in an effort to drag the company through the worst of 2020.
“Thankfully, two months later, things started to gradually reopen,” he said. “Some of those tougher situations I had lived through at PacSun and Quiksilver were instructive because I knew what we had to do conceptually. You have to skinny down to minimal staff. What’s the bare minimum? What are the nice to haves versus the must haves, and you need to protect the must haves.”
One surprise internally has been the company’s bounce back. Initial fears consumers would be too wary of shopping in stores and malls were swept to the side right away.
“Things were better than what we had prepared for. Once things reopened, people were out there. It was shocking how good things were as soon as things reopened. People were excited to leave the house and do anything and so shopping in a store was one of those things. So, we were pleasantly surprised at how business was once things reopened,” he said.
The proof is in the numbers.
The fourth quarter ended Jan. 30 yielded net sales and earnings growth. Tilly’s began its fiscal first quarter ended May 1 with the best net sales results and earnings since its public market debut in May 2012. The following quarter produced another set of record net sales and earnings.
“Fast forward to now, we’re doing the best business we’ve ever done,” Henry said.