Irvine-based Tilly’s Inc.’s co-founders are picking an opportune time to cash out a sizeable portion of their holdings in the youth fashion and footwear chain.
Hezy Shaked and Tilly Levine, who opened their first store in 1982 and remain among the largest shareholders in the company—which now has 226 locations—are part of a group of shareholders that disclosed plans last week to sell nearly $117 million in stock.
The offering is the largest stock sale by either since the company went public in 2012, based on a reading of regulatory filings.
The sale comes during a high point for Tilly’s stock. It reached an all-time high of more than $25 a share earlier this month, following a second-quarter earnings report that topped analysts’ estimates.
They plunged 22% following news of the planned stock sale and dilution of outstanding shares. Tilly’s market value is about $578 million.
Cashing Out
Chairman and Chief Strategy Officer Shaked, who served as chief executive from its inception until 2006, is selling the lion’s number of shares in the offering.
Affiliates of the former chief executive—who also owns many of the local properties used by Tilly’s for corporate operations—stands to get nearly $75 million in proceeds, according to regulatory filings.
He’ll continue to have a large say in the company’s future; his remaining shares giving him a 73% voting interest, and he’ll still own Tilly’s stock currently valued at about $120 million, according to last week’s filing with the Securities and Exchange Commission.
SEC filings show that Levine, who’s Shaked’s ex-wife and is vice president of vendor operations, should get nearly $43 million from the sale and will continue to own about $20 million worth of stock, based on Tilly’s current stock price.
The company won’t receive direct proceeds in the offering, unlike in its 2012 IPO, which netted about $108 million for it. It’s since nearly doubled its number of stores. It was the first IPO in the local apparel industry since Costa Mesa-based clothing maker Volcom Inc. raised $89 million in 2005.
Large institutional shareholders in Tilly’s include Dimensional Fund Advisors LP in Austin, Texas, and New York-based Blackrock Inc., which each own over 1 million shares, according to regulatory filings this year.
Outlier
Tilly’s is an outlier in its retail segment, as competitors have retrenched, closed stores, and filed for bankruptcy over the past few years.
It had $157.4 million in revenue last quarter and posted a profit of $9.7 million. Sales are up 13% year-over-year, thanks to solid brick-and-mortar business, as well as a growing e-commerce line of business.
Comparable in-store sales increased 3.8% year-over-year in the last quarter to $137.7 million, their strongest performance since the third quarter of 2011, according to Chief Executive Ed Thomas.
It also marked Tilly’s seventh consecutive quarter of year-over-year store traffic growth, Thomas told analysts on the company’s quarterly earnings call in August.
The company opened four stores last quarter and is on pace to open a dozen this year, the most since 2015.
“We’re positioning ourselves to accelerate our growth,” said Thomas, who noted that the openings are in malls and other locations, “and they are both working.”
The company has 14 retail locations in Orange County, according to its website. It employs about 1,400 people at its Irvine offices.
E-commerce sales represented 13.1% of sales last year; last quarter online sales made up 12% of total sales, up 8.1% year-over-year.
The company’s aiming for between $145 million and $151 million in sales during the current quarter, along with a 3% to 6% increase in net comparable store sales.
“The back-to-school season has been strong for us thus far,” Thomas said on the analyst call.
Mark Mueller contributed to this report.
