The key holiday selling season’s looking cheerier for retailer Tilly’s Inc.
The Irvine-based men’s, women’s and kids retailer (NYSE: TLYS) is coming off a strong second quarter that caught the attention of Wall Street on its better-than-expected performance for the period ended Aug. 3.
The company is now riding high as the industry readies for Black Friday and the weeks leading up to Christmas and Hanukkah, which has historically come with aggressive promotions to woo shoppers into stores.
Tilly’s President and Chief Executive Ed Thomas is holding steady and doesn’t expect a ramp in sales and markdowns from previous years.
“With traffic being down across the industry, we’ve outperformed the industry without discounting, without giving the store away,” Thomas told the Business Journal last week.
He attributes that to the company’s engagement with consumers at stores and events that have helped hold shoppers’ attention, in addition to the right merchandise mix.
Shares Up
Tilly’s shares opened up 12% the day after it released its results, when it beat analyst expectations. The company reported net income of $9.3 million during the quarter, compared to $9.7 million in the year-ago period. Net sales rose 2.8% from a year earlier to $161.7 million.
It has a market value of about $306 million; its shares are at its highest point in about three months, but still around 50% of where they were a year ago.
Tilly’s counts 230 stores, which also includes two pop-up shops for its in-house brand RSQ.
The results were aided in large part by positive trends seen for men’s, boys, accessories and footwear; women’s and girl’s started off slow in May later improving as the period went on.
Thomas attributed the slow start partially to a miss on the merchandise mix, while Chief Financial Officer Michael Henry added cold and wet weather at the quarter’s start stalled sales of items such as swimwear, shorts, and dresses.
Champion and Vans continue to do well at Tilly’s, showing no signs of a slowdown amid a general trend in recent years that’s had consumers gravitating towards logo-heavy merchandise.
“We’ve been in a branded cycle for a while and we don’t see any slowdown in that right now,” Thomas said.
RSQ Rollout
RSQ, which is billed as a premium denim line, also appears to have legs.
Tilly’s had been testing the brand with its own pop-up shops and is now readying for a permanent door to open at the Irvine Spectrum in May.
The location, totaling about 3,500 square feet, keeps the store close for executives at headquarters to monitor.
The typical Tilly’s store runs closer to 7,500 square feet.
“Well, the pop-ups, with very little attention paid to it, overall did well,” Thomas said.
“The intention of the pop-ups was more of a marketing vehicle to continue to grow the brand in markets we want to enter,” he said. “As we learned more, the brand is strong enough that this might be a potential growth opportunity for us, which led to the decision to test doing a permanent store.”
The King of Prussia shopping center in Philadelphia, by way of example, had a RSQ store to test into the market and proved successful enough the company is now readying to open a regular Tilly’s store there.
The two concepts appear to be working well together, with RSQ not cannibalizing on nearby Tilly’s locations.
“That was another encouraging sign it [RSQ] did not appear to hurt other, full-size Tilly’s stores,” Henry pointed out.
The RSQ in-store assortment is currently being worked on, but store shelves will, of course, carry the RSQ brand in addition to some third-party lines.
For the current quarter, Tilly’s said it expects net sales of $151 million to $156 million with net income in the range of about $5.4 million to $6.6 million.
