A $100 million initial public offering proposed by Tilly’s Inc. could be the first of several fund-raising deals if the Irvine-based clothing retailer’s aggressive growth plans are going to be met in the next several years.
Tilly’s sells clothes, shoes and accessories inspired by surfing, skateboarding and snowboarding in more than 125 stores nationwide. It filed paperwork with the Securities and Exchange Commission early this month to go public on the New York Stock Exchange.
The $100 million filing isn’t huge by Wall Street standards.
Still, Tilly’s planned offering would be one of the first by an established Orange County company in several years.
It also would be the first in the local apparel industry since Costa Mesa-based clothing maker Volcom Inc. raised $89 million in 2005.
Volcom was acquired for $608 million by Paris-based PPR SA last month.
Tilly’s was founded by Hezy Shaked and Tilly Levine in 1982, who remain the company’s primary owners. They are expected to get “most” of the proceeds from the IPO, according to the registration statement.
Shaked and Levine will remain substantial shareholders in the company after it goes public, according to the filings.
Shaked turned over chief executive duties to apparel industry veteran Daniel Griesemer earlier this year.
Financially Healthy
The July 1 registration statement also includes some encouraging details for potential investors, including a history of profitability and minimal debt.
The company reported sales of $332.6 million last year, a nearly 18% increase from a year earlier, according to the filing. Net income of $24.4 million was up about 17% from a year earlier.
Tilly’s stores average between 7,500 and 8,000 square feet. They averaged sales of about $326 per square foot last year, compared to $318 the prior year.
The stores primarily are located in malls and other retail centers. They sell local brands such as Volcom, Huntington Beach-based Quiksilver Inc., and Irvine’s Billabong USA, among dozens of other West Coast-inspired labels.
Tilly’s own brands account for a little less than 30% of its sales.
Under new Chief Executive Griesemer—who joined the company in February from women’s clothing and accessories retailer and catalog company Coldwater Creek in Idaho—the company is eyeing an aggressive expansion plan.
The registration statement said that it is looking to expand to as many as 500 stores in the next decade or so.
In comparison, Anaheim-based mall retailer Pacific Sunwear of California Inc., with more than $900 million in annual sales, had about 850 stores at the end of last year.
In the near term, Tilly’s is planning to add 13 stores this year, and about 20 more in 2012.
Between inventory, construction costs and rent, it costs about $500,000 to open a new store.
• Headquarters: Irvine
• Founded: 1982
• Business: clothing retailer
• 2010 sales: $332.6 million
• Notable: Filed for $100 million public offering
Plans for Money
How much of the money raised in Tilly’s offering will be used towards funding the company’s growth remains to be seen.
Any money left after current shareholders get their proceeds may be used for working capital and other general corporate purposes, the company said.
Along with nearly $29 million of cash, Tilly’s other big source of funds is a
$15 million line of credit with Wells Fargo. That credit line is expected to be increased to $25 million after the public offering is complete.
Tilly’s biggest upcoming expense besides its growth plans looks to be a new, 26,000-square-foot office and warehouse project in the works near its 126,000-square-foot headquarters and distribution center in the Irvine Spectrum.
The build-to-suit project, which will be used by Tilly’s as its e-commerce distribution center, should be completed next year.
