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Tilly’s Q1 Sales Climb 13%, Net Income Plunges 61%

In a 10Q filed with the Securities and Exchange Commission, Tilly’s announced that net sales for Q1 climbed $12.6 million, or 13% in the  quarter ended May 4. However, net income plunged $3.6 million, 61 % below last year, with earnings per share falling from $0.30 last year to $0.08 this year.

Here are some of the highlights from the report:

Net sales increased $12.6 million, or 13%, to $109.1 million for the thirteen weeks ended May 4, 2013 from $96.5 million for the thirteen weeks ended April 28, 2012. A portion of this increase was due to net sales of $11.6 million from stores open in the first quarter of fiscal 2013 that were not open during the same period last year, as well as the increase in e-commerce shipping fees, due to the increase in e-commerce sales. Net sales also increased due to a comparable store net sales increase of 1.1%, or $1.0 million, in the thirteen weeks ended May 4, 2013 compared to the thirteen weeks ended April 28, 2012. This increase was due to higher net sales of guys’, juniors’ and girls’ apparel, offset by lower net sales of accessories, footwear and boys’ apparel. There were 141 comparable brick-and-mortar stores and 34 non-comparable brick-and-mortar stores open as of May 4, 2013.

Net sales from our e-commerce store, including shipping fees, increased $1.7 million, or 16%, to $12.6 million for the thirteen weeks ended May 4, 2013 from $10.9 million for the thirteen weeks ended April 28, 2012.

Net Income

Net income decreased $3.6 million, or 61%, to $2.3 million for the thirteen weeks ended May 4, 2013 from $5.9 million for the thirteen weeks ended April 28, 2012, due to the factors discussed above. Applying a pro forma 40% “C” Corporation effective tax rate to the thirteen weeks ended April 28, 2012, rather than the “S” Corporation tax rate that actually applied to us, pro forma net income decreased $1.3 million, or 36%, to $2.3 million for the thirteen weeks ended May 4, 2013 from $3.6 million for the thirteen weeks ended April 28, 2012.

Basic earnings per share decreased 73%, to $0.08 for the thirteen weeks ended May 4, 2013 from $0.30 for the thirteen weeks ended April 28, 2012. Diluted earnings per share decreased 72%, to $0.08 for the thirteen weeks ended May 4, 2013 from $0.29 for the thirteen weeks ended April 28, 2012. Applying a pro forma 40% “C” Corporation effective tax rate to the thirteen weeks ended April 28, 2012, rather than the “S” Corporation tax rate that actually applied to us, pro forma basic and diluted earnings per share decreased 56%, to $0.08 for the thirteen weeks ended May 4, 2013 from $0.18 for the thirteen weeks ended April 28, 2012.

Gross Profit

Gross profit increased $1.8 million, or 6%, to $32.2 million for the thirteen weeks ended May 4, 2013 from $30.4 million for the thirteen weeks ended April 28, 2012. As a percentage of net sales, gross profit was 29.5% and 31.5% for the thirteen weeks ended May 4, 2013 and April 28, 2012, respectively. The decrease in gross profit margin was due to a 1.1% increase in product costs as a percentage of sales due to increased markdowns and a 0.9% increase in buying, distribution and occupancy costs as a percentage of sales due to costs increasing faster than the growth in net sales.

Selling, General and Administrative Expenses

SG&A expenses increased $3.9 million, or 16%, to $28.3 million for the thirteen weeks ended May 4, 2013 from $24.4 million for the thirteen weeks ended April 28, 2012. As a percentage of net sales, SG&A expenses were 25.9% and 25.3% for the thirteen weeks ended May 4, 2013 and April 28, 2012, respectively.

Store selling expenses increased $2.6 million, or 16%, to $18.8 million for the thirteen weeks ended May 4, 2013 from $16.2 million for the thirteen weeks ended April 28, 2012. As a percentage of net sales, store selling expenses were 17.3% and 16.8% for the thirteen weeks ended May 4, 2013 and April 28, 2012, respectively.

General and administrative expenses increased $1.3 million, or 15%, to $9.4 million for the thirteen weeks ended May 4, 2013 from $8.2 million for the thirteen weeks ended April 28, 2012. As a percentage of net sales, general and administrative expenses were 8.6% and 8.5% for the thirteen weeks ended May 4, 2013 and April 28, 2012, respectively.