Tilly’s Inc. (TLYS) reported a 45% dip in earnings for the first quarter of 2019 due to higher costs related to e-commerce sales growth and the minimum wage impact on store payroll. The bottom line came in line with the analysts’ expectations while the top line exceeded consensus estimates. However, the company guided second-quarter earnings and revenue below the Street’s view. Following this, the stock inched down over 6% in the after-market session.
Net income plunged 45% to $0.68 million and earnings dropped 50% to $0.02 per share. Total net sales rose by 5.4% to $130.3 million.
Comparable store net sales, which includes e-commerce net sales, increased 2.4% compared to an increase of 0.1% during the prior-year quarter. E-commerce net sales increased by 29.6% compared to a decrease of 7.2% last year. However, comparable store net sales in physical stores decreased by 1.4% compared to an increase of 1.2% a year ago.
Looking ahead into the second quarter of 2019, the company expects total net sales in the range of $154 million to $159 million and earnings in the range of $0.17 to $0.23 per share. The sales outlook is based on an assumption of a 1% to 4% decline in comparable store sales. The earnings outlook assumes no non-cash store asset impairment charges, an anticipated effective tax rate of about 27%, and weighted average shares of about 30 million.
The company’s quarter-to-date comparable store net sales have decreased by 6.6% through Memorial Day weekend. This slow start is largely attributable to unseasonable weather, particularly in California where 95 of the company’s 228 total stores reside, resulting in weak sales results across almost all spring/summer product categories. The company believes these results will improve over the remainder of the second quarter, assuming more normal weather patterns occur.
Tilly’s continued its positive momentum during the first quarter with its twelfth consecutive quarter of flat to positive comp sales. Despite a slow start in the second quarter, the company expects to continue improving its operating results during fiscal 2019.
For the first quarter, Tilly’s ended the quarter with 229 total stores compared to 222 total stores last year, both including three RSQ-branded pop-up stores.
Shares of Tilly’s ended Wednesday’s regular session down 1.36% at $10.13 on the NYSE. The stock has fallen over 14% in the past year and over 16% in the past three months.
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