Zumiez, Tilly’s Get a Jump on Back-to-School Amid Triple-Digit Sales
Both Tilly’s and Zumiez had record-setting sales quarters, with year-over-year totals jumping 111.1 percent and 102.6 percent respectively, indicating that the mall-based retailers might be in for a strong summer. In an earnings call, Tilly’s president and CEO Ed Thomas said the “atypical back-to-school timing” already impacted first quarter sales. The company saw backpack and denim sales of nearly $5 million over 2019’s first quarter. Chris Work, chief financial officer at Zumiez, says the retailer’s buying teams have continued to successfully adapt to the shifts in demand. “As we think about back-to-school, this is one of the challenges of a year like this,” Work said in the company’s earnings call. “Obviously, in the first quarter, we had to chase a lot. We’ve put a plan together for back-to-school. We’ve thought through, both regionally and holistically, on how to serve these communities as they go back to school. If we need to chase, we’ll chase. And if we have to push out, we can push out.” Total net sales at Tilly’s reached $163.2 million in the first quarter, which represented an increase of $85.9 million or 111.1 percent, compared to $77.3 million last year. On a two-year basis, total comparable net sales jumped 21.9 percent, with comparable net sales from physical stores up 11.7 percent and e-commerce net sales up 80.4 percent. In the first quarter of 2019, total net sales from physical stores represented 84.9 percent of total net sales while net sales from e-commerce represented 15.1 percent of total net sales. Thus far, Tilly’s second quarter has brought in $58 million in total net sales, up 104.7 percent and an increase of $29.7 million, from last year’s quarter. Net sales are up $15.9 million, or 37.7 percent, compared to the 2019 second quarter.
Net income improved to $11 million, or 36 cents per diluted share, both records for a first quarter since the company became publicly traded, compared to last year’s net loss of $17.4 million, or a 59 cents-per-share loss. At Zumiez, net sales increased 102.6 percent to $279.1 million from $137.8 million in last year’s first quarter. Compared to the first quarter in 2019, net sales increased 31.1 percent. For the start of the second quarter, net sales for the four-week period increased 42.4 percent on a year-over-year basis and increased 30.5 percent from the 2019 quarter. Net income was $26.4 million, or $1.03 per diluted share, compared to a net loss of $21.1 million, or an 84 cents-per-diluted-share loss, in the first quarter of the prior fiscal year. Net income for the first quarter of 2019 was approximately $80,000 or 3 cents per diluted share. Inventory remains healthy throughout back-to-school prep Inventories at Tilly’s dipped 3.4 percent in the quarter to $65.3 million from $67.7 million in the year-ago period. On a per-square-foot basis, it was down 2.6 percent relative to last year, but up 8 percent relative to fiscal 2019 as the retailer seeks to support current demand. “We did plan on bringing in some inventory for back to school a little earlier than norm to compensate for the potential delays,” Thomas said. “But I feel pretty good about where our inventory is right now and where it’s going to land.” At the same time Zumiez’s total inventory came in at $136.5 billion, remaining relatively flat across both 2020 and 2019 numbers. On a constant-currency basis, inventory levels are down 3.2 percent from last year, according to Work. Overall, the inventory on hand is “healthy and selling at favorable margins,” Work said, noting fewer issues securing product versus the prior two quarters despite port delays. In terms of merchandising, all departments at Tilly’s improved on a comparable sales growth basis from fiscal 2019, with women’s, men’s and girls’ posting double-digit percentage increases, and boy’s footwear and accessories posting single-digit percentage increases. At Zumiez, most categories saw sales boosts from the prior year, with men’s being the most positive, followed by accessories, women’s and footwear. Hardgoods was the only category that saw a sales dip. Unlike Tilly’s, Zumiez broke out these stats on a year-over-year basis. 2021 outlook appears to be bright Tilly’s and Zumiez didn’t provide official guidance for the second quarter or 2021. Tilly’s said it believes its second-quarter net sales and earnings per share will improve on both the 2020 and 2019 quarters. Zumiez called for full-year 2021 net sales to grow in the low to mid-teens from 2019. It expects second-quarter growth rates to slow down from the first, but still reach “high single-digit growth to low double-digit growth” over the year-ago period as stimulus benefits fade. For the third and fourth quarters, Zumiez anticipates year-over-year sales growth to be in the “low to mid-single digits,” according to Work. Zumiez was able to get past a big headwind in the first quarter, as its European and Canadian operations still had impactful Covid-related store closures. The retailer’s 54 European stores were open for approximately 40 percent of the available for operating days, while the 52 Canadian stores were open 77 percent of the available days. Tilly’s wasn’t impacted by the closures since it only has a brick-and-mortar presence in the U.S., where all stores remained open.
Zumiez is planning to open 22 new stores in fiscal 2021, including approximately five stores in North America, 12 stores in Europe, and five stores in Australia. Tilly’s has opened eight stores already this year, and expects to open one more in November. As of June 1, 2021, Tilly’s had $166.2 million of cash and marketable securities, including approximately $500,000 of withheld store lease payments and no debt outstanding. At May 1, 2021, Zumiez had cash and current marketable securities of $400.4 million. The increase in cash and current marketable securities was driven by cash generated through operations partially offset by capital expenditures.